Mortgage Minute

What is the difference between a mortgage broker and a mortgage banker?

As a Mortgage Banker and Broker, I have an unbiased opinion of each type of entity. From the standpoint of a consumer the differences in the two can be hard to detect. While each entity has strengths and weaknesses, it’s beneficial to remember that all mortgage entities are middle men. They must sell loans to the market to free up cash in order to make more loans. I know of Bankers that overcharge consumers with a smile on their face and I know brokers that offer a great deal. There are national lenders that are publicly traded companies making thousands of shareholders rich at your expense and there are local private firms that can beat national lenders hands down due to better efficiencies and lower overhead. From my experience certain loans are best handled as a banker while others are best brokered. What you need is an experienced consultant you can trust who will share realistic expectations. For mortgage information contact TexasLending.com today or send your email questions to info@texaslending.com.

How do I shop mortgage companies for the lowest closing costs?

The fact is that closing costs are whatever you want them to be. If you want $3,000 in total closing costs then tell all companies that you want a rate quote with only $3,000 in costs. Count taxes, insurance and daily interest separate from closing costs. Tell the mortgage companies that you will ask them to sign an affidavit holding them to the closing costs quoted. You will now be able to see who has the best rate with the costs you choose. Rates should only be shopped on the same day within a 2 hour window because the mortgage market sees rate changes in real time similar to the stock market. If you receive a rate quote on Monday from company A and a quote on Wednesday from company B be sure to call back company A to get a rate update. In a falling rate environment the good quote on Monday may seem like a bad quote on Wednesday. In a rising rate environment the Wednesday quote will look worse than Monday and you’ll kick yourself for getting greedy and not locking the loan sooner. For more information contact TexasLending.com or send me your email question to info@texaslending.com.

What can you tell me about the loans that can drop my mortgage payment by 50%?

The loans you hear about on the radio or see on TV about dropping your payment 50% are designed for the benefit of the lender and not for you. Mortgage companies sell you this loan is because they get paid 3 times as much to push this loan on you than they will if they close you on a fixed rate at 5.75%. For example, they may start you with a “pay” rate of 1% but your actual charge rate is somewhere between 7% and 8%. While you may improve cash flow today you may be trading your future away. The difference between 1% and 8% is added to your loan principal and will compound yearly. You may soon owe more on your home than it’s worth and at some point you’ll be expected to pay back the higher principal balance and interest. Because I don’t let friends drive drunk, I don’t suggest this loan for you. For a safe mortgage for you and your family contact TexasLending.com today or send your email questions to info@texaslending.com.

What is a 2/1 buydown and how can it help me with a mortgage?

A 2/1 buydown is mortgage program that helps families afford the first years of home ownership. Let’s say you are obtaining a 30 year fixed mortgage with a 6.5% interest rate. A 2/1 buydown will start the rate at 4.5% for the first year, then move to 5.5% the second year, and finally reach 6.5% and stay there for the remainder of the loan. The mortgage interest saved during the first two years is typically between 2% to 3% of the entire loan amount and is charged at the time of loan is closed. The 2 to 3% upfront charge can be paid for by the homebuyer, the home seller, or the lender. The monthly payment savings for a 2/1 buydown is significant. For example, the difference between 4.5% and 6.5% on a 30 year mortgage for a $180,000 loan is $300 per month. A 2/1 buydown can be obtained on certain conforming loans, FHA loans, VA loans, and nonprime loans. As usual other conditions will apply. For more information contact TexasLending.com today or email your questions to info@texaslending.com.

Who is eligible for the PMI tax deduction for 2009?

Previously, borrowers could not deduct the cost of private mortgage insurance payments on their federal taxes. A new federal law allows qualified co borrowers with adjusted gross incomes up to $100,000 to deduct 100% of their 2009 PMI premiums on their federal tax returns. Co borrowers with adjusted gross incomes up to $109,000 can take advantage of a partial MI tax deduction (the legislation includes a phase-out by 10% for each $1,000 a taxpayer’s adjusted gross income exceeds $100,000 with a cut off of any deduction at $109,000). Single borrowers are limited to an adjusted gross income of $50,000 to deduct 100% of their 2007 PMI. Partial deductions are possible with a phase-out by 10% for every additional $500 in adjusted gross income with a cut off of deductions at $54,500. The legislation is effective for PMI certificates issued through 2010. For clarification see your CPA. Call TexasLending.com for your home loan today and send your email questions to info@texaslending.com.