We received a telephone inquiry from a prospective client in the Tampa Bay area about an hour ago.  I took the call and apparently this client wanted to refinance his 30Yr fixed rate VA home loan of 5.50% to consolidate his small 2nd mortgage and consumer debts.  He had been with a mortgage company for over 3 weeks as they dragged out the approval process.

Fortunately for this client, he found BeechTree Mortgage and was going to get some sound advice.  I asked the homeowners why would he give up his already low rate of 5.5% (rates are higher today), roll-in the VA Funding Fee, and roll in closing costs and a new escrow account?  He should consider a small simple 30Yr fixed rate 2nd mortgage.

He asked me why the other mortgage loan officer didn’t offer that as an option.  Well, it’s either because the Loan Officer isn’t experienced enough to show other options available or simply wants to earn more.  Obviously there is less profit on an extremely smaller 2nd mortgage.  In both scenarios the homeowner’s best interest is put aside.

But who are we representing in this thinning mortgage industry?  It’s the people who entrust us to provide the best sound advice we have to offer as Mortgage Professionals.  If the person you are talking to isn’t asking enough questions to get a bigger picture of where you, the homeowner, are and what you plan to accomplish ; then hang up and keep looking.  We are out here and eager to help.  For mortgage advice, call anytime and ask for Stephen Thaggard or visit our web site at www.beechtreemortgage.com.

Everyday I coach consumers on which mortgage program should fit their needs and why.  Focusing and being responsible for the consumers best interest; has been the secret of my success.  The problem however is most new home buyers or homeowners have a hard time trusting mortgage loan officers or bankers.  Or finding someone who is upfront with pertinent disclosures and accurate with estimating closing costs
My recommendation is simple and this really narrows the playing field.  After obtaining Good Faith Estimates from several mortgage companies, ask each of them one question.  “If I choose your Good Faith Estimate illustrated mortgage recommendation; how much money will you or your company make.”  This question is usually never asked and in the mortgage industry and there are some who would feel very uncomfortable revealing their profit margin.  If answering this question becomes too much of a burden on the lender; you might ask them why or call another mortgage company.

But it’s this profit margin or Yield Spread Premium, and miscellaneous fees, that determines your interest rate.  Consumers should be aware.  It becomes much easier to compare one mortgage company to the next; than to figure out the science of APR.  Always shop several lenders and ask questions.  Make it fun; not a mystery.

When I hold mortgage program training classes, for our mortgage professionals, I sometimes ask this bewildering question. “If closing costs and interest rates were the same wherever cosumers searched for mortgage financing; why would someone choose you, the mortgage professional?”

Most of the time the room gets quite. You see, loan officers and bankers assume that closing costs and interest rate are the only consumer considerations when shopping for their new home loan. After a few minutes someone always shouts what they thought to be the key difference, service. But again, I would simply add service to interest rates and closing costs, leaving not much else to one differentiate one mortgage professional from the next. What separates all of us?

The answer of course is the Mortgage Professionals primary goal. To ensure the new home buyer knows his/her mortgage program choices and it’s advantages and/or disadvantages.  This will  ultimately empower their mortgage financing decision. The Mortgage Professional who educates consumers in all facets of the mortgage industry, is the one who will retain and earn lifetime referrals. They are the ones that stand out from the rest; they love their job and are proud to share their expertise with others. We sure do here at BeechTree Mortgage, Inc.

Bank of America’s new “No Fee” mortgage for new home purchases seems unreal.  They mentioned that based on an average loan amount of $200,000, they would be covering approximately $2,000- $3,000 in closing costs, which includes all 3rd party fees.  Wow.  Did you know mortgage professionals across the country have been doing this for years?  The difference is in disclosures.

Large banks such as Bank of America are not required to disclose their yield spread premium on the Settlement Statement or HUD-1.  That is, disclosing how the profit they make (which is directly proportionate to the interest rate provided) is only required by mortgage brokers and correspondent lenders.

Is it fair?  No.  But I look at it this way.  As a Mortgage Profssional I always disclose exactly how we get paid, which includes the yield spread premium.  Banks are exempt from requiring to tell you and apprarently don’t.  The only way to clarify if a no closing costs loan is a good one is to compare.  Be careful.  Disclosure is everything.

Please make sure that you compare the interest rate they are offering by calling other mortgage professionals.  YOu will be surprised to know exactly how they are paying for these fees. 

Stephen Thaggard

www.beechtreemortgage.com

    It seems the mortgage market is finally changing as it should have a few years ago.  The mortgage industry is finally limiting the availability of credit by tightening lending standards on popular mortgage programs that have perhaps caused so much turmoil with homeowners.  At last, first time home buyers and others with marginal credit issues, lack of reserves or income documentation fears will have to chill and rethink steps they should take towards buying their first home.  

My grandfather told me of the days when first time home buyers had to actually save money and put 20% towards a down payment; unless they were a Veteran.  And once the money was saved, you then had to qualify by calculating your debt ratios.  This is where a loan officer or banker would divide monthly revolving and installment debt (such as credit cards, car loan and student loans) by your gross monthly income.  That’s something I believe many loan officers that got into the business within the past 5 years have never been accustomed too. 

Many mortgage programs became available without needing to document income, assets, or employment!  And the notorious Option ARM mortgage became an option for almost every consumer, even first timehome buyers with less than perfect credit and without  a down payment.  Thats simply too much risk for lenders and too much pressure for new home owners who really couldn’t afford their dream home.

I am glad to see these changes are upon us because we need to step back into reality and have would-be homeowners contribute towards their dream of home ownership.  Save money.  Work on your credit profile. And talk to a mortgage professional to discuss the many mortgage programs that are available. 

Stephen Thaggard

Is there truly no mortgage closing costs with a no fee or no closing cost “advertised ” mortgage?  Let’s think about this a moment. Bank of America, the second-largest U.S. bank, recently decided to market their no fee mortgage to new home buyers.  Do they want consumers to believe that all the closing costs are magically erased from the transaction completely? Ok, but this isn’t true.  The costs are real and they do exist; home buyers will simply pay them in a different form; most likely with higher interest rates.  Is that fair? 

When recently asked about increasing the interest rate to cloak closing costs; Bank of America’s responsed by simply saying they were competitive.  Maybe they didn’t hear the question.  What bugs me mostly is the mystery they are building with the term “no fee”.  They are selling consumers on no fees when the truth is the fees are being covered by the consumer with higher interest rates.  Home buyers end up paying more in interest to the bank than they would have paid in closing costs.  And that’s assuming consumers were given the option to choose. 

Since we originate mortgage loans in Florida, I will use our State as an example.  In Florida the State collects taxes when someone borrows with a mortgage to purchase their home.  In Florida there are also Title Insurance costs to insure the Lender and the homeowner.   All of these costs are not excused because the bank or lender provided a no fee program.  These costs are being paid and the borrower is usually the one holding the bag, that is, not knowing how they really contributed.

 It is simply my friends.  The interest rate is increased so the bank, in this case, can earn more money from the secondary market, and in return, they take this extra money and pay these costs on your behalf.  However, you end up paying the bank more interest over the life of the loan in the form of a higher interest rate!  There is your real cost.

When clients call our office for trusted upfront answers on how this no fee mortgage works, we inform them.  Closing costs are paid in one form or another; I wish banks would be more upfront as to how it really works.

If anyone out there needs a Florida no fee mortgage illustrated with our very accurate Good Faith Estimate; I will be glad to give you one.  Then you can call Bank of America and compare.  The real difference is not hiding how it really works.  There’s usually always a catch.  And you will be truly informed when working with a true Mortgage Professional.

Stephen Thaggard

www.beechtreemortgage.com

Ok.  Let me clear the air where interest rates and credit scores are mentioned in the same sentence.  Usually new home or fist time home buyers ask me; “If they have excellent credit scores will the interest rate improve?”.  Of course the opposite is “If my scores are lower than average, will my rate be higher?”

Interesting question.  Let me explain.  When professional mortgage brokers are listening to consumer requests for mortgage financing; we are gathering information to provide, hopefully, the best mortgage program options to consider.

Every mortgage program; whether it be, FNMA’s (Fannie Mae’s) FLEX-100, FLEX 80/20, My Community Mortgage, etc, has a specific set of interest rates available.  It doesn’t matter if you have a middle credit score (most lenders use the middle of the three credit scores) of 640 or 810.  The higher the credit score, the easier it will probably be to obtain a loan approval.  But if someone has a lower score and gets approved on the same mortgage program; they should receive the same “approved” interest rate as someone with higher credit scores.

Remember, interest rates are mortgage program specific.  If a banker or lender tells you your interest rate is higher because of your credit scores, it most likely is because they couldn’t obtain an approval with a conventional FNMA or FHLMC (Freddie Mac) type mortgage loan.   Please make sure you are asking your mortgage professional, why your interest rate is what it is.  The answers are very specific.  That is, if you are working with an upfront mortgage professional.

Stephen Thaggard

BeechTree Mortgage, Inc. 

It happens again and again.  While first time home buyers are searching the Internet, gathering Good Faith Estimates, and comparing the interest rates, they forget to focus on costs.  I just completed our free Good Faith Estimate for a client that was being charged 2 discount points as a first time home buyer.  The only issue was, he would have to consider taking the additional funds from his 401K account; an account he wants to reserve for retirement. 

He called our company, BeechTree Mortgage, Inc., because of our online advertisement of no discont points or origination fees.  I explained that paying discount points should be the option of the consumer.  It’s a trade off.  Paying discount points is simply paying the interest due on a mortgage; upfront.  The recovery periods are usually at least 5 months and liek most first time home buyers, this consumer would rather keep his 401K investments choose if he wants to pay points or not.

Discount points are a consumers option.  I am tired of mortgage brokers charging them upfront as a matter of fact fee.  We need to stop confusing consumers and provide the lowest rate we have avialble for fair consumer internet shopping.

Again, it does pay to talk to a Mortgage Broker Propfessional.