Mortgage brokers have been the whipping boys of the lending industry this year. Ouch, still stinging, still getting bad press. We're battered, we're bruised, but guess what? The real estate world needs smart, creative mortgage brokers more than they ever did before.
Why? Because putting loans together in a way that gets the BEST LOAN for the borrower requires thinking outside the proverbial BOX these days. What has changed?
- The difference in a jumbo loan ($417,000 and above) and a conforming loan is much greater
- Lenders place limits on the amounts they want to loan on first loans
- Every aspect of a loan is subject to much tougher scrutiny from appraisals to credit scores
Yes, kids, the easy days are over.
Earlier this week, I sat with a new client in the conference room of a real estate company. The air was thick with skepticism when I sat sat down, ("how can SHE help me?") Although I had been invited there by the Realtor for a pre-qualification meeting, I couldn't seem to break the ice until we began to crunch numbers.
After showing him via an actual rate sheet that the difference in JUMBO RATES and CONFORMING RATES was nearly a point, I suggested he limit the first loan to $417,000 to get the lower rate of a conforming loan, and take the rest as a second loan. Why? Because the blended rate of the 2 loans is less than one loan at the jumbo rate.
After he absorbed what I had said, his eyes grew wide, a smile appeared on his face, and you could feel the chill start leave the room. I had just saved him thousands of dollars ("hey, maybe she DOES know something that can help me!")
Later that same day, I showed an investor how limiting his first loan to 70% of the value of the property (instead of the 80% he suggested) and adding a 10% second, made more sense. Why? Because again, the blended rate of the first and the second combined was a lower rate than just one loan.
Lenders have come to the conclusion that they only want to "risk" a 70% first loan with investors, so the rate at a 70% loan is much better. Their theory is "Let another bank take the risk for the last 10% of the loan".
Mortgages have always been a little like putting together a puzzle. So let's just say in this new environment, the pieces are much smaller, and there is no picture on the cover of the box.
PS I like adding equitylines as second loans instead of fixed rate seconds. This adds the flexibility of lowering the payment as it is paid down, while still giving the client access to the equity in the property, should they need the money again. Rates are great as well, since they are tied to prime, and prime is the index the Feds have lowered twice in recent months.
Comments(6)