Types of Mortgage Lenders

by cgilles | Nov 24, 2011 | a-El Segundo, a-Hermosa Beach, a-Long Beach, Blog, Manhattan Beach, Redondo Beach, Torrance

There are several types of mortgage lenders for those who are seeking financing for either buy a home or refinance a home. Each type of lender has its advantages and dis-advantages, but anyone getting ready to buy a home, or refinance their home, should be aware of the financing options that exist in the real estate market today. Most all lenders who do mortgage loans are going to require the same application package from the borrower, and accompanying documents as most loans are sold by the lenders to Fannie Mae or Freddie Mac, so all mortgage financing requires the same paperwork and borrower qualification standards.

1 BANKS
Advantages:

Regulated by state and federal agencies
Current banking relationship can get you a reduced mortgage rate
Numerous branches provide you with face-to-face access

Disadvantages
Limited to products only the bank has to offer
May not have the best rates
May lack negotiation leverage when it comes to publicized rates

2 MORTGAGE BROKERS
Advantages

Access to a variety of mortgages and lenders
Can save you money by shopping for the best rates
Can quickly find another lender if your loan initial application is turned down
Disadvantages
Some function as the lender’s agent and have the lenders best interest at heart
Free to set their own pricing and may mark-up wholesale rates to whatever they want
Service may vary from broker to broker

3 HOME BUILDERS & REAL ESTATE DEVELOPERS

Advantages

Good way for the first-time home buyer to qualify
The buyer does not take title to the property until the home is completed

Disadvantages

May favor certain lenders who offer higher rates
Can pressure you into getting their loan instead of using a different lender

4 INTERNET LENDERS (ONLINE LENDERS)

Advantages

Allows you to shop for competitive rates online

Disadvantages

A greater learning curve for the borrower to understand the lending process

The most common source of home lending is a retail financial institution, like a bank or credit union. They offer specific loan products and handle their own direct financing.

Mortgage Brokers, act as the loan processors, taking care of everything needed to get the loan funded, like ordering appraisals, getting credit reports, opening escrow, and other details. Mortgage Brokers don’t fund the loans themselves, but handle the mortgage financing arrangements for the borrower. Most Brokers earn their fees (called points) from the lender, and in some cases from the borrower also, or a combination of both. Since mortgage brokers have access and work with a wide variety of banks, credit unions, and other sources of financing, they are usually on top of the latest rates, fees and lending practices, and know who has the best overall mortgage loans to meet each individual loan requirement. Mortgage Brokers also know which lender will best match the borrowers financial qualifications.

Home builder, or home developer financing is common in new home developments where there is a single builder. The builder carries the construction costs until the homes are built and are ready to be sold and permanent financing put in place to pay off the construction loan. The builder works with a lender to set-up financing for the buyer and finances the construction costs. The buyer doesn’t make mortgage payments until the home is completed and bought off by the building department, and approved as complete by the construction lender.

Buying A South Bay Home – Are You Financially Fit?

by cgilles | Nov 20, 2011 | a-El Segundo, a-Hermosa Beach, a-Long Beach, Blog, Manhattan Beach, Redondo Beach, Torrance

People make a decision to purchase a home or piece of South Bay real estate without any consideration of their ability to be able to make mortgage loan payments in case of an emergency or a major life change like an illness, loss of employment, divorce, or other unforeseen circumstances. The top three reasons people file for bankruptcy are change of job status, divorce, and unforeseen health expenses. If you face any of these challenges and don’t have a financial cushion like some money put away, this may negatively impact your ability to pay a mortgage. Big life events dictate your readiness to buy now or to wait for a little more stability.

Some signs that you should not buy right now:

Will you be moving within the next five years?
Are you planning on having children soon?
Will you be making a job change? (or maybe you don’t know)
Have you recently filed for bankruptcy or is your credit score below 630?

If you answered yes to any of these questions, or you are experiencing other life-changing events like illness, marriage, divorce, or breakup, you may want to wait until your life and finances stabilize better. Aside from life events contributing to your decision to buy a home, getting your financial house in order before you begin your home search is the key. Even with all the programs available for buyers with a low-or-no down payment, if your debts are growing steadily and you don’t foresee an increase in your income, you are putting yourself in greater financial risk by taking on a mortgage.

With few exceptions, most loans for people who are still repairing their credit or recovering from bankruptcy will always carry higher rates than those available once your credit is in better shape.
So the question comes down to this: Do you buy now, before prices appreciate higher than you can afford, but do so with an expensive loan?
Or do you wait and repair your credit, then get a favorable loan, and pay more for your home? These are questions that a good financial counselor or mortgage broker can help with. Don’t be in a rush, after talking to a good Realtor, and a mortgage broker or lender, go to some open houses to start getting a feel of whats available and the prices, etc. Talk to a mortgage broker about getting preapproved for the amount of your loan. Remember that your Realtor and mortgage broker can explain details of all the mortgage loans that are available. Go over your credit report and your credit score with a broker and make sure that there are no problems that will come up later in the process. Talk to other homeowners and also talk to people in the neighborhood you are interested in, and get their inputs, the good and bad. Keep an open mind and soon you may be in that new home you have been dreaming about.