Cleaning out the clutter

The other night I was home cleaning out some old boxes that had been laying around for a while.  I am at times a little obsessed with throwing things out, so I find myself often trying to find unnecessary clutter and get rid of it. My motto is “When in Doubt, Throw it out!”.  I feel as though the things you own, own you!  I am a big believer in less is more. Many times I have clients upgrading to bigger homes just because they need more space for the things  they own,  never see and never use.  This is only a sidebar to what I am going to share with you today.

So here I am cleaning up and I come across one of my sleep journals. Many times the best ideas I get come at night right before bedtime, so I keep a journal close by and write down my thoughts. It helps me rid thoughts from my mind and sleep a lot better. I want to share with you one of my entries from right about the time I started Artisan Mortgage Company.  Take it as you will.

People build wealth like card castles, high and wide and fast, but blown away or tumbled from the bottom in an instant!

Build your wealth slow and stable with blocks. Blocks of wealth that remain and grow on their own!

Life’s objective is two part, sustenance and happiness.  To accomplish both would be to succeed, while many get lost in the pursuit of just one!  We need balance in our lives.  Just as we build our personal relationships on solid foundations so should we build with our money.

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Private Mortgage Insurance —– The “X” factor

It’s been some time since I’ve been able to post some new information. While others in my industry are struggling to stay afloat , I’ve been hard at work closing loans in the face of tough mortgage conditions.  One of the biggest issues I’ve been running into lately is the availability of PMI.  I’m going to start by giving my readers a brief 101 on PMI-  Private Mortgage Insurance.

Most loans today are done through Fannie Mae, Freddie Mac or FHA. ( I’ll explain why in another blog )

These institutions require that the borrower of the loan take out an insurance policy against loan default, anytime the borrower is financing more than 80% of the homes value.  In the case of FHA, they will require PMI regardless of your equity position. I will tailor this information more towards Fannie and Freddie where most of the great loans are being done today.  The lenders believe that if they have to foreclose on you they will probably only recoup 80% of the home’s value through a foreclosure sale.  This is why insurance comes into play.

When you finance more than 80%, you will be required to pay for an insurance policy that INSURES the LENDER in the case you default on the loan. If you default, the lender makes a claim with the PMI company and can recoup some of their losses.

 In the past, there were a wide variety of PMI companies issuing insurance on all types of mortgages, i.e. investment properties, no income verified loans, co-ops, condo’s etc, etc. Wait, not anymore!

Just like all the big lending institutions tightening their lending guidelines, so have the PMI companies. Now, many times I am able to get a person approved for a loan through various mortgage companies but am unable to acquire them a PMI insurance policy that the lender requires to complete the loan.  There are many PMI companies out there and they do differ from company to company, however it seems that the PMI companies have become the last word in lending. It matters not if the bank wants to do the loan, if you can’t obtain PMI.

One of the easiest ways to get around PMI is through the use of combo loans. In example, if you want to borrow 90% on a purchase, you can break the mortgage into 2 loans. The first loan would be for 80%( NO PMI needed) and we would also get a second mortgage for 10% of the purchase price. You are still able to finance 90% of the deal, but it is broken up into 2 loans. Generally, the interest rate on the piggyback second mortgage is slightly higher but often it is cheaper than paying for the PMI. The best part is there is no need for PMI underwriting and PMI. If the the lenders are willing to do the 2 loans we don’t need to get a yes from anyone else.

The only problem to that solution is 2nd mortgages can now be tough to obtain. Not all lenders are doing them and not all lenders are doing them well.  Here is where a good broker should be up on their products and be in constant search for new ones. I’ve just recently signed up with a large national lender who is one of the few still doing combo loans.  This has allowed me to offer loans to clients turned down by PMI companies for PMI insurance where other lenders have given up on them because they don’t have the product or PMI eligibility.

 PMI, which used to be a sure shot has changed our game. Loans are now being underwritten twice, with PMI companies having the final say. It doesn’t mean we have to stop doing loans because PMI’s are unwilling to write policies, it just means we have to be a little more diligent in our qualification processes and make sure we are up on the latest products!

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Service! Service! Service!

Service! Service! Service!

If  I could choose one thing that stands out when comparing a wholesale mortgage broker from a retail mortgage bank it would be very simple, it would come down to service. The service that I can provide as a wholesale broker is the reason why I am here. There are many tiny nuisances in the mortgage industry that need to be addressed and more importantly they need to be addressed by someone that cares.

Let me just make myself clear!!! Not all wholesale brokers are going to be great and are going to provide you with the best service but working with a quality wholesale broker is always better by far than working with a retail bank.

Who else is going to answer your phone calls 7AM in the morning before you go to work or 9 PM when you are just getting home. The ability to have easy access to and to communicate with someone when you have a question is invaluable. Many times I hear from clients that tried to work with a retail bank and there experiences were very much the same. They would state that every time they tried to call the loan officer they were working with the person was either unavailable, they were transferred to someone else or if they did get lucky and speak with the loan officer the person could not answer the question because the file was in another department.

When it comes to getting your loan done, when it comes to getting your loan done quickly and when it comes to having the sense of security knowing that you are being taken care go wholesale.

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Will I get the Best Deal with my Current Bank?

Will I get the Best Deal with my Current Bank?

Many times I have customers come to me wanting to find out what kind of loan and what kind of “deal” I can offer them. They do this because they are being solicited by their current bank with special deals but many times these deals are no more than teasers to get their current customers back through the doors for more business.

Retail banks already figure that they have earned your trust because you are already banking with them so why not advertise other services. Just because they are advertising to you more services and products it doesn’t necessarily mean that they are better or even competitive. In this day and age it is very easy and convenient for you to shop products and services at your own home in very little time.

So next time your local bank offers you something that you like and sounds good, shop around you may be surprised at how much better you will be able to do. Wholesale brokers like myself not only offer the same products your bank does, we can actually shop your loan with various banks and offer you a discounted Wholesale Rate.

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Stated Income/No Income verified

Wow, what a difference from 1 year ago.

Stated Income and other types of no income verified loans have almost completely vanished from the market.  For as long as I have been in the business (over 10 years now ) there has always been some types of no income verified loans available. However, that may not be the case today.

No income verified loans were designed for those who don’t completely claim all their income come tax time. The people who benefited from these products were the self-employed borrowers and cash income people like waiters and taxi drivers.  These products served a need in the market place but have been lumped in with the rest of the credit crisis.

There are still a  few no income products  available, although they are being done at very low equity positions usually 75% and below.  If you a person with great credit, who has been running their own business for many years and can’t qualify for a loan based on your tax returns, you are going to need a hefty down payment.  These No Income verified products are still good loans and should be available to the right people, but the industry has been beat up to the point of no common sense.

The industry professionals know that we need to have these products available but we just have to wait for the dust to settle.  My advice for now is to analyze your income and really see if you need a no income loan. Many times customers had come to me saying they needed a No Income verified loan because of their situation, but on further review did qualify on a full documentation loan. If you are self-employed, make sure you are working with a loan officer who understands the complexities of self-employed tax returns and who can look past the adjusted gross income. Many times there are figures that can be written back into the income such as depreciation.  It is times like these where consumers really need the advice and professionalism of a true mortgage broker.

There are still a few dangling chad programs for the No Income verified, however review all your options first before deciding what route you need to take.

 In due time, it all comes back around!

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Why should you use a mortgage broker

With the media frenzy surrounding the mortgage industry, I’ve been seeing more and more articles being written in the financial publications about mortgage brokers and the mortgage industry as a whole.  These journalists have been glossing over the details of our industry.  While they’ve been putting out correct information they have also been omitting some of the key aspects in the role of mortgage brokers.

The number one notion people have of mortgage brokers is that all they do is shop around for you, so if you are a person who likes to shop around themselves, they don’t need a broker.  This is false.

The most important feature in dealing with a mortgage broker is the difference between retail and wholesale.  As a mortgage broker I have access to hundreds of loan products offered by various banks and mortgage lending institutions.  These products are also offered to me at a wholesale discount!!  An example would be to look at the rates a large national lender is offering directly to the public and then be able to see the rates that this same bank offers me as a mortgage broker. There is a substantial difference in the wholesale price we are offered.  A good mortgage broker should shop around, find out who is offering the lowest price on a mortgage, take a portion of the wholesale discount as a profit margin and pass the rest of the discount on to the consumer, resulting in a cheaper mortgage than would have been available through a retail outlet.

While big banks don’t mind the negative press mortgage brokers receive, they realize that a good portion of volume is originated through brokers. Big banks love brokers because we deliver mortgages to them at no cost and that is the reason why they offer us a wholesale discount. In order for a large lending institution to write mortgage loans they need to lease a space, furnish it, set up communication systems and hire employees which all cost a lot of money. In order to make this business profitable for them, they then need to charge you the consumer a retail rate that builds in enough profit to cover these costs.  Here is where the mortgage broker comes in to play.

We the brokers incur all the costs with originating mortgages. We lease the space, buy the phones and pay for all the marketing costs associated with our origination business.  We bring in the customer, structure the loan and deliver this loan to the designated bank without them paying a dime( except maybe the marketing money they spend to attract wholesale business).

Big lending institutions realize we are not their competition, rather we are business partners.  The big banks fight one another to attract our business because the wholesale side of the industry can be very profitable. If times slow down they don’t need to worry about laying off employees or paying rent on spaces that are no longer in use because they have no overhead in conjunction with wholesale business.  Voila, wholesale discount to brokers.

A good mortgage broker is able to set a fair profit margin that allows them to make money while still offering a discount on the mortgage being offered directly to consumers.  If a mortgage broker was greedy, their profit margins would be too high and would result in a mortgage that was more costly than if you just went directly to a retail outlet.

This wholesale Vs. Retail scenario is probably the most important aspect to using a mortgage broker. There are many other advantages to using brokers and I will be detailing them in my upcoming posts. Just remember this, go to you local convenience store and look at the price of ketchup, then go to one of those large wholesale food discounters and compare prices.  You now understand the difference between retail and wholesale.

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In Today’s Market You Need a Mortgage Broker

In the past year the mortgage industry has bee turned upside down and rolled over a few times. Many banks and loan programs that were readily available to consumers have now disappeared. This makes it very difficult for the mortgage professional in the business to navigate through the many restrictions and limitations placed on borrowers.

For these very reasons it is more important than ever to make sure you are dealing with a broker who can navigate you through all the complexities of today’s market. Like anything else you can try to do it yourself but more than likely if you don’t know what you are doing your not going to get the result you were looking for.

It is my advice that you speak to a loan professional, I repeat a loan professional and make sure that you are being guided in today’s market properly.

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Rates are Down! Now What? Buy!!!!

Our wholesale 30 year fixed rate dropped to about 5.5% this week, with 15 year fixed mortgages a tad under 5%.

Now what?

I think this is the best time to be a buyer in the market. The old saying simply states buy low and sell high.  Home prices have definitely fallen over the last 18 months and with rates as low as they are, now is the time.

It’s a simple idea, but I still see many people selling when they should be buying.  If you can wait it out, now isn’t the time to sell your home. Maybe you should consider renting your current home and moving forward with the purchase of the house you’ve been eyeing for years.  Renting a home and becoming a landlord does have its risks, however you may even want to consider hiring a professional property manager.

 Rates are down, should I refinance?

First you need to run the numbers. The rate difference has to be enough to repay the cost of your refinance within a reasonable time period. If the numbers work, my suggestion is to lock in on a rate and proceed ahead. Don’t try to time a bottom on rates because you might miss them. The markets have been very volatile and unpredictable over the last several months, so if the numbers work and you feel comfortable with the interest rate, lock it and get it done.  Many times consumers don’t understand that rates do indeed move everyday just like stock prices and it’s not just a line you’re being given to attract your business.  The price on your mortgage can fluctuate throughout the day. Seek counseling from a true mortgage professional and let them guide you, but in the end make the decision yourself.  If you are unclear, ask as many questions as it takes to clarify your position.  In today’s world, we need to be educated consumers that do homework and understand what we are being sold.  I have many clients who spent more time shopping around cell phone plans then shopping their mortgage loan.  Your home can be your largest asset, so show it some love.

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Mortgage Rates Are Up Now What

Mortgage Rates Are Up Now What
 
Currently the national average for the 30 year fixed rate is near 6.5%. Some people out there may think that these rates are too high and are still waiting for rates to come down. In my opinion 6.5% for a 30 year fixed rate is still a great deal considering that in the 1980’s rates ranged from 9% to almost 15%. When you consider where rates were 20 years ago, rates today are a steal. Unfortunately, over the past couple of years consumers got use to consistently seeing interest rates in the 5% range and even a couple of times rates have dropped below 5%.  
 
My advice to you is that if you can refinance to a fixed rate where you are able to drop your interest rate by at least one full percentage point more than likely it will save you thousands of dollars over the life of the loan.

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New Conforming Loan Limits

New Conforming Loan Limits
 
In recent weeks there has been much discussion in the Mortgage Industry as to how much the conforming loan limits for Fannie Mae, Freddie Mac and FHA (Federal Housing Authority) will be. Currently the conforming loan limits for Fannie Mae and Freddie Mac are $417,000 for a single family home. FHA loan limits are a little more complicated and varies based upon the county in which the home is as well as a few other factors which I will not be going into. Currently, in New York the maximum loan limit in the highest priced counties is $362,790.
 
The 2008 stimulus package signed by the President in February looks to push the loan limits as high as $729,750 for a single family home but this $729,750 will not be a national standard. Either way any way to increase loan limits in any part of the country will help new buyers as well as existing home owners. It may not be a perfect plan but at least it will be something more than we already have

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