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WalletPop:

Filed under: Debt, Real Estate, 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.

Which is the better choice, a mortgage broker or a mortgage banker? First, let’s dig a little deeper and find out exactly what each of these terms mean.

A mortgage broker does not lend money nor make a mortgage but instead finds a mortgage from other lenders on behalf of their client, the buyer. A mortgage banker places a mortgage directly to the buyer from its own funds. Does that make the mortgage broker more expensive?

No, because the mortgage broker has access to other mortgage company’s loans at a discount, mark them up to “retail” and can compete with any direct lender. Much like an independent insurance agent who shops around for the best deal. In fact, that’s an advantage mortgage brokers tout…having the ability to shop for the best deal. A mortgage banker can’t shop around, they use the interest rates and fees set by their company. So if the broker can shop around for the best deal, isn’t the broker the better choice? Not necessarily.

Mortgage rates from one company to the next can’t be all that far apart because lenders price their 30 year fixed rate mortgage on the very same index. One lender can’t be at 5.00% while everyone else is at 5.50% for instance. There is no secret lender who has the best…

WalletPop:

Filed under: Real Estate, Shopping, 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.

Rates over the past few months have been volatile, to say the least. I recall one day where mortgage rates on a 30-year fixed rate loan went up nearly 1/2% in one day. That’s a rare occurrence, but not unheard of. Rates can move throughout the day based upon a variety of economic or political factors but the fact that they do move requires a portion of prudence when it comes to qualifying.

Realtors, lenders, even your beer buddies acknowledge the importance of getting pre-approved by a lender before you go shopping for a home. When you do so you can shop in confidence. That is unless you were pushing debt ratios to begin with while mortgage rates hovered near 5 1/2%, like they did last March. Now, rates are closer to 6% and if you got pre-approved for a home loan a couple of months ago and are still shopping you might want to contact your lender and make sure you can still qualify.

This is especially true for those who might have been pre-approved for a mortgage to buy a brand new house but the builder isn’t finished with your new abode. A lot can happen over several weeks, shoot, a lot can happen in the course of a business day. If you’re pre-approved, it pays to contact your…

WalletPop:

Filed under: Debt, 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.

Okay, I admit. There are those who will vehemently disagree with the premise of not paying down debt, I’m among them, but there are times when not paying down debt makes perfect sense when considering buying real estate and obtaining a mortgage. On the other side of that very same coin, it also makes sense to pay down debt for the very same reason: to help qualify for a home loan. What’s up with that?

When debt-to-income ratios are too high for a particular loan program, then getting rid of some of that debt to help qualify is in order. But which debt? Revolving balances on credit cards do very little unless you substantially pay down a credit card balance, from say $10,000 to $5,000, but simply paying $1,000 or so will do very little to reduce the minimum monthly payment on that revolving account. That means the debt to income ratio will barely be affected.

Not the case with installment loans, and in particular an automobile loan. An interesting underwriting guideline asks that if an automobile loan has less than 10 months remaining then the lender won’t count the car loan against the borrower’s debt even if the borrower is still making payments on the car. For instance, if a borrower’s monthly car payment is $450 and has 12 months left,…

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.

Q: David- I have a 3-1 arm. Every 6 months the payment goes up. I need to refi and lock in lower payment but I now live in a “decreasing” neighborhood. My credit is excellent but nobody wants to refi me. I have no money to bring to closing!!! H-E-L-P!!!!!! -Groovner

A: Groovner: It’s not a situation of a lender wanting to refi you, they certainly do, but only under underwriting guidelines that include a consideration of living in a “declining market.” When an appraiser appraises a property, she must check a box that states if the market is stable or declining. Other lenders and mortgage insurers have identified various counties throughout the United States as “declining.” When a property is in a declining market, lenders will require a lower loan amount compared to the current appraised value, typically 5% lower than normally required.

Perhaps you can save some money by taking a higher fixed rate in exchange for a lender paying some of your closing costs, but other than that all I can suggest would be to wait it out. One good point is that adjustable rates have been on a downward trend as of late and it’s likely your next adjustment will be down, not up. — David

Real estate finance expert David Reed is president of CD REED Mortgage…