Central Connecticut's Guide To Home Ownership

This is a replica of what I posted on WannaNetwork.  You can Click Here for that thread.  This blog post is primarily for other mortgage originators, but if you are a client and want more information on Reverse Mortgage programs, please let me know!

A significant piece of my business are Reverse Mortgages. They make up for about 70% of my total volume, and are truly great programs.

Here are a few reasons why your client should look into these programs and why you should get "brokered in" with me:

1. You can improve your client's overall quality of life
2. Allowing them to be financially stress-free
3. Ability for them to support their less-fortunate family members
4. Paying off old loans and/or debts
5. Making renovations or improvements on the home.

And for you brokers, correspondent lending with Reverse Mortgages are falling through the cracks and brokers are losing their ability to write these loans. What does that mean for you? Flat commission fees for broker programs with no further incentives. Essentially, you are now going to be going to an unknown Reverse Mortgage originator that you don't know. Do you want that for your client(s)?

My point is, wouldn't you rather actually close the loan and get paid rather than sitting around waiting for that commission check for 4 months?! Broker-in through me, and I will try to push every closing to 21 days!

I have been getting a lot of requests for New Construction financing.  The clients have been telling me that they would have to get the lot first and finance the construction, then they would have to get permanent financing in place.  I cannot tell you how relieved they were when I told them they didn't have to go through that entire process!

There is a couple of loan programs that I offer which are designed specifically for new construction.  Here are the features:

1. You only close one time.  This means you don't have to qualify two times, and you don't have to worry about permanent financing or losing your home if you don't qualify for that part!  This is not only a huge relief to you, but the builder/developer as well!
2. Conforming loan rates with no add-ons like some competitors
3. Ability to pay interest only throughout the construction period which saves you on your current monthly living expenses.
4. Estimated monthly housing costs are waived to help you qualify for this loan program.
5. Construction terms up to 18 months and down to 3 months
6. Permanent financing terms of 15, 25, 30, and 40 years which gives you flexibility based on your income and financial situation
7. Construction periods up to 18 months
8. Stated income loans are accepted
9. First and second homes are allowed (sorry investors)
10. FICO as low as 660 can get this conforming loan financing!

There are quite a bit of details in these features, and I'll go over those in the next few weeks.  Please stay tuned for more information, or email me if you have any questions!

I know there's a ton of investors and home-owners alike out there looking for these types of loans.

I'm sad to say that the following program is not meant for the in investors, but is meant for an Owner Occupied property (either primary or second/vacation home). That being said, we do have loan programs for you as well, so read on!

There are 2 types of rehab loans that we can use in order to provide financing for your home's improvement(s). The first that I would like to touch on is FHA backed. It's called a 203k program. This is very similar to the FHA program in that you have no particular credit guideline (previous 2 years have to be pretty decent). A stipulation, however, is that you are maxed at FHA's loan limits. The best thing about this program, though, it that you are able to go 97% financing of the estimated finished value of the home, AND the 3% can be a gift or DAP (down-payment assistance program).

The second program is a conventional loan product. There is a specific program that is offered where you do not have to close two times (once of the construction/rehab, and once of the permanent financing). The downfalls of this program is that it only goes to 95% financing of the "after rehab" value (all 5% must be from borrower), and you need to have a 660 or above. However, you are going to benefit from more product options and loan limits than the FHA program.

So, here's a brief run down of how they work:

1. You find a home that you want to rehab (maybe it's yours right now)
2. We refer you to certified contractors/builders
3. We close you one time for both the rehab/construction and your permanent financing with no addition to rate
4. Your building funds are kept in escrow until needed
5. You pay interest only until the rehab is done, and only on the amount drawn
6. We get a certificate of occupancy once the construction is done
7. You move in with your stuff, or get it ready for your second home, and pay on a conventional, or FHA, mortgage

We have all heard the countless advertisements and discussions on home loans with absolutely no fees.  In fact, there are many discussion posts as to why the lenders don't pay the fees themselves.  The later is a whole different topic.  I want to enter into the debate now of whether it's more cost effective for someone to do a no cost refinance over a with closing costs.

First of all, it's important to define exactly what a closing cost is.  Here is just a general list as well as a link to a credible source.  Please keep in mind that these are costs not incurred by every lender, and I will mention what my typical costs are as well at the end of this post.  So, with that said, here is the general list:

• Application fee
• Credit Report Fee
• Origination fee (percentage points)
• Discount fee (percentage points)
• Title search
• Title insurance
• Attorney fee
• Appraisal
• Homeowner's insurance escrow
• Tax escrow
• Private Mortgage Insurance
• Mortgage Insurance Premium (if FHA loan program)
• Inspection (if required by lender)
• Survey fee (if new construction and required by lender)
• Recording fee
• Transfer fee
• Administration fee
• Lender fee
• Processing fee
• Underwriting fee

The list goes on and on, and unfortunately there is no government regulation as to what fees a lender can/can't charge.  The only stipulation is that there is no discriminatory practices associated with the fees.

Now, according to reports from 2006, the average cost to close a $100,000 home loan was 3% ($3,000) which included all fees associated.  So, playing off this example, let's consider what it would cost to do a no-cost refinance.

On a typical loan of (hypothetically) $100,000 at an interest rate of 6.5% you will be paying a total of $127,500 in interest.  Now, add on the additional $3,000 it took to close the loan, and you are looking at spending $130,500 in total cost associated with the loan.

On the flip side, we'll take a no-cost interest rate of 7.125%.  On this loan, the entire $3,000 in fees are waived and paid by the lender.  Your total associated cost in interest is $142,500.

 So, by doing a no-cost refinance or purchase on your home worth $100,000, you just spent an extra $12,000.

Now, what are the alternatives?  You ask this because you don't want to pay closing costs, and certainly don't want to pay more because of a higher interest rate.  Here's the solution:

1. Shop around to 3 different lenders and use an interview process to determine who to go with
2. Negotiate with the lender/broker on fees associated with the loan once the rate is locked in (sorry all the LO's out there...I just wanted to help out the borrower here)
3. Negotiate with your leverage (you have people that you know, I'm sure who are looking at financing options - use those referrals)
4. Don't be afraid to walk away from the deal at closing if it's not what you agreed to (it's only too late if you sign on the dotted line)

There are a lot of upfront Home Loan Consultants out there!  You, the client, need to really concentrate and carefully select the lender that will handle your biggest investment!

Please contact me for any other information regarding home loans.  My cell phone is always on (203-257-5279), and you can email me at any time as well (Andrew_Scherer@Countrywide.com).  Thank you for stopping in, and I look forward to hearing from you soon!!

*As promised here are my typical closing costs associated with my loans.  Lender fee of approx $500, 1% origination, and the 3rd party fees associated with the file (attorney, title, appraisal, etc).  However, I am very negotiable on the fees and will work with you to get your deal closed and funded!