Loan Origination and Servicing

Home loans used to be a fairly simple product where a person wanting to buy a home would save and save until they had 20% of the purchase price to use as a down payment, then go to their local bank and apply for a loan to cover the balance of the purchase price.  Things have changed over time, it's not unusual for a person interested in buying a home to purchase using one loan to cover 80% of the purchase price, and another loan to cover the remaining 20%.  Local banks also are not the source of choice for many borrowers.

Mortgage brokers, mortgage bankers, direct lenders, local banks, LTV, secondary markets, par pricing, FICO, Fannie Mae, Freddie Mac.  What's it all mean and how do you get a good loan with a low interest rate?

Modern lending, and the interest rates charged are driven by credit scoring systems that look at your existing credit and assign a number value.  Higher number values indicate a good credit risk likely to have no difficulty with the repayment of the loan and lower values indicating past credit problems with a greater risk for the lender when making a home loan.  This is a major factor in determining what kind of loan you can get, and what interest rate you will pay for borrowing that money.  If you are in the circumstance of having a lower score, but need to get a loan, prompt payments on all your credit lines will greatly increase your credit score allowing for a more favorable refinance in a few years.

Monthly income - Does it matter anymore?
Over the past few years, there has been a huge increase in the amount of loans made using either low or no income documentation.  Add to that the use of option ARMs, which are adjustable rate mortgages with the option of paying interest only or fully amortized payments, with qualifying based on low starting interest rates, and you have a recipe for huge problems.
Your monthly housing payment, including property taxes, homeowners insurance and any possible association fees should not exceed 33% of your gross monthly income.
If you choose to use loans without income documentation, you'll pay more in interest than an equivalent loan that requires documentation.  No-Doc loans are higher risk for the lender, and you'll be the one paying for it. 

Down Payments
20% of the purchase price of a home still provides the greatest benefit if you are evaluating how to pay the least in interest rate.  Paying less than 20% down will require either payment of mortgage insurance premiums or the use of multiple loans.   One loan is an 80% loan, the other loan will be for 10-20% of the purchase price of the property.  Although the 80% loan will be at the best interest rate, the smaller loan will be at a much higher rate as the lender is taking the risk rather than the mortgage insurance company.