Sunday, October 30, 2011

Bankers Vs. Brokers - What are the Differences?

Ever wonder what the difference is between a mortgage banker and a mortgage broker? Today's winning question by Steve Jacobson of Metro Brokers addresses that issue. Steve receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Steve's contact info follows:

Steve Jacobson CRS
Steve Jacobson Group - Metro Brokers
303-898-9000
steve.sjgroup@gmail.com

Steve's question is: What are the differences between Mortgage Brokers and Mortgage Bankers. Should one be considered better than the other?

Here's the answer: The main difference between bankers and brokers is in the way they fund the loans they sell. Mortgage bankers fund the loans themselves - the money comes from their own credit line. Mortgage brokers, on the other hand, do not fund the loans themselves. Instead, they arrange for the money to be sent to the closing, but the money comes from the bank.

There are two types of mortgage bankers: retail and wholesale. Retail mortgage bankers have employees who get paid a salary and work only for them, and they only sell their own loans.

Wholesale mortgage bankers get paid on a commission-only basis, and they sell loans from many different banks.

Because retail mortgage bankers have salaries and other overhead to pay their employees, they generally have higher interest rates than wholesale mortgage bankers. Also, lenders offer wholesale bankers lower rates in order to entice them to sell their loans. If Wells Fargo and US Bank are two of the banks that a wholesale banker represents, then both Wells Fargo and US Bank have to offer that wholesale banker a cheaper interest rate than they offer their retail customers. It is the only way they can get the wholesale banker to sell their loans.

Mortgage brokers (the people who do not fund their own loans) have interest rates somewhere between retail bankers and wholesale bankers. They are cheaper than retail bankers, but not quite as cheap as wholesale bankers. That's because the wholesale bankers assume some of the risk for underwriting the loans they sell. In exchange for assuming that risk, the lenders give wholesale mortgage bankers lower rates. Since mortgage brokers only act as middlemen, and do not assume any risk, they don't get the same low rates that wholesale bankers get.

So here are the differences:

Retail mortgage banker:
  • Fund loans themselves
  • Can only sell loans from their own bank
  • Have the highest interest rates
Mortgage brokers:
  • Do not fund loans themselves - they only arrange for the funding
  • Can sell loans from many different banks
  • Have slightly lower interest rates than retail bankers
Wholesale mortgage bankers:
  • Fund loans themselves
  • Can sell loans from many different banks
  • Have the lowest interest rates
None of this is to say that you should always use a wholesale mortgage banker, just because they have the lowest interest rates. There are plenty of good retail mortgage bankers, plenty of good mortgage brokers, and plenty of good wholesale mortgage bankers. You should use a lender with whom you are comfortable. Yes, low interest rates are important, but using a lender who is knowledgeable and trusting that your lender is not ripping you off (as so many lenders do) is more important.

Just FYI, we are wholesale mortgage bankers: we represent many different banks, we fund loans ourselves, and we have the lowest rates. And we are certainly knowledgeable!


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Wednesday, October 26, 2011

$100 Down HUD Homes are BACK!

$100 down HUD homes are back!

From now until October 20, 2012, The $100 HUD home sales incentive is back in Colorado. Here's how it works:

  • The offer price must be the full listing price.
  • The down payment requirement is only $100.
  • The financing must be an FHA mortgage.
  • The maximum loan amount cannot be more than 100% of the appraised value.
FHA loans have a 1% up-front mortgage insurance premium (UFMIP), which is typically included in the loan amount. However, since the maximum loan amount cannot be more than 100% of the appraised value, it seems like there will be a problem.

Well, there's not a problem. Here's why:

  • If the appraised value exceeds the offer price by more than 1%, then the UFMIP can be included in the loan amount and the total loan amount will still be less than 100% of the appraised value.
  • If the appraised value is less than 1% greater than the offer price, the UFMIP cannot be included in the loan amount. However, the lender is allowed to pay for the UFMIP. When we do $100 down deals like this, we pay for the UFMIP.
And that's another great reason to call us for your next mortgage!

Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com


By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Tuesday, October 18, 2011

Debt-to-Income Ratios (DTI)

People are always asking us about debt-to-income ratios. Here's what you need to know.

Each type of loan has a maximum allowable Debt-to-Income (DTI) ratio. However, if the loan is run through the automated underwriting software that is available from Fannie Mae, Freddie Mac, FHA, and VA, the maximum DTI ratios may be exceeded.

The DTI is calculated like this: Add all the monthly payments that show on the borrower’s credit report to the total monthly housing payment (principal, interest, taxes, insurance, mortgage insurance, and HOA fees). Then divide that number by the borrower’s gross monthly income (income before taxes).

The following table illustrates the maximum DTI ratios for both manual underwriting and automated underwriting (underwriting using the software):

Click image to enlarge
 NOTES: Compensating factors are things that add strength to the borrower’s loan file. Some of the more common compensating factors include excellent credit, very high reserves (money in the bank), and a large down payment (20% or more).

Front-end ratio = total monthly housing payment (principal, interest, taxes, insurance, mortgage insurance, and HOA fees) divided by the borrower’s gross monthly income.

Back-end ratio = Add the total monthly housing payments to the total of all the monthly payments on the credit report. Divide that number by the borrower’s gross monthly income.


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!


Make sure you check out our web site:
www.mtgsupportservices.com

By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Friday, October 14, 2011

Down Payment Requirements

Ever had a question about down payments? Check out this table - it shows all the current down payment requirements.



Click on the table to enlarge


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com


By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Tuesday, October 11, 2011

VA Funding Fees Stay the Same

A couple of weeks ago, we announced that VA funding fees were going down beginning October 1. However, Congress has since passed a bill that does not allow for the VA funding fees to be lowered.

So the bottom line is that VA funding fees remain unchanged. If they change in the future, we will be sure to let everyone know!

The VA funding fee is a fee that is charged to the borrower on VA loans. It is typically included in the loan amount.

If a borrower is receiving military disability payments, they are usually exempt from the funding fee completely.

Remember, VA loans are the best deal possible for vets, active military, and members of the Reserves or National Guard. There is no down payment, no mortgage insurance, and really low interest rates. VA loans are a benefit for people who have served our country. If a lender ever tries to talk someone out of a VA loan, it's probably because that lender is not approved to sell VA loans.


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com


By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Friday, October 7, 2011

Why Investors Can't Make an Offer for 15 Days

Why do investors have to wait 15 days before making an offer on a HomePath home? Today's winning question by Mike Bradley of Metro Brokers Eagleview Properties addresses that issue. Mike receives a $25 Starbucks card and gets his contact information sent to the 6,600 people on our contact list. We also list his contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Mike's contact info follows:

Mike Bradley
Broker-Owner, Realtor, MBA
Metro Brokers Eagleview Properties, LLC
385 Inverness Parkway #140
Englewood, CO 80112
Phone: 303-887-4275
Email: Mike@MikesClients.com
Web: http://www.BestHomesInColorado.com


Mike's question is: When looking for bank-owned properties for investors, I often see a line in the MLS notes that says, "Available for HomePath financing...no investor offers accepted for 15 days." Why is that allowed?

Here's the answer: A HomePath home is a property that went into foreclosure and is now owned by Fannie Mae. For most of the homes they own, Fannie Mae has a special financing program called HomePath financing. No appraisal is required, no mortgage insurance is required, and the approval guidelines for condos are more relaxed than they are for non-HomePath condos.

Fannie Mae is run by the US government at the moment, and they are doing everything they can to make sure the foreclosure rate drops. Because rental properties have a much higher foreclosure rate than homes that are owned as primary residences, Fannie Mae would rather have the homes they sell be owner-occupied. To accomplish that, they will not accept offers from investors for a certain period of time after the house is listed for sale.

Although that policy may seem unfair to investors, it helps to keep the foreclosure rate a little bit lower, which is good for the entire housing industry.


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!

Make sure you check out our web site:
www.mtgsupportservices.com


By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.

Tuesday, October 4, 2011

When You Should Lock the Interest Rate

When should you lock the interest rate? Today's winning question by Becky Gregory of Keller Williams Realty DTC addresses that issue. Becky receives a $25 Starbucks card and gets her contact information sent to the 6,600 people on our contact list. We also list her contact info on our blog (10,199 visits for the first 6 months of 2011) and on our blog at Active Rain, a real estate blog with more than 210,000 members.

Becky's contact info follows:

Becky Gregory
Broker Associate/REALTOR®
Keller Williams Realty DTC
Phone: 303-475-2007
beckygregory@kw.com
www.realestate-denverco.com

Becky's question is: I often get questions regarding locking in a rate, especially when working with a new-build where the closing date is not set in stone when the contract is signed. It could be (and usually is) more than 30 days before the house is complete and good to close. When is the best time to lock in?

Here's the answer: Interest rates can be locked for different periods of time. Most lenders allow rates to be locked in increments of 15 days, for example, 15 days, 30 days, 45 days, and 60 days. The shorter the lock period, the cheaper it is to lock the loan. That means the loan originator gets a bigger rebate from the lender if they lock the rate for 15 days rather than 30 days, 30 days rather than 45 days, and 45 days rather than 60 days.

Also, some lenders will tell borrowers they know that rates are going to go up or down, but they are not telling the truth. No one knows when rates will go up or down. If someone knew where rates were going, they would not be selling mortgages. They would be trading bonds on Wall Street.

When a rate is locked, the person locking the rate (the loan originator) is making a commitment to the lender to deliver a closed loan to them within the rate lock period. If they don’t deliver the loan, they can be fined by the lender (sometimes thousands of dollars).

We always tell borrowers to lock the rate as soon as they know when the deal is going to close. Waiting is just gambling. Yes, the rate may go down if you wait, but it can also go up. If the rate goes up too much, some borrowers may no longer qualify for the loan, and then the deal will have to be cancelled.

In the case of new construction, the rate should be locked as soon as the builder can provide a firm completion date. If the house is not ready to occupy by the time the rate lock expires, the lock can always be extended, but that can get very expensive. The sales contract should state that the builder should pay for the lock extension if they go beyond the firm completion date. If the builder is unwilling to pay for a lock extension, then the date they gave as the firm completion date is probably not very firm at all, and the rate should not be locked until the builder can actually provide a firm completion date.


Getting a loan approved is easy - if you know what to do. The Mortgage Experts know what to do!!!


Make sure you check out our web site:
www.mtgsupportservices.com



By the way, don't forget to refinance your current mortgage. Rates are very, very low right now. Don't miss out! Call us today to get the details for your particular situation.