Jason Holter: A Houston Lender You Can Trust!

As we all know the Lending business has gone through quite a lot this past year. I have come across an article written by one Lender I have done business with and trust. I thought it would be worth sharing his article with you:

Chances are you have seen the mortgage meltdown within the past year on various forms on news. Who hasn't? Whether you were watching the evening news, reading the newspaper, have heard various stories from friends and family members, or are involved in it yourself.

Here are some of the problems that occur in the mortgage industry and some insight on what to watch out for:

1) Stated income loans - These are loans for people who say they make x number of dollars however they cannot prove it. In turn, the loan officer qualifies them at this usually higher than realistic income and they get into the home. When a financial problem arises, they are unable to make their mortgage payments. If you cannot afford the payment with the income you make right now it is not a good idea to get into the loan. You might want to consider looking for something more affordable.

2) Borrower showing up for closing and the rate and closing costs on the paperwork are different from disclosed. Loan officer says they are getting 6% fixed and at the time of closing, the rate is 8% and is adjustable. This happens all the time. It happens more with people applying with a mortgage company advertised online or on commercials. The problem is that you do not get to know the people you are doing business with. They may be in another state. Sometimes you have no other choice but to sign and then you get into trouble. A way to prevent this is by looking for testimonials from people that your loan officer has helped.

3) Application fees - Mortgage companies charging application fees. Some mortgage companies require an application fee of $465.00 or more. The reasons these fees are charged are to prevent a borrower from shopping around. It is hard to walk away from a deal when you know you are throwing $465.00 away by leaving.

4) Builder affiliated mortgage companies - This is a huge one. The builder who owns part of the mortgage company says that if you use xyz Mortgage Company (builder preferred), you will receive the upgrades at no cost. If you decide to use your own mortgage company, you will not receive the upgrades. This is a violation of RESPA, and should be reported to HUD. Builders receive fines of thousands of dollars for this practice. For example, this is the story with James and Jennifer. They have great income and good credit. They have jobs that they have been in for a while. They bought a home and used the builders preferred mortgage lender. They are in a 2-year adjustable rate mortgage (goes up after 2 years) at 8.6%, with a pre-payment penalty of 3 years (mortgage lender charges a fee for paying off early). Their second rate is 12% fixed. The first rate is adjusting to 10.6 this January. By refinancing to a fixed rate mortgage of 6.5%, they are saving $312.00 per month.

5) No fee refinances - Loan officers make money in two ways. One is in the closing costs you see. The other is in the interest rate charged. The higher the interest rate the more money the mortgage banker-broker makes. A television commercial was offering a $395.00 flat fee refinance. Given the scenario, of a 700+credit score, proven income and looking to refinance a $200,000 loan, switching it from a 30-year to a 15-year and no cash out, they would qualify the buyer for a 7.5% interest rate. Someone with this can easily receive around 6% fixed with closing costs. Based on the commercial offering the buyer would pay an additional $124 per month for the no cost refinance. Over 15 years that is $22,320 extra in payments. Make sure that the person you are dealing with tells you about how the mortgage company makes money. Closing costs and yield spread and, remember that mortgage brokers are required to disclose the amount of money made where mortgage bankers are not.

6) Retail lenders vs. mortgage broker - The myth is that you can receive better pricing by going directly to the bank to secure the financing vs. using a mortgage broker. I recently had a client I will call Greg. He is in the financial advising business. I called and gave him the deal that I could get and gave him the name of the bank I was using. He called the bank directly and to his amazement, my rate was .5 cheaper than he could get at the same bank. We closed him at 6% and the best the bank could do was 6.5%. Their answer was that from the bank was that the mortgage broker must have WHOLESALE RATES!

Here are some tips to make sure you are getting a good mortgage deal:

1) Do not be pressured in any way.

2) Check references.

3) Look for testimonials.

4) Get expert advice.

5) Have an attorney review the paperwork.

6) Do not pay application fees.

7) Do not borrow more than you can pay back. If someone offers you a stated loan, leave the office.

8) Find out how long the loan officer has been in business. Have they furthered their education by taking fraud prevention courses?

9) Deal with someone local. It is easier to resolve problems with someone you can meet face-to-face vs. talking with someone in another state. Avoid dealing with online advertisements or commercials.

10) Make sure that they are telling you how much they are making on the loan. Make sure they discuss how they are paid. If they are a broker, they will have to disclose closing costs and yield spread premium.

11) Find out if they are licensed. Mortgage brokers and loan officers that work for mortgage brokers require a license. Mortgage bankers that work for banks or credit unions do not require a license.

12) Find out what percentage of clients are from repeat/referral business. This will give you a good idea on who you are dealing with. See if they will give you the name and number of a closed client.