Ask Anything About Mortgages

[jba]

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That means that as long as your credit is over 720 (680)

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why the second number here?

[Bicycles_Biatch]

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That means that as long as your credit is over 720 (680)

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why the second number here?

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Some banks only allow low doc programs with 720 FICO... some allow low doc loans with FICO's down to 680 (at the best rates).

I can actually do some loan low doc down to 620 FICO... but the rates get crappy.

[Mansavage]

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What if I have excellent credit but am trying to leverage myself very highly on rental properties and 2nd-10th mortgages... Will each require a larger amount down... Will rates go up? Suggestions?

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What I would do is find 3 lenders you are comfortable with. With each lender you can apply for an owner-occupied loan (assume that you will be using your 3 most expensive houses); this will get you the best available rate on 3 different properties.

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This is fraud.

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Next, if you have any properties that are farther away, apply for them as your "2nd / vacation home"... this strategy will allow you to get better rates and more leverage (banks are more generous on their loans on O/O and 2nd homes).


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More fraud.

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Try not to work with more than 2-3 different lenders... this will raise a red flag to the underwriter and make it look like you are trying some type of mortgage fraud angle.


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But he is.

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<Terrible but not fraudulent advice snipped>


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I understand giving terrible and dangerous advice for profit but doing so for free on a public forum? Guess you weren't content with amoral and decided to go for immoral.

J

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I like the way that the OP didn't respond to this extremely important post. All of the advice that the OP gave about applying for multiple Owner-Occupied loans is is extremely fraudulent, and will show you that Loan Officers for direct lenders (like the OP) and brokers really aren't that different.

In my experience most Loan Officer's for banks rip on brokers because they usually can't cut it as one. Bank L.O.'s sit at their desk and answer phones all day and close loans for rate shopping A+ borrowers.

Meanwhile, brokers actually have to go out and work to try and generate business, and we also do loans for those clients that aren't privelaged enough to have 680+ scores.

Not to say that the OP is this way, but lender's don't really do the same thing that brokers do, so a lot of this "All Broker's Are Evil" talk is based out of ignorance.

[BeaucoupFish]

What kind of differences are there when applying for a mortgage when 'moving up' to a new property. e.g.
-exceptional credit score,
-significant increase in equity from your home sale gives you the option to put down say 30%-40% on your next property. Should you?

Also, if you have the ability to pay down 'points' with this equity, does it become a more viable option? You do get to deduct cost of points up front (not refinance points, of course), so it is not quite so obvious when it is a good idea to buy down your rate or not.

Beyond the APR rate, what else should you be looking for? Pre-payment penalty is a good one, anything else?

Thx for this useful thread!

[Bicycles_Biatch]

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I like the way that the OP didn't respond to this extremely important post. All of the advice that the OP gave about applying for multiple Owner-Occupied loans is is extremely fraudulent, and will show you that Loan Officers for direct lenders (like the OP) and brokers really aren't that different.

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There as so many things wrong with this quote... I don't even know where to start.

First of all... the guy was wondering how he could leverage himself to the hilt... he wanted to know, I told him.

Doesn't mean I would risk my job by doing this... but if he can find someone who will... or if he can be smarter than the underwriters, more power to him.

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In my experience most Loan Officer's for banks rip on brokers because they usually can't cut it as one. Bank L.O.'s sit at their desk and answer phones all day and close loans for rate shopping A+ borrowers.


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I rip on brokers because the #1 loan in CA right now is the negative-ammortization-ARM. This loan should be attractively priced to strong borrowers... and is a great option for borrower who have lower FICO's 580-660.

Unfortunately, since the lay customer doesn't understand the complexity of how this loan is priced... Tons of borrowers are getting shafted by Brokers who are just lining their own pockets by "up-pricing" the margins and fees. Furthermore, add-in any "up-pricing" the bank does for their own risk tolerance, and customers are paying out their ears.

What people fail to realize is that Brokers don't ever own the loans. The day they submit the application, they know exactly where that loan is going. Normally speaking, that same customer could get the SAME exact loan at a lower cost basis if they went through the lender directly.

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Meanwhile, brokers actually have to go out and work to try and generate business, and we also do loans for those clients that aren't privelaged enough to have 680+ scores.

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I do loans for all types of clients and do some aggressive self-marketing / adverstisment ... I'm not just cherry-picking the clients from the bank lobby.

Based on your statment I'm guessing that you are a broker. Can you honestly tell me that your clients know all the ins and outs of a 1% start rate loan and it's negative implications???

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Not to say that the OP is this way, but lender's don't really do the same thing that brokers do, so a lot of this "All Broker's Are Evil" talk is based out of ignorance.

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There are a few good brokers out there, but for the most part the numbers speak for themselves.

For example... why should a client every pay ANY points to a broker directly (disclosed on the HUD-1) when that broker is already making a point in rebate commissions from the bank directly???

[Bicycles_Biatch]

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What kind of differences are there when applying for a mortgage when 'moving up' to a new property. e.g.


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For your own piece of mind and financial well being I would look to several "cost" items while moving "up". keep in mind that you real-estate taxes (cost basis and net) will go up substantially with a new purchase.

Also remember, once your loan goes over the amount of $417,000.00 ... it goes from being a conforming loan to a "jumbo" loan. The ramifications being that a jumbo loan has slightly higher pricing.

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-exceptional credit score,
-significant increase in equity from your home sale gives you the option to put down say 30%-40% on your next property. Should you?


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I always recommend that customers roll as much equity into the down payment as possible. Remember, most customer build most of their equity by property value increase- NOT by paying down their mortgage.

Therefor, equity from your sale is like found money. Don't waste it on frivolous stuff, role it back into your property.

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Also, if you have the ability to pay down 'points' with this equity, does it become a more viable option? You do get to deduct cost of points up front (not refinance points, of course), so it is not quite so obvious when it is a good idea to buy down your rate or not.

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Don't forget, the break even point of paying "points" for a lower rate is usually about 30-36 month. if you are going to be there for 5 years or longer it's definately worth looking at... I would be on the fence.

HOWEVER, one huge benefit is that the points (and closing costs) that you pay in the year you buy the house is tax deductable in THAT year. Unlike a refinance where points and costs have to be written off over the course of the loan... on purchase you can write-off all those costs in the same year. So, depending on your tax bracket, $5,000 in points will will get you a lower rate and hopefully lower your tax basis.

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Beyond the APR rate, what else should you be looking for? Pre-payment penalty is a good one, anything else?


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APR is important... but I dare you to find anyone that can explain exactly what an APR is. I always recommend that borrower get a GFE (good faith estimate) upfront... before even applying. If a lender can't give you atleast a hand-written GFE (estimate)... I would be suspicious.

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Thx for this useful thread!

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You're welcome

[Mansavage]

To preface any of my comments (which I should have done in my first post) I work for a broker. I am the Sales Manager for a moderately sized broker in Minnesota.

I will try to reply to as many of your points here as possible. You claim that the average customer can get the same loan at a lower cost basis by going directly to the lender. Most of the time this is not true for a few reasons. The first is that many of the best lenders that I work with don't have retail branches, and therefore my clients could not simply go get the loan from them. The second reason is that most lenders have specific wholesale divisions, and those divisions offer brokers better rates than the retail division can offer. It is the same way that wholesale retail prices work at Sam's Club or Costco.

I don't think that the average customer understands the Option ARM, and that is why I simply don't offer them to most of my clients. This is a loan that is only effective for a very small percentage of home-owners and really only works in a market where housing prices are rising fast enough to outpace the Negative-Amortization aspect of the loan. You make it sound like broker's are the only people that offer these Option ARMs, but earlier in the thread you told somebody to PM you if they wanted more info on one.

To answer your last point. The reason that brokers charge slightly higher fees is because we don't service the loans. We don't make any money off of the thousands of dollars that home-owners pay in interest every year, so the fees from closing the loans have to pay our bills. My clients can make the choice of how they want to pay their fees. They can choose to allow me to charge them up front, or they can pay the higher rate for the life of the loan. The bottom line is this, I charge what the market will allow. If my client signs all of the disclosures that very clearly tell them I am charging 2%, then in no way am I being dishonest or fraudulent.

[Weasel45]

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One thing I need clarification is that brokers exist because people don't qualify for loans from the bank correct?

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you usually can get a better rate from a broker than the bank because the brokers have access to multiple sources of funding and can shop around. most of the loans still end up on bank balance sheets anyway (either as loans or securitized mortgage bonds).

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I totally disagree... most brokers are no longer "shopping" for which loan is the lowest costing loan for the customer. Most brokers are shopping for the bank that is paying the biggest kick-back, rebate, or wholesale cost that month regardless of the cost to the borrower. I know one broker who is certified with 127 different lenders... and he only uses two. Guess why... they pay the higher rebate.

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I'm a loan processor. The Broker that i work for, has a correspondent division, plus we also have all the wholesale branches that we can use. So we have the correspondent division of Countrywide, plus we have the wholesale division. If we use the correspondent division, it usually goes a lot quicker since it is in the same building as us. We have our own underwriters and funders. Then after we fund the loan we sell the loan to countrywide.

We also have a like 12 banks that are correspondent plus a ton more that are wholesale. I guarantee that i could get just as good if not better of a rate than any Bank.
This makes it better to go through good brokers so the borrower saves time not having to go to 3 different banks.

Also, about being certified with 127 different lender and only using two. The rates and rebates we get change everyday so it would be dumb to only look at the same two.

[Bicycles_Biatch]

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To preface any of my comments (which I should have done in my first post) I work for a broker. I am the Sales Manager for a moderately sized broker in Minnesota.

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... right off the bat you and I are going to have different opinions of how things work. You work in a mostly side-ways market where turn-over is limited and the cost of doing business, in addition to loan sizes, are much lower.

I work in Los Angeles for one of the top 5 lenders in the country.

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You claim that the average customer can get the same loan at a lower cost basis by going directly to the lender. Most of the time this is not true for a few reasons. The first is that many of the best lenders that I work with don't have retail branches

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There are no Wells Fargo's, Washington Mutuals, or Freemont Loan branches around you??

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The second reason is that most lenders have specific wholesale divisions, and those divisions offer brokers better rates than the retail division can offer. It is the same way that wholesale retail prices work at Sam's Club or Costco.

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I'm very familiar with our wholesale departments and you are correct that IF you brought the loan in at par and just recieved your rebate, the things would be almost equal. Unfortunately... or luckily for you.... we both know this isn't what happens.

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I don't think that the average customer understands the Option ARM, and that is why I simply don't offer them to most of my clients. This is a loan that is only effective for a very small percentage of home-owners and really only works in a market where housing prices are rising fast enough to outpace the Negative-Amortization aspect of the loan.

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If in fact you don't offer this mortgage to your customers that don't understand it... then I commend you.

However, 1% neg-am loans are the fasting growing segment in the market (per the WSJ).

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To answer your last point. The reason that brokers charge slightly higher fees is because we don't service the loans. We don't make any money off of the thousands of dollars that home-owners pay in interest every year, so the fees from closing the loans have to pay our bills. My clients can make the choice of how they want to pay their fees. They can choose to allow me to charge them up front, or they can pay the higher rate for the life of the loan.

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I originate loans for a bank directly and dont see a dime of that paid interest or servicing dollars... so I don't see your points.

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The bottom line is this, I charge what the market will allow. If my client signs all of the disclosures that very clearly tell them I am charging 2%, then in no way am I being dishonest or fraudulent.

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This my friends is the crux of the broker mentallity.

IF I CAN TALK A CUSTOMER INTO SIGNING IT... IT MUST BE RIGHT. Who cares how I screw them, as long as they are dumb enough, miss-informed enough, or gulable enough to sign the dotted line.

Good job... you my friend know exactly how to screw people out of their hard earned equity.

I mean come on. That is the weakest logic I can think off. How many customers don't even understand that there are NO point loans out there. How many customers won't speak up for fear of having their loan denied.

That's the most pathetic thing I've read today. There is no way your service is so much better than the guy down the street that isn't charging 2% points.

[Bicycles_Biatch]

I didn't want this thread to turn into a me vs. the broker type of deal.. but luckily you've just proven the most important thesis of the day...

don't trust Brokers... Thanks.

I'll be leaving shortly for the evening and will check back in tomorrow.

Looking forward to more questions and maybe even a bit of bantar from the brokers out there.

Sidenote: it took 90 posts of me giving out good, solid, helpful advice before a broker cut in... and ironically... all they seem to care about is me advising the public about their pay structure.

I didn't see any "brokers" posting about how to help the people understand their mortgages or advice on how to reach their financial goals. The brokers who are posting only seem to care about their bottom line... funny how that happens.