Q: I am buying a new home and want to know if there is an advantage to getting the mortgage through a mortgage broker versus one of the big banks in town.
A: A mortgage broker represents what we call "end" lenders. These are companies that invest in mortgage loans. Some of these end lenders can even be big banks. So the mortgage broker arranges for you to get the financing you need to buy your house, and then checks to see which end lender is interested in buying the paper on that loan. You could go to a mortgage broker in your city and end up with a loan from one of your big banks in town.
When you use a mortgage broker, you get your money, and the investor gets an investment. The broker gets a fee for providing the loan. In some cases, if you pay points to reduce the interest rate on your loan, some of that payment may compensate the mortgage broker. But generally, the end lender pays a fee to the mortgage broker to get you as a customer.
Once your loan is sold off to another lender, you may find that your loan is serviced through a different company. That company is there to collect the monthly payments you owe and to service your loan.
A mortgage banker (your big local bank could be a mortgage banker) also works on the origination side of the business. The mortgage banker may give you the loan and in some cases may even keep the loan and service it. If you have a question about your loan after you close on the loan, you'd call the bank. In other words, a mortgage banker might do everything from arranging the loan, closing on the loan, providing the financing, servicing your new mortgage, and making sure your real estate taxes are paid.
In many cases, the mortgage banker might turn around and sell your loan to Fannie Mae, Freddie Mac or another investor that is interested in buying that kind of investment. The mortgage banker may still service the loan, but the loan is actually held by an investor or other company.
From your point of view, it shouldn't matter whether you use a mortgage broker or a mortgage banker. What you need to do is find a lender that provides a great rate, a loan program you like, and terrific customer service. You shouldn't feel pressured by the lender, and if you do, you should walk out and find another lender.
Q: If someone does a quitclaim, how long does it take for you to completely be on the loan and the other party is off the loan?
A: I think you may be a little confused about what a quitclaim deed is and what it does with regard to the mortgage.
A quitclaim deed transfers any interest a person has in a piece of real estate to another person. I could give you a quitclaim deed to the Brooklyn Bridge, for example. Would you own it? No, because I don't have any ownership interest in that piece of real estate.
But a quitclaim deed doesn't have anything to do with the financing of a piece of property. So, let's say I actually own a lovely house at 123 Bank Ave., Anywhere, U.S. And, let's say that I have a mortgage for $100,000 on the property.
If I execute a quitclaim deed granting you any interest I own in 123 Bank Ave., you would then own the property. But what happens to the mortgage? It's still there, and my name is on it. In fact, I've probably violated the terms of my mortgage, which require me to own 123 Bank Ave. as long as I still have a mortgage, since the property is the collateral for the loan.
You could try to refinance 123 Bank Ave., and you might get away with it -- in the short run. But a simple title search would turn up the existing mortgage lien to the property to my lender.
Meanwhile, my lender could call the loan and force me to repay the lender the amount owing on the loan.
If you obtain title to the property by quitclaim deed or by any other deed, your name will never be "on" the loan unless you take out a new loan in your name. Unless the person that took out the loan in his or her name pays off the loan, that person's name will remain "on" the loan until the loan is paid off in full.
For more details, please talk to a real estate attorney.
To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.
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