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Ask a Mortgage Banker

Discussion in 'General Discussion' started by Mike Ness, Aug 12, 2010.

  1. Mike Ness

    Mike Ness
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    I have noticed a couple threads of people offering advice to TIB. If you have ask a lawyer, ask a chef, I guess it could be helpful to ask a mortgage banker as well. Buying a home is more difficult then ever, combine that with historically low rates and you have quite a situation.

    I have been in the industry for over 12 years, I have a degree in finance (not that it meant crap in the real world) and have worked at major banks (Wachovia, Countrywide) and small banks so I have seen every situation possible. I have been a sales manager as well as a recruiter for these firms but now I'm strictly sales and that suits me just fine. I was a financial planner for a couple years but that was long ago so I'm not sure I would be any help as far as investing is concerned. I can help you with buying a home, refinancing a home, second mortgages, and credit repair. I do four or five commercial properties a years as well but I would not say that it is my area of expertise. I can help with all government lending as well FHA, VA, ect.....

    Not sure if this will be beneficial to anyone but if I can help feel free to ask.

    30 year Fixed 4.375% with zero points

    15 year Fixed 3.875% with zero
     
  2. silway

    silway
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    Thank you for volunteering to answer questions, very kind of you.

    I have heard that credit unions might do consolidation loans for *private* studen loans and I was wondering how likely that really was? I have a lot of student loan debt that is private and consolidating it seems like it would be very helpful.

    Here's a really really basic question, in all the commercials for mortgages I see or hear they always talk about "points" at closing. What are they talking about?

    Thanks again.
     
  3. rei

    rei
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    What sort of FICO score would I need to not be laughed at when I want a decent rate?
     
  4. TheCapn

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    Do you think the criticism that your industry has taken regarding the collapse of the real estate market and the recession is justified?
     
  5. Mike Ness

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    I don't deal with student loans but they are very, very lenient. The rates are always low and they will work with you if you have trouble paying (they offer multiple forms of deferment) I would call whatever bank you paying now and ask about payment restructure. Even Salliemae should do that for you if you have a clean history.

    A point is a buydown feature for an interest rate. If your loan amount is 100,000 a point would cost 1k and usually would buy the rate down about an .125. The most common form of points is the "no-escrow" charge, this allows you to pay taxes and insurance by yourself and usually cost's about 1/4 point.
     
  6. Mike Ness

    Mike Ness
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    The national average is between 660-680. Anything above 720 is "A" credit, below 620 is trouble.
     
  7. Mike Ness

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    I really don't know how fucked we are. General thinking is that the only thing keeping the country from a full blown depression is keeping the rates low. Prime rate is 4% right now, this rate is what most credit cards are based on when it goes up all those payments go up. The Fed is desperately trying to spur the market and get people buying homes again (that's why we have had all the numerous tax credits just to buy a home) the problem is real estate has fallen off so much that it is not worth it for most people. If you bought a home for 500k and now it is only worth 350k, you are not going to lose 150k just to buy another home at a low rate.

    If you do not have another home to sell right now, depending on your area there should be plenty to choose from, if you have 20% down and good credit the market is indeed your oyster.
     
  8. Mike Ness

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    That is an excellent question. For the most part I would have to answer yes. The greed that came from the big banks (Countrywide) was just ridiculous. The fraud that was coming out of the industry was also a problem in some areas as well, but it all tied to greed.

    However now you have idiots like Barney Frank trying to change everything and he is causing more problems. The simple form in lending is the Good Faith Estimate, this form has every cost associated with your transaction on it for you to review. It used to be one page and name every cost with the dollar amount next to it. Now it is a three page novel complete with an a+b=C formula that nobody understands.

    Many loans were given that should have never been written. If you had a client with a 609 FICO score, 2 mortgage lates and he could not prove his income do you think it would be a good idea to give him 100% financing? Probably not. Then you had the California problem, people bought houses for 600k and before they knew it it was worth 1.2 million. So what did they do? Take 600k out of the house and buy an investment property, then the market tanked all the homes are now worth 800k and they can't pay the second mortgage or the mortgage on their investment property. You also had asshole mortgage guys selling option arms to young couples in NY and California. An option arm is based on a specific index and can adjust monthly. You have four options to pay on it, 30 year fixed, interest only, 15 year fixed and minimum payment. Min. payment is what caused the negative ammortazation you end up owing more than the original loan amount and more than the home is worth. You now have a couple who can't afford the monthly payment, they can not sell or refinance because they owe more than the home is worth and the whole time they are freaking out because they had no idea the type of loan they signed up for.

    I wish I could say it was "a couple bad apples" but the bad apples were the CEO's who were making 200 million a year. We no longer have stated income, no-doc loans and many other useful products. Our business has also become very cut throat as well as a bit embarrassing. People you used to call me for advice and value my consultation, now I feel like they let me refinance their house so they can do me a favor.
     
  9. Nick

    Nick
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    This is timely.

    I currently own 2 homes. One in Louisville in which I reside; and one in Dallas that I have been unable to sell since I moved to Louisville 2 years ago. I've got great renters (young professionals with a 2 year old) in my house in Dallas, and my costs are covered. My sense is that the market is not going to rebound anytime soon, so I'm thinking about refinancing the Dallas home and renting it out for the next 3-5 years until the market improves. Based on a recent appraisal, the home has lost approximately 10% of its equity over the past 2 years, but I still have about 25% equity in it. My current rate is 5.375%, but I think I can do better. A couple of questions for you:

    1) Are rates any different when re-financing a second home/rental property? I.e., could I still get something in the 4.5% range (assuming my credit score is on the high end)?

    2) I've heard that in today's market, you need to have at least 30% equity in a second home if you want to get premium loan pricing. Is there any truth to that?

    3) Does having a rental contract in place improve my credit profile for this particular loan? I realize that it obviously impacts my credit from a total gross income standpoint, but does having a contract tied specifically to this particular asset improve the loan profile? The tenants have agreed to sign on for another year, which would extend the rental through October 2011.

    Thanks dude.
     
  10. lust4life

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    I will have 4 years left on my mortgage when my youngest starts college and we plan on using the equity in our home to fill any financial gaps in her education not covered by her college fund and any financial aid she may get. What is my best course of action in accessing that equity? just a simple home-equity loan? Are there other options?
     
  11. Bravo

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    Thanks for this. This has the potential to be a VERY informative thread for us prospective first time home buyers who know next to nothing about mortgages.

    What general tips (or common things most people don't know) do you have for someone looking to purchase a home in the next 6 months? What are common mistakes we should avoid? I know that is kind of a broad two questions.

    I assume now is the best time to buy in the last probably 10+ years, correct? Or, is the market just going to keep better and better as the economy keeps getting shittier and shittier? In other words, is renting for another year ideal? I'm sure that is a case by case scenario, but I mean in general.

    As for your job, do you take pleasure in telling someone that they aren't approved for (can't afford) a mortgage? I would love to tell some entitled little fuck that the real world just bitched slapped them in to reality. Of course, there is the flip side of that where you are actually helping them financially in the long run.
     
  12. StrangeBrew

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    Just nitpicking a bit, but prime is currently 3.25%
     
  13. Veovis

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    Since the US is different from Canada, it may not work the same, but for a new vehicle recently. Normal vehicle loan rates were 7-9% interest rates, which sucks. However we did it by using the house and not the vehicle, this changed our rate to currently 1.95% for that loan. This was simply done through our banker as well as notoriety for the legal paper work to tag it into the house value. We set up far more than the bike amount though for future projects we may do, but worked it with the house equity as either a line of credit or a line of credit with a fixed term.

    Personally I would set up additional financing for the education costs as a separate loan to be paid off in x amount of years as opposed to rolling it into your mortgage which will simply add years to your debt life. If things remain as they are, I’ll be completely debt free in 5 years, but have been very aggressive on my mortgage and pay more than required every payment.
     
  14. dewercs

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    I currently do loans in AZ and am licensed on a federal and state level under the SAFE act provisions and today August 12,2010 if you had a 620 fico score and were doing an FHA loan with 3.5% down on a loan of 100k I am quoting 4.5% on a 30 year fixed.

    I believe this violates TILA laws since I am not disclosing an APR but I want to give you an example.

    edit.
    This has to be disclosed for federal compliance
    That would be an APR of 5.1387
     
  15. Mike Ness

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    1. Second home are usually identical to a primary home rate wise. Investment not even close. Investment property's are a much higher risk so it's more expensive. I just did one at 5.25% with one point on an 80% LTV (loan to value) and the guy had good credit. If it was me I would do a 5/1 ARM, that should get a decent rate. I have no idea about the market in Dallas so I can't tell you were prices will be 3 years from now. Experts predict sale prices to start increasing in spring of 2012.

    2. No. As long as you don't rent it 10 or 20% down is fine. Now I guess I should have said this first if you are buying what is termed "super jumbo" one million dollar loan amounts and higher you may be required to put more than 20% down.

    3. It doesn't improve your ability to get approved but it does have certain pros. If you are doing an FHA loan and buy a two unit home you can actually use the second unit's rental income to help qualify. A big thing to know about investment property's, you have to have been managing one for two years to be able to count the rental income. You are reading that correctly, if you want to buy an investment property and have never owned one you will have to qualify carrying both mortgages on just your income, most people are quite surprised by this. Reason being back in the hayday we would just come up with "dummy leases" on property's to add income and help qualification procedures.
     
  16. Mike Ness

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    Depending how much you need I would do a cash-out refinance NOW. If you only need 15-20k a HELOC (home equity line of credit, usually second liens) is a good bet. Bad things about HELOC's is: the rates are higher, rate is usually adjustable (Prime plus 1) and the payment is usually interest only.

    Good things is ii's cheaper as far as costs go and because it's interest only the payment is usually low. Personally I would do a cash-out refinance right now because of the low rates. I also would do a 30 year fixed, I know it sounds crazy but with rates this low I feel you should always leave yourself the lowest payment possible. You can always pay more every month, a good broker will give you ammortazation charts and tell you exactly how much to pay each month to pay it off in fifteen or even ten years.

    If anyone lives in PA, MD, NJ, DE or florida I would be happy to help them and would certainly give them a TIB discount.
     
  17. Mike Ness

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    FHA is a great product, I kind of wanted to avoid everyone coming in and advertising rates. We are not violating anything if you put out a rate and you are not soliciting, I placed the rates in my previous post to give an idea of what rates are.

    However if you are in AZ, a first time home buyer with bad credit (or good for that matter!) You may want to PM Dewercs.
     
  18. Disgustipated

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    I'm a consumer credit lawyer, and have been dealing with consumer, business and developmental finance for the last 18 years. But it's in Australia, so the laws are different.

    However, I saw a professor from somewhere in Florida speak at a seminar last year and he gave a potted summary of the reasons behind the US collapse. Dumbed down and very simplified, he said:

    "The Clinton administration pushed the banks to lend to poorer people to get them into the housing market, by refusing to have the loans guaranteed unless they did certain minimum proportions. This lead to ninja loans, but the mortgage writer was fine because they onsold the debt and it was off their hands. The loans were guaranteed, so everyone treated them as normal and traded away. A glut of these got in the system, and a combination of factors including the end of honeymoon payments and just general unaffordability caused a ton of them to fall over. The housing market tanked with all the repos and the guarantee corporations (Freddie May/Fannie Mac? We don't have that shit here) blew up. Cue economic disaster."

    Is this accurate?

    For our part, we have less banks but they're more stable and much more conservative. We actually weathered the GFC pretty well, but anyone you ask will take the whole credit for it. Our banks lend and retain the security. They're cashed up and all but bulletproof. Unfortunately, they've also pulled the strings so tight on the moneybag that no one's getting any credit at the moment.

    There's also a raft of new consumer credit laws that have taken over since 1 July that will send a lender to jail if they so much as cough in the wrong direction. That's further restricting credit.
     
  19. Mike Ness

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    It's hard to pick one reason but that was certainly a factor. Clinton was the one who pushed for "every American to own a home." He made FHA only require 2.25% down and have no minimum FICO requirements. It was also his administration that began to seriously audit the race of the borrowers.

    To completely blame him would be inaccurate though, it was more than just foreclosures that caused the banking systems to blow up.

    A great book to read is <a class="postlink" href="http://books.google.com/books?id=YK6-xuF6gZIC&dq=liars+poker&printsec=frontcover&source=bn&hl=en&ei=hTtlTLjmNoH48AasgN23CQ&sa=X&oi=book_result&ct=result&resnum=4&ved=0CDsQ6AEwAw#v=onepage&q=liars%20poker&f=false" onclick="window.open(this.href);return false;">http://books.google.com/books?id=YK6-xu ... er&f=false</a>, It's called Liars Poker and it's about the start of mortgage bonds on Wall Street in the 80's. It shows how Solomon brothers first started with a security that would have several borrowers with high credit and good equity be packaged together to create a strong bond, however then they had the idea to sell a cheaper bond with poorer borrowers making it up.

    Thing's have been happening in this industry that have either never happened before or rarely happen. Rates are as low as they have ever been in forty years, about three years ago we had a reverse yield curve meaning short term bonds were more expensive than long term bonds (adjustable rates were higher than the thirty year fixed) we have had real estate increase up to 70% in area's (Florida, Las Vegas) and then drop 90% in the same places. It has been an absolute clusterfuck.
     
  20. Trakiel

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    Michael Lewis recently wrote a book about the current financial crisis called The Big Short which gives a pretty good perspective on some of the other causes of the 2008 meltdown. However that goes beyond just the real estate industry so is probably out of the scope of this thread.