Asset Center Inc

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Choosing Your Mortgage Representative, Or: Finding a Rep to Represent You By Jean Barish Buying a or refinancing a home requires decision after decision and you need to choose someone to represent you in your quest for a mortgage. Let’s take a look at the options and give you some tools to help you select an appropriate mortgage consultant; first, let’s look at who’s out there: 1. There are the loan officers at the retail consumer banks. These people work for one financial institution and sell the financial products that their own bank offers. 2. There are the mortgage bankers who represent companies whose business is to lend money for mortgages; some of these mortgage bankers also represent other financial institutions as a mortgage broker. 3. And there are the mortgage brokers. Brokers represent numerous financial institutions and offer the widest array of products. Mortgage bankers like to emphasize that they have greater control over the process since they work directly with the bank’s underwriters and close loans in their own name. However, they must follow their investors’ criteria just as a broker must follow the banks’ criteria. Bankers also like to tout that they make the loan. What they don’t identify is that they frequently just ‘table-fund’ the loan – reselling or reassigning the mortgage immediately after close to the real mortgagee. In reality, bankers and mortgage bankers and brokers all work through the same corporate layers. And they work from basically the same rate pricing as their broker brethren. Mortgage brokers are not another layer, just another channel within each bank. A good mortgage broker has strong relationships with the underwriting and closing departments in each of the banks they work with. And there are no additional costs to the borrower. 1. So why bother with a broker? Mortgage brokers can use their breadth of access to information to help you choose the right loan program. Industry professionals talk about institutional appetites for particular types of loans depending upon investor interest. You know a bank’s interested in a particular line of business (type of mortgage) when their rates for that loan product are low; low rates attract borrowers. The bank with the best rates for a 5/1 ARM in January may not be the bank with the lowest rate three months later. A good broker will ferret out the bank of the moment that is particularly interested in the type of loan you’re looking for and place you there. A good mortgage broker will shop around for the best rate. A bank rep has only one choice – whether their bank is in the market for that type of loan or not and whether their rate is the best or not. 2. A good mortgage broker will pre-qualify you and match you with a particular bank interested in your financial profile. 3. The mortgage market can be volatile. Borrowers are content when they lock in a rate and the market moves up. But when a rate is locked and rates then drop dramatically, most borrowers are motivated to take advantage of that opportunity. If the bank won’t float down the rate, a broker may have the option to move the loan to another bank; the banker does not have that flexibility. more... There is no Mortgage Genie By Sol Skolnick The rates for a fixed 30-year mortgage on a conforming ($417,000 and below in our area) loan amount remain below 5%, their lowest level since 1971. Those posted rates included no origination points but could only be locked for a 30-day period, which is not always sufficient to close your refinance. Here’s why: even assuming that your mortgage broker, lender, title company and appraiser are handling all of your paperwork efficiently the CEMA, or assignment process can be a laborious one. In NYS there is a mortgage tax that you pay when you make your purchase and each time you refinance. To avoid paying this tax again, which costs approximately one thousand dollars for every one hundred thousand that you borrow, the assignment process allows your old lender to assign the mortgage and note (not your rate or terms) to the new lender. Each bank has a different set of fees to perform this process but simple math will show you that it is often a money-saver. The lender that you are leaving has no vested interest in expediting the process. This usually involves retrieving your original documents from a remote location, transmitting them to an outside attorney who then delivers them to your new bank’s attorney who must vet them, so a 30-day lock brings its own perils. You should be getting quotes on rates with 45- or 60- day locks to protect the rate while the refinancing process is completed. What’s the magic formula to determine whether or not refinancing your mortgage is a prudent move? A half a percent cut in rate? A full point? More? There is no mortgage genie. Your individual time-table and circumstances are your baseline. The new mortgage must save you an amount that is meaningful to you in a time period that aligns with your plans. How long do you intend to stay in the home? What do you consider a reasonable amount of time to recover the closing costs? Your financial profile includes your W-2 income if you are a wage earner, rather than being verifiably self-employed, assets such as money in the bank, stocks, bonds, retirement funds; your credit history which shows a FICO score (think 700 and above for a realistic conversation about a non-government 30 year-fixed loan, slightly lower for a 15-year term), how you have used credit and your current liabilities. Your profile includes your mortgage debt and the appraised value of your home. If your mortgage exceeds 80% of the appraised value lenders will require that you purchase mortgage insurance, adding a monthly expense not included in the rate. This is one of the reasons that the phrase “it’s not about the rate it’s about the payment” is not sales hype but a caution to examine your total cost to own (CTO) the mortgage. Also, depending on your profile and the amount of equity in your property you may be eligible for different rate. If you are pulling rate quotes from the web you must know the source. Check for information about points and the length of the rate lock. If you are running a web calculator on refinancing note that the amount of your new mortgage must include closing costs (unless you are paying them out of pocket). Some web sites assume that new mortgage and the one you are paying off are the same, potentially showing a false savings. The new mortgage showing all closing costs (so that they can be paid off at the low-rate over time) will be higher. Gather your paper work and start the math motor running. After all, there is no mortgage genie. printer friendly What to Consider When Investing in Real Estate By Sol Skolnick The recession, the banking crisis, the revaluing of major stock indices, the decline in home values have all of us re-assessing personal finances and re-balancing investment portfolios. There has been a marked decrease in home prices and a slowing down of the purchase market. The shift in the residential real estate market has many of my clients and colleagues wondering if lower home prices present an opportunity for investing in real estate. Not all areas in Westchester or all types of housing stock present the same level of opportunity, of course. According to Westchester-Putnam MLS during the first quarter of 2009 the median price for condominiums declined by seven percent and single-family homes declined by almost fourteen percent while the median price for two-to four- family homes declined by more than twenty percent. During the recent hey day of low down payments many speculators purchased rental properties. These would-be landlords, enabled by meager capital requirements, overpaid for properties and had neither the cash reserves nor the business skills to maintain these homes. The result has been foreclosure, short sales and tenants in jeopardy of being underserved or displaced. The lenders, in belated response to this situation, increased the required size of down payments and pegged interest rates for investment properties higher than for the same amount borrowed to purchase a primary (owner occupied) residence. For example: the rate on a loan (under $417,000) with a 35 percent down-payment might be 5.5 percent; the rate with 25 percent down payment would be 6.75 percent; and it rockets to 8 percent with a down payment of only 20 percent. The rational is simple: the mortgage upheaval and up-tick in the rate of foreclosures has reinforced the fact that a landlord is more likely to retreat from a troublesome financial situation involving an investment property than he or she would as if it meant leaving or losing his or her own home. Owning real estate is a business proposition. Although we often interweave emotions and personal preference with the acquisition of our own homes it is essential to understand that purchasing investment properties is a business transaction. The recent correction in prices has further helped to decrease the price of distressed properties increasing the potential for good investments. Whether buying of a single-family property that you intend to rehabilitate and sell or maintaining a multi-family dwelling you must have a business plan. An investor must have a clear sense of what he or she wants to accomplish from property ownership. A single-family homes in this Westchester may provide the opportunity for equity growth, for long-term investors, rather than strong cash flow. The cost to maintain a single-family home cannot often be justified by the rental income that it can command. This is particularly true in the current market which includes many homes that are available for sale and/or rent simultaneously by owners who have been unable to find buyers, and who have themselves become accidental landlords. Multi-family dwellings can provide several sets of rent paying tenants creating an economy of scale for certain utilities and services that is not the can in one-family home. It is essential to calculate the totality of expenses including the mortgage, insurance, taxes, utilities, allowance for vacancies, and for refreshing the property when there is tenant turnover. This has to be compared to a realistic estimate of the income derived from rent to determine the capitalization rate. The “cap” rate is calculated by dividing a property's annual net operating income by its purchase price. It is also essential to consider that as a landlord you have taken on a job that includes being accountable for all of the situations that arise within the building. If you are intrigued by the potential opportunities created by the correction in the real estate market be sure to solicit the advice of a real estate broker with experience in the residential investment market, your accountant and a mortgage professional. printer friendly

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