Tim Bradford - AMMCorp.net

 

As many of us know in the real estate market, FHA loans are being used more than ever before.  With the disappearance of the subprime market of 2 years ago and in several cases, that conventional loans can be more expensive, more FHA loans are being utilized.  I just wanted to point out some basics, because I am still hearing some misleading information that makes me cringe from time to time.

 

FHA loans are more expensive than conventional loans.  - FALSE

This one is always a favorite of mine. Right now, forget about the pricing hits on the credit scores when comparing the 2 types of loans.  In reality, a lender can make a little more on the FHA loan because of the SRP's, which are the service release premiums. This is basically what the investors on Wall Street are paying to buy the loan.

 

 

 

 

Why would a loan officer state that FHA mortgages are more expensive?  Or the fees might seem higher?

Here are a few reasons why you might hear this.....

• It went through the rumor mill. If it came from a realtor, the consumer, or the loan officer, it just circulated and either was twisted information or someone didn't know what they were talking about.

• Some people get the upfront mortgage insurance premiums confused with the general costs of the loan. If this is not explained correctly, it's very easy to assume that FHA mortgages are more expensive.

• Here is a good reason.... because the loan officer wanted to make more money, since the borrower didn't have perfect credit and or the credit scores were in the low 620's. I have known loan officers in the past that gave higher rates and or fees, telling the borrower that they were being placed in a FHA B minus loan.

• One false rumor - FHA loans are said to have higher costs. This might take place if the lender or loan officer decides that they can capitalize on FHA mortgages. But in reality, no matter what company that I worked for, my costs were the same no matter if it was a FHA loan or a conventional loan. And as I mentioned, sometimes people included the upfront mortgage insurance and associated it with the costs. Now, this is an extra cost, but you need a very good loan officer to break down these costs and compare apples to apples. I have written a series on comparing FHA loans and conventional loans. I take into consideration the LTV (loan to value) and the borrower's credit scores. (there will be 5 different blogs below, that will show you the differences between FHA loans and conventional loans.)
  

 

 

 

 

Other rumors out on the street?

 

• FHA loans now require a 3.5% down payment, not 3.0%. (this was announced in 9/08 and was effective January 1st, 2009.)  Besides, back then, it was 2.25% as a down payment and .75% used for closing costs).  I bring this up, because a friend of mine who is a loan officer in Florida was told in a class that it's 3.0%.  And keep this in mind, this was coming from an instructor.

• FHA loans aren't just for First Time Homebuyers.  You can use FHA loans over and over.

• You can have 2 FHA loans at once, but there are major requirements.

• Monthly Mortgage Insurance is not there for the life of the loan. It will fall off when you hit the 78% LTV mark. And if you put 20% or more down, the monthly mortgage insurance is only there for 5 years. On a conventional, this is called PMI, private mortgage insurance.

• FHA loans take longer to close !!! -  This is 110% incorrect. They take just as long as a conventional loan.  It comes down to how hard the deal itself is, and how good the loan officer and the mortgage company.
  

 

 

 

 

For more FHA loans vs conventional loans comparisons :

• FHA loans vs Conventional loans - A true numbers comparison with 5% down - Using a 710 credit score
  

• FHA loans vs Conventional loans - A real comparison with 5% down - Using a 659 credit score
  

• FHA Loans vs Conventional Loans - 20% down - A Rude Reality Check - Would you believe that FHA loans could be cheaper even with 20% down?  Come see why and how.

• FHA Loans vs Conventional Loans - 5% - 4 comparisons that you need to know - Comparing a FHA loan against 3 types of conventional loans with different types of monthly mortgage insurance. Guess who won while still using a 679 credit score.....

• FHA loans vs Conventional loans - Knowing the true comparisons - A great comparison with a 679 credit score and 5% down.  This example will still show that even with a better than average credit score, that FHA loans are still better in many cases.

 

 

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

DISCLAIMER : This topic might tick off some of those that do play both roles, who are a loan officer and a realtor. Sorry, but I have a problem with this. Just hard core mortgage related facts.

 

So, how many hats do you wear?  Sure, I wear many hats as a loan officer, but in my opinion, it's all part of my job. What about those that are actually a loan officer and a realtor though? How many more hats do they need to wear?  Sure, if you are one of those that do both, I am sure you think you do a good job for your clients. But is this just your opinion? And is good good enough?  I try for excellent and feel that it's hard to hit that mark if you are both. And keep in mind, this is just my opinion.

 

 

 

I GUARANTEE !!!!

 

I am sure that these same people that are both a loan officer and a realtor will say that they have your best interests at hand. Their reasons would be :

• I am not charging you as much, since I am your realtor and loan officer. But define not as much.  And could it cost you more in the long run?

• I have been doing mortgages and real estate for 10 years.  Okay, is this together, combined in years?  Have you been a realtor for 9 years and a loan officer for just one year? More on this later.

• "I will guarantee you satisfaction." Well, anyone that knows me, I hate such words and phrases as :  "I guarantee" "I promise" "no problem," "Don't worry" "trust me" "I have your best interest at hand" etc, etc. Even though I know I am very good at what I do and know that I can get you a mortgage, I don't like using these phrases. Yes, they calm the borrowers nerves, but I view it usually as a good sales tactic.
  

 

 

 

Here is how come I can make my opinions. I can base them on past examples and on comments from other individuals that say they are both a realtor and a loan officer.

I wrote this blog a while back. FHA loans vs Conventional Loans, a real comparison with 5% down  I was attacked by like 3 loan officers in this blog, telling me that I was way off on my conventional rate example. They either told me that they were both a realtor and a loan officer or I found out after doing some research. What was ironic was that I asked each one of them if they knew how to read a rate sheet and see that there is a major pricing hit for lower credit scores. And that this is not a lender hit, but a FANNIE MAE pricing hit. Only one got back to me and said that he spoke to another loan officer and still told me that I was wrong.Just because someone else confirmed your thoughts, doesn't always mean that it's correct. Hence why I ended up writing about this. Two wrongs don't make a right, or do they?

And the funny thing, yet a sad thing, these same people that tell me that I am wrong are usually both a loan officer and a realtor.

 

 

 

I will say this....   no matter how good you are in the beginning, you do usually become better with more years of experience. But just because you have been doing something for 10 years, doesn't always make that person very good or better. Example - I closed a loan last year that another loan officer had for 30 days, yet he couldn't make the settlement date. He was still working on it when we closed it in 5 business days. There were credit issues that needed to be taken care of. But this was a loan officer that told the borrower that he had been doing mortgages for 30 years. See my point?  Age doesn't always make it better or you better.

Passion and having a large heart. - Now, I know many of us have a large heart and passion for what we do. I know I do...  but just because you are nice, doesn't mean that you are good at what you do. Sorry, but it's just a fact of life.

 

 

Conclusion : Let me pose one question to you.  Would you want a heart surgeon who specializes in this, to operate on your brain, just because they are a "surgeon" and or went to medical school? What about a realtor who says, well, "I was trained as a loan officer also." The better loan officers and realtors that I know and respect, wouldn't do both. Sure, conflict of interest in my opinion. But it's hard to stay on top of just the mortgage industry alone.  Just food for thought and based on my opinions.

 

PS....  I know we are in a very tough economy. I know many loan officers and realtors that have gotten second jobs. But as a realtor and a loan officer?  In my opinion, this is like mixing gasoline with fire. You could just be waiting for an explosion and that explosion could be your mortgage not closing or closing on time.

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc

 

 

BEWARE – A very boring topic below, but important to understand. (please read the whole thing before you assume what I meant by the title of my blog, about FHA loans.)

 

 

What first comes to mind when you hear the word junk? 

  --  Crap?

  --  Old?

  --  Trash?

What about the term, junk fees? Closing cost junk fees? Answer dot com gives you a definition of this and an example. - Junk Fees - Many people, even realtors and loan officers, assume that fees other than points charged by the lender are junk fees.  Back in the day, this might have been partially true. But there is a cost of doing business and in today's market, it's not cheap. It all comes down to how it's explained and how it's shown on your good faith estimate.

 

 

So, how does a mortgage work?  A mortgage company, the processiing, and it's fees?  It really hasn't changed since I got into the mortgage business in 1992. Well, the profit margin and fee structure of a mortgage company hasn't really changed. The cost of doing business has a little. 

Your typical fees are generally :

• $500 commitment fee

• $82 transfer tax fee

• Credit report fee

 

Other fees that you will see :

• Processing fee

• Warehouse fee

• Doc Prep Fee

• Attorney Fee

• Administration fee

 

 

Now, here is what disgusts me when so many realtors or borrowers scream junk closing fees. Until you understand on how a normal mortgage company operates, you won't truly know what is a junk fee or not.  And another thing to understand, it also comes down to the rate and points that one is charging. All mortgage companies and banks have fees associated with doing a mortgage.  Even your bank down the street or Bank of America or Wells Fargo charge closing costs.  It just comes down to where they place these fees. Here are some real examples....

 

It generally costs about $1,000 for the processing of a mortgage. This is to include fees associated with the lenders warehouse line, underwriting, and closing of the loan. You might say that the lender can get this in the points and or rate. Yes, this can take place and this is how I generally do it. Why?  Because you can write of a percentage of your points and interest on the loan. The fees, aka junk fees, can't be deducted on your tax returns. Please consult a CPA or an accountant when talking about this. Overall,  it comes down to understanding the process and costs of a mortgage; not what you assume.

 

 

My whole point to this is that the fees have to be collected one way or another. Yes, some loan officers or lenders beef up their fees, adding to them, which gives them the name  'junk fees'. I have seen some weird names for some of these fees. But every lender has a profit margin. I have worked for large lenders and small ones, and it usually is close enough. When you borrower money, it costs money. It basically comes down to how large the profit one is willing to make. But keep in mind, it's more than just about the rate and fees. What about service?  What about communication? What about timely responses?  What about your loan officer educating you about the process? I'll be honest, I would be the cheapest one out there every time, that's if I didn't have to return a phone call or an e-mail or explain anything.  And this happens more often once you say yes to a specific lender, in starting the application process. I know this because I hear it from borrowers all of the time. Good news or bad news, that loan officer should be somewhat easy to reach until you are finally closed on your loan.

 

 

 

Important Key Point to remember -

 

Each borrower is different.  Each loan is different. Remember that I said most lenders have a specific profit margin in mind?  Let's say it's $4,000 per loan. If I am borrowing $400,000, it would cost me 1 point in fees, points, or in the rate. Meaning that I could charge you no points and no fees, yet charge you a higher rate to still make my profit margin. If I am borrowing $100,000, it will now cost me a total of 4 points, no matter how this is spread out within the fees or the rate.

My whole point is that you can't compare your friends cost of a loan or sometimes the rate. Not if the lender is charging you accordingly. I just had a borrower e-mail me their HUD settlement sheet and yes, they charged $2,083 in fees. But if I look at my profit margin, I was about $2,100 cheaper than this company and a 1/4 percent lower in rate. I agree that you need to shop for your mortgage, but you should not over-shop or shop for the lowest. Just my opinion on this.

Please read : I want the same deal that my friend received on their mortgage.

 

 

 

Pet Peeve -

 

FHA loans are more expensive!! - No, they are actually cheaper in costs. I just did a cost scenario for a borrower, as I always do, and it was costing him $9,000 less on a FHA loan and the payment was $3.00 more a month. Yes, it was because I had him put 3.5% down instead of 5% down. But it was also because the points for that same rate were actually a 1/2 point less on the FHA loan, which in this case was $1,930 cheaper. Why?  Because most investors and major lenders get a larger SRP (service release premium) back from those that buy these on Wall Street. The fact that many say FHA mortgages are more expensive in costs, just don't know what they are talking about in most cases.

 

 

 

                    

                                                                                               FOLLOW ME ON FACEBOOK

 

 

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages - 

- Conventional Loans - 203 k loans -

- Mortgages -

 

Experience & Knowledge at its BEST !!!

 

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger of Infinity Home Mortgage Company, Inc