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.

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!

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.

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.

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!