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WalletPop:

Filed under: Real Estate, Saving, Technology, Mortgage Confidential

Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.

In the olden days, say before electricity maybe, mortgage applications required all sorts of documentation before the loan request was even looked at by a human being: the underwriter.

Nowadays most underwriters won’t review a loan request until the loan application has been electronically submitted through either Fannie Mae’s Desktop Underwriter or Freddie Mac’s Loan Prospector. While this may not mean a whole lot at first glance, this method can actually save you some money for closing costs: particularly for your appraisal. That’s about $400, and if you’re scraping up money for a down payment that $400 can mean a lot. How can electronic approvals save on appraisal money?

When your loan officer first submits your loan request through either Fannie or Freddie’s automated underwriting system, your loan decision will be returned in mere moments. This decision will list all of the documentation you’ll need to provide your lender: nothing more and nothing less.

Among all the required documents is a section that addresses the value of your current or proposed property and whether or not an appraisal is even warranted. The automated decision can ask for a full appraisal, a simple “drive by” appraisal costing maybe $200, or even extend an “appraisal waiver,” meaning you don’t have to shell out for a new property appraisal at all.

This…

WalletPop:

Filed under: Borrowing, Real Estate, Ripoffs and Scams, Saving, Mortgage Confidential

Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.

When comparing mortgage companies to try and find out who has the best deal, one is encouraged to ask for a “Good Faith Estimate of Settlement Charges,” or simply, a “Good Faith,” from each competing lender.

One lender may have a lower interest rate but tacks on a whole host of fees to make up for the lower rate. While yet another lender might offer fewer fees in lieu of a lower rate. There are several problems associated with reading a Good Faith, but the biggest problem is trying to understand all those fees, who charges them and what they’re for.

Sneaky loan officers can write up a competitive Good Faith, with low rates and low fees, not by low-balling their own mortgage company fees, but by underestimating charges associated with third parties such as attorney or title charges. Unwittingly, consumers can compare three different Good Faith estimates and look at the bottom line…how much is this going to cost me? Loan officers have no control over third party fees; they are what they are. But loan officers do control what’s entered onto the actual Good Faith.

If all the consumer does is look at the bottom line and see one lender quoting lower closing costs than all the others, it’s important to compare the non-lender fees…

WalletPop:

Filed under: Debt, Real Estate, Mortgage Confidential

Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. Leave your questions in the comment section of this post.

Q: I’m either looking at a good opportunity or a potential rip-off, and I’m not sure which it is. Perhaps you could help me sort it out? In January of this year, we attempted to refinance our home to help us pay down some substantial credit card debt. To make a long story short, our house appraised for a lot less than we thought it was worth, so the finance company wouldn’t make the deal. And, as it turned out, that was okay, because we’ve taken a couple of other options, paid our debt down, and are okay, for the moment.

But, suddenly, I’m hearing from another loan officer at the company where we had attempted our refinance. According to the message he left me, he’s been reviewing our file and doesn’t understand why the previous loan officer didn’t offer us some kind of deal that could have been approved. He says he can help us.

I’m smelling set-up, but I could just be reacting to all the negative press about sub-prime mortgages, etc. Is it common for loan officers at a finance company to compete in this fashion?

I’ve not returned the call, yet. What should I do? -James

A: I smell more than a set-up, I smell a rat. Understand that loan officers don’t make any money unless they close…

WalletPop:

Filed under: Real Estate, Mortgage Confidential

Mortgage expert David Reed invites Walletpop readers to ask him questions about real estate financing. leave your questions in the comment section of this post.

Let’s do a flip on a previous post where we talked about how to lower your mortgage rate by 1/4% by paying one discount point. Lenders can lower your mortgage rate for you if you decide you want to pay them for the privilege. On a $250,000 note, two points would lower your rate by about 1/2% but it would cost you $5,000 to do so. What if you didn’t have $5,000 for points? Well, then you’d get the mortgage rate offered at zero points. But what if you were also short on closing costs and didn’t have the money for things such as an appraisal, title insurance or attorney fees? Again, look to your rate.

Just as lenders may reduce your rate by 1/4% by paying a point, they can also increase your rate by that same 1/4% and give you a point that you can use at closing to help offset closing costs. Does that make sense? Of course it does.

Using that same example with a 30 year fixed rate of 6.00% on a $250,000 mortgage, the monthly payment is $1,499 per month. Now increase that rate by 1/4% to 6 1/4% and the new monthly payment is $1,539 per month, or a difference of $40. Yeah, it’s higher, but you also saved $2,500 in closing costs because your lender gave…