While there are a number of ways to finance a home purchase, one of the most common ways to do so is using a mortgage.  A mortgage is a legal instrument that allows a finance company to advance funds for the purchase of a home, and then record on official land records the existence of the loan.  This guarantees that the lender can be protected and the title to the home cannot be sold to another person unless and until the title to the residence is clear from legal encumbrances.

       The term mortgage is from the french for “dead deed,” which means that the deed is not useful until it has been cleared.

You can obtain mortgage financing through a bank, private lender or even a private person.  In some instances, a person may own their house outright and choose to give a mortgage to the buyer and accept the payments (and earn the interest on the note).  In most situations, however, it is common to look outside the seller to get a mortgage.

There are 2 types of mortgage issuing bodies most buyers get financing from. The first is direct lenders, who have the money to lend and search out buyers to finance.  They can be a bank, but there are specific mortgage financing companies.  The second option for obtaining a mortgage is through a mortgage broker.  A mortgage broker acts as your representative to search for multiple options for you from direct lenders.  A mortgage broker is usually paid by the lender, through a commission.  They may work for a mortgage brokerage, a credit union or a bank itself.  Even though you may be told that “you don’t have to pay for a broker’s services,” in a way you are, because the mortgage lender includes those costs to you in their loan package.  In today’s highly competitive lending market, you should consider all your options in obtaining a mortgage. One major difference is that lender’s representative may just have access to one lender, whereas a mortgage broker may have access to other financing sources.  You should ask your broker if they work with multiple lenders and the percentages of each.  You should also ask what loan costs, fees, points, penalty fees and other fees you might be required to pay to the broker or lender to get a full picture of the costs for your mortgage.

Jill Ruane is a Connecticut real estate attorney known as “LadyClosings” who handles the legal side of buying and selling real estate in Fairfield and New Haven Counties in Connecticut. She is available for FREE consultations at 203-275-9442

By Alex

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