Real Estate Forums

San Diego Real Estate · 05-01-2005, 01:56 PM

Ok all you Mortgage Consultants!

What advice would you give on shopping for your home Loan?

afm1 · 05-09-2005, 12:21 PM

Overall the obvious answer is to shop 2 or 3 places for the best rates. You don't want people pulling credit over and over, so be aware of your income #'s, credit scores, downpayment and a general purchase price. That way you can talk to several lenders without having them pull credit....Although, if someone has good credit, pulling it a few times should not effect the score that much.

Here are a few tips:

1. Determine your needs: Decide if you should get an interest only loan, and ARM or a fixed rate. If there is any chance that you will not live there forever, you may refinance down the road, consolidate a 1st and 2nd from the purchase or eventually "move up" have kids; I strongly recommend an ARM. Watch the market or read the newspaper to see where the market is.

2. Points can sometimes be helpful: If a lender is going to charge a point, it typically means you are "buying down the rate". A point is simply pre-paid interest. 1 point would be 1% of the loan amount (not purchase price). Paying a point or so, may indeed get you an incredible rate. Make sure you compare with different lenders. Also, consult your tax accountant as the whole point should be tax deductible the first year.

3. Broker is not a dirty word: Remember that companies like Countrywide, Bank of America, Ameriquest, and Wells Fargo (too name a few) have a ton of overhead. The retail market usually carries an inflated rate or fee. A broker can usually offer better rates. BUT, make sure they are "purchase savvy".

4. Get organized: There is nothing worse than dealing with a borrower who is buying the home of his/her dreams and they take his/her sweet old time getting documents to the loan center (ie. W2's, paystubs, Homeowners information, bank statements etc). Speed bumps occur all of the time when getting approved for a loan, but work with the mortgage company to overcome the issue in a timely manner.

These are just a few suggestions. I am sure everyone has his/her own philosophy, but here is the bottom line. Some consumers are so worried about getting screwed, they dilly dally around and eventually end up screwing themselves for waiting. Lock the rates if you feel comfortable with your loan proposal.

San Diego Real Estate · 05-09-2005, 07:52 PM

Great advice...afm1

What would be your recomendation on interest only vs full PITI?

afm1 · 05-10-2005, 08:01 AM

SDR,

It is interesting you bring this up. I did an interest only loan myself and I am in the biz. It allows homeowners to buy more house and it frees up cash flow on a monthly basis. It is a great product for people who want the nice house and still be able to afford the Lexus and tennis lessons.

Practically speaking, it makes the most sense for people in areas that have high appreciation percentages. Plus, you always have the option of applying money towards principal as money permits. Lenders now have a 30 year fixed rate with an interst only option for 15 years.

If you do decide to apply principal and interest you should know that for the first few years of the loan it is mainly interest anyway.

Here is a good example. Lets say you buy a house for $200,000. If you do a principal and interest loan and pay down the mortgage over 5 years by $10,000 and you sell the house in five years for $240,000 how much money did you make? The answer: $40,000! The $10,000 you paid down is your money that you will eventually get back.

Now take the same example above and do an interest only loan. You sell the house in 5 years for $240,000. How much money did you make? The answer: $40,000. BUT, this option saved you money on a monthly basis.

Here is the best part, if an agent is educated about the above mentioned, you will be able to sell more house increasing your commissions. I once did an analysis and figured out that if someone did a fully amortized fixed mortgage versus an interest only 5 year fixed mortgage, that same person was able to afford $70,000 more in house and the payment was the same.

Las Vegas Real Estate · 05-13-2005, 11:57 PM

I've got to say... I love my interest only mortgage. Added benefits to what afm has pointed out: You can have a checking account tied to it and draw out the equity like a revolving line-of-credit. My interest rate is set at prime. Some months I pay just the interest due and some months I pay huge chunks. I love the flexibility.

Also... there were no loan origination or closing fees, or an appraisal. That was pretty sweet. The paperwork amounted to just about the same as a consumer loan and financial statement.

All of these benefits add up to saving the homebuyer significant dollars, allowing them to buy more real estate than they'd otherwise be capable of.

REMAX LV · 05-15-2005, 03:51 PM

Interest only allows for a lower payment, but is not for everyone because mostly i.o is tied to arms which some flucuate so much that the payment can actually go higher than a fixed rate with principal.

afm1 · 05-16-2005, 07:15 AM

REMAX LV,
You can also do it on a fixed rate now. Most are a 10yr - 20yr repay but some now have a 15 yr with a 15 yr repay.

Las Vegas Homes · 07-08-2005, 03:59 PM

There are so many options now-a-days, afm, what is the most popular loan program that you have used recently (most volume)?

afm1 · 07-11-2005, 07:40 AM

By far the 5 year interest only. It usually prices out the best for me and the customer. Plus, 5 years usually gives a customer enough time to decide if they are staying around, if they are going to sell, or the most obvious, gain some equity and then refi into something fixed.

My most popular loan is a 5 year interest only first trust and a 30/15 balloon second trust (fully amortized). It keeps the payment low and I can do 100% all day long.

SEOWolf · 07-11-2005, 07:59 AM

I wish I were as knowledgeable on real estate website design as you are on Mortgages afm1. I would rule the Internet on the subject of real estate.

I am always floored with your expertise. As fast as the Mortgage industry appears to be changing it must be a nightmare to keep up with. (Thinking to myself…. This guy must never sleep.)

Is there anything about Home Loans or Mortgages that you don’t know about?

~VegasMack