When we advertise that we will find you the best loan for your financial situation what does that mean? Does that mean the best interest rate? Does that mean the lowest down payment with the lowest closing costs? Does that mean the loan that will cost the least over the long term? Or does that mean the loan that will make the loan originator and their company the most money? How is all that determined? What the heck are you mortgage people thinking?
troll.me.com
Let's put one of those pesky questions to rest-the how much the loan originator and their company make on a transaction and whether you will be steered to a loan that makes the originator or their company more money. The answer is no. The Dodd-Frank financial reform act changed the game on lender compensation. And the Consumer Financial Protection Bureau is the gunslinger that is sure it is enforced. The law says the lender may make no more than 3% of the loan amount. So there you have it- doesn't really matter where we place a loan or the type of loan. FHA loans don't pay more than conventional loans or VA loans. There is no advantage for us to send you into one or another. So that is something the consumer doesn't have to worry about. And-to further promote transparency, mortgage brokers are required to disclose to the consumer how much that paycheck will be. In most cases it is the lender that pays the broker so that fee is not coming out of the borrower's pocket.
So that concern out of the way, next up is the confusing maze of loans, their rules, and how folks fit into those particular boxes.
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Looks scary doesn't it? Really-it's not. But back to the boxes idea...
pandawhale.com
Our job is to discover what box you do fit in. The process to doing that begins with how much money the borrower may wish to put down or have available to put down. No down payment funds-that consideration generates more questions:
Is the borrower a veteran? Are gift monies available from family members? Depending on these answers our box begins to take shape. For instance if you have no down payment funds but you are a veteran-then the answer is obvious. The only time another type of financing may be better for the veteran is if the borrower wants to put 20% down or wants to buy home in addition to the one he/she has a current VA loan and there are some exceptions to that rule. If there are gift funds available for down payment then we want to look at other criteria-what is the credit score? In recent years a credit score below 680 would mean automatic inclusion into the FHA box as conventional lending would not work for those with scores lower than 680. However, recently conventional score requirements have been lowered, which means that there may be another options available for those under 680. And a couple of our conventional lenders do allow 5% gift funds.
The choice of specific lender also depends on the borrower's characteristics or the loan's characteristics. Is credit below 640? That sends us in one direction, how big is the loan? That may dictate another as various lenders have requirements for loan size. Once we have the big picture we can begin to pare down the lending possibilities to those that most fit the borrower's needs.
18chasestreet.com
Sometimes our borrowers fit in multiple boxes. Maybe someone meets the criteria for all offered types of loans. At that point I normally begin figuring payments to show the borrower the difference in rates, mortgage insurance etc. so the borrower can choose what box they want jump in.
In other cases such as a borrower that has just completed a Chapter 13 discharge, I have one box and one box only. But at least I have a box.
And then there is the borrower that doesn't fit the criteria for any of my boxes. Then the task becomes figuring out what box they will fit in when they do certain things such as pay off debt or collections, or bring a credit score up.
Of course the goal is to tie the box up neatly with a bow and hope it stays tied. But sometimes it seems that no matter how well you plan it the box turns into a jack in the box.
All that takes is for something to be a bit different than what we are told about employment perhaps or an ill timed credit card purchase or late payment. The variations are as many as there are people who want mortgage loans.
When that happens we might have to go back to the drawing board and look for a different box that can contain the issue. The good news since we don't believe in one size fits all, we are more like
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and can choose a different size.
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