Mortgage Banker vs. Mortgage Broker

Mortgage Banker
The mortgage banker is the lender; the one making the loan directly. A mortgage banker will present you with only that lender's program of mortgages, so you need to speak with several lenders to do comparative shopping. Usually banks will be competitive in a few products, and will encourage their sales agents to sell these products to the consumer. Many times banks will not even necessarily try to be competitive in rate, but will instead try to fill a niche, such as quick approvals or flexible underwriting of loans. Going directly to the bank or source was probably the way that your parents obtained their home loan, but the trend is clearly away from such direct establishments towards the brokerage. If you walk into your local bank they'll usually take your application there, perhaps underwrite your loan there, and lend their own money. If your loan is declined for whatever reason, you will need to begin the process again with another source. With a broker, you have another chance if one lender doesn't approve your loan.

Mortgage Broker
You can think of a mortgage broker in the same terms you think of an independent insurance agent. When you go into that agent’s office, you present your needs and the agent searches for the insurance companies that can provide you with the best coverage at the best prices. This is the same basic service provided by a mortgage broker. When you choose a mortgage broker, you’re asking this person (or company) to search through mortgages offered by various lenders for those that would most closely suit your needs, and to provide the options with the best prices. The benefit is that these brokers know details about the banks, credit unions, and other lenders that you may not know and which ones are most agreeable to financing homes for people in your particular situation. A mortgage broker serves as a matchmaker between the home buyer and the lender. The broker draws from a pool of lenders to find the right match. The broker has access to the products of hundreds of lenders, not just one lender's programs. In scanning the mortgage market, both nationally and regionally a broker knows a lender's specialty. The broker can identify what lender might fit a borrower's special needs, such as the first-time home buyer, investment purchases, second homes, etc. The broker does everything the lender would do. A Broker checks your credit and work record, arranges for title search and hires the property appraiser. Once all of this information is compiled, the broker selects a mortgage lender that will most likely accept your application based on your financial data and personal information. Brokers represent a number of lenders and offer these lender's products through a wholesale arrangement. So the broker can offer wholesale rates, as opposed to retail rates. By offering wholesale rates, a broker can in fact be more competitive than the retail side of the same bank. This is happening more and more as brokers are moving their services to the Internet and reducing their costs of distributing loans to the consumer.

Bankers make their salary whether you take the loan or not. Brokers only get paid when the loan closes. Who has the most motivation to get you a loan?

In Summary
The advantages of working with a broker are substantial and account for the shift away from banks and direct lenders. Understanding the loan process can minimize the likelihood of frustration during the loan transaction. Remember to work with a source that has established itself as a company with integrity that cares for the borrower throughout the experience. The majority of people find that better deal with mortgage brokers. About 65 percent of home loans are originated through brokers. Borrowers who have trouble qualifying, or want to finance tricky deals will often get turned away at banks. So for these people, using a broker is often the best option. And pricing with brokers can be just as competitive as a bank. Wholesale prices are actually much cheaper than retail interest rates you’ll get with banks.

Pros of working with a broker:
- They do the legwork for you, comparing the wholesale rates of a large number of banks and lenders
- Wholesale interest rates can be lower than bank interest rates
- Brokers must disclose the yield-spread premium
- Can finance tricky deals

Cons of working with a bank:
- Conservative loan programs
- Do not disclose the yield-spread premium
- Lengthy process, very bureaucratic

Homeowners Insurance Part II. Lower your premium!

In a post last week we discussed Homeowners Insurance. We focused on the parts of the home insurance policy and how it works. Today's post is part 2 of this segment. As we mentioned last time, you get what you pay for so don't focus solely on price. While this is true, there are ways to keep your premiums as low as possible. Everybody wants to keep their house payment low and if you escrow your insurance premium plays a part in this.

Some people bounce around from company to company searching for the lowest price at their renewal date. I am not a big fan of this. You don't develop any loyalty here and this could come back to haunt you if you have a large claim. Many times there is a reason why 1 company is drastically cheaper that all the others. State Farm, Allstate, etc. have been pricing their business for a very long time and have it figured out. You'll find a company come out with a super low price one year and then they run into financial trouble. You want your insurance company to be financially sound. After all, you are counting on them to be there for you. With this being said it is ok to shop occasionally, especially if you think your price is getting out of hand. This will keep them honest.

Here are some tips on keeping your home premiums down:

1. Multi-Policy Discount - Insure your auto, home, and life insurance together. By doing this you will earn a multi-policy discount.

2. Raise your Deductible. - Go with a $1000 deductible. This keeps your premium down.
Just make sure you are comfortable with the $1000. Also see what a $500 deductible costs .
The larger the home the more difference it makes, therefore a higher deductible may not always make sense. Home claims are fairly rare and usually if something is claimed , it is a high dollar amount. Therefore, the $1000 is small relative to the damage.

3. Home security system - By having an alarm you are eligible for a discount. It is best to
have a full-reporting alarm to maximize the discount you receive. Keep in mind the cost of the alarm is more than what the discount will save you. If you already want an alarm, just realize this helps justify the price you pay for it.

4. Affinity Marketing Discounts - Ask your insurance company if they offer any Affinity
Marketing discounts. Liberty Mutual is the leader in this field as they offer over 8500 different
group discounts. In Columbia The University of MO Alumni Association and Missouri Credit
Union are big ones. BMW and Onstar are a couple others. If your are a member or affiliated
with these companies you can get a discount through Liberty Mutual. Met Life is another
company that does this and there may be others, just ask. This can save you up to 15% on
top of any other discounts you already receive!

5. Loyalty counts - I mentioned loyalty earlier. Some companies offer loyalty discounts or
loss forgiveness programs for your years of continued coverage. Ask what programs they
have in place.

Keep all of these things in mind when looking to improve your premium.

If you are looking to buy a new home, here are a couple things to be aware of that can potentially cost you money and give you a headache!

1. Location of the nearest fire hydrant and fire station. - If you are in the city limits
this won't be an issue. If you are not, then pay attention. If you are over 1000 feet from
a hydrant or over 5 miles from a station, you will pay significantly more for home insurance!
Some companies won't even insure you!

2.Dogs - If you own a Pit Bull, Doberman, German Shepard, or other dangerous breed you may
have some issues obtaining home insurance.

3. Prior claims on the residence - If the home has a history of water problems or claims,
you will want to know. You will need special approval and this can affect your future rates.
Insurance companies have different rating policies, so get all the information available to help
avoid surprises in this area.

Hope all of this information helps!

Your comments are welcomed!

Seller Paid Closing Costs

Back in the day, you would have to hike up hill, both ways, in the snow, barefoot, to the bank carrying a 20% down-payment and a 12 year old Scotch (just to butter up the president of the bank). Then we saw the introduction of ARM's, Interest Only and No Money Down Loans. But soon, buyers realized that No Money Down did not equal No Closing Costs. So, with increasing property values we see more and more buyers/sellers using "Seller Paid Closing Costs". So lets take a little time to look at "Seller Paids"

Call 'em what you want: Seller Paids, Seller Concessions, Seller Contribution, Allowances, etc. Good or Bad, they have become another tool to get home buyers into houses with little or no money to contribute to the transaction. By using Seller Paids in the purchase agreement, the seller is basically just allowing the borrower to roll closing expenses into the loan against the house. It works like this, You're buying a home for $100,000.00 and the seller has agreed to allow for $2000.00 in concessions. That allowance can, unless otherwise stipulated in the purchase agreement, be used toward any expense of the transaction. In the event that the total costs don't use the whole $2000.00, it can be used to reimburse the buyer for any cost which were Paid Outside of Closing (POC), for example the appraisal or earnest money. And vice versa, if the costs of the transaction exceeds the $2000.00, the buyer is then responsible for the difference. Most lenders will cap these concessions at 4%-6% of the loan amount.

I USED TO get this question a lot, "Well, if the property appraises at $110,000.00, can I just get that $10,000.00 out to do improvements?" The answer is always "nope". The lender will only loan the lesser of the purchase price or the appraised value. The reason I say USED TO, is because in the last few years, property values had been going up and up. And buyers/sellers found creative ways to roll many expenses, including closing costs, into the loan amount against the home. What we're experiencing now is a correction or slow down in the market. Property values are not increasing as quickly as they have in the recent past. So many of the people that rolled closing costs into their purchase, could potentially owe more on their home than the market will bare. So instead of just "rolling it in", many buyers are finding out that "Seller Paid Closing Costs" aren't available because of equity issues. In contrast, it is a buyers market, so many sellers are getting more creative and aggressive to sell their homes. So, some sellers will take a 2 or 3 thousand dollar hit by including Seller Paid's, just to sell the property.

Are these closing costs really paid by the seller? Technically yes, but theoretically no. Yes, some costs may be listed under the sellers expenses on the settlement statement. But no, because in the big picture, what is passed to the buyer as a concession, could have been used to negotiate a lower price. As a buyer, your paying more for the home.

So, what are your goals as a buyer? Does it make more sense for you to put those costs into the loan? In the short term? In the long term? Or, does it make better financial sense to pay those up front and not finance those costs for 15 or 30 years? Do you, as a buyer, have the ability to pay closing cost in cash?

Again we arrive at a reoccurring theme in these discussions. A good mortgage professional will look at the goals of their client, the conditions of the market place, and the tools (loan products) they have in order to extend financing options.

Whats the Difference in FHA and VA Loans?

All mortgages fall under one of two classifications; Conventional or Government. There are several distinctions within Conventional; Conforming, Non-Conforming, Jumbo, Sub-Prime, etc. But, with Government loans, there are only 2 distinctions FHA or VA. Both FHA and VA are funded by private lenders, not the government. But because some of the risk is shifted away from the lender because of government programs, they offer opportunities where conventional products might not
FHA is a loan that is insured by the Federal Housing Administration. Meaning, that the borrower will have mortgage insurance, however it is usually a lower rate than that of conventional mortgage insurance. Some features of an FHA loan would be:

1. Low down payment requirements


2. Lenient credit, debt, and income guidelines


3. Down Payment and closing costs can be in the form of gift funds or can be rolled into the loan amount.


4. Fixed and Adjustable rates are available

VA Loans offer many of the same benefits as FHA with a couple very significant differences. The biggest is that the VA guarantees the loan. This does not mean you are guaranteed a loan. This means that, if you meet the eligibility and qualification guidelines, the VA will guarantee the lender against a certain portion of loss in the event of foreclosure, etc. Why is that important? Because of that guarantee, the lender feels all warm and fuzzy and will extend some features like:

1. No down payment required


2. VA loans are assumable loans


3. No Mortgage Insurance


4. Lenient credit, debt, and income guidelines


5. Fixed and Adjustable rates are available

Government loans aren't the answer for everyone, but they do offer significant advantages for home buyers that meet certain criteria. There are a lot of misconceptions from realtors and banks about the processing and underwriting for these loans, but any reputable mortgage broker can easily guide your loan through so you can maximize the benefits available to you.

Homeowners Insurance. What Coverage's are Worth Buying?

I'm sure we all can remember the process we went through to buy our first home. It was an exciting time for me, but I bet we can all agree that securing an insurance policy on our new home was not a memorable occasion! Actually, nothing about insurance is exciting. In a perfect world you buy a good policy, pay over time, and never have to use it. To most people this is a big waste of money! Deep down we really know this isn't the case. Insurance is very critical to your family's financial well-being. We all take for granted that if we lost everything, "the insurance company will pay for it". Just imagine the family that doesn't have this luxury. They just lost a $150,000 home and all of their belongings! What a nightmare! All because they let their policy lapse! The reason that I feel strongly about this is because I was an insurance agent for 5 years. I saw how having or not having insurance affected many people. I have compiled a few tips and coverage explanations to look for when looking for your home insurance policy.

Dwelling with Expanded Replacement Cost- If every insurance agent and computer property evaluator was perfect, we wouldn't need this endorsement. However, we know this isn't the case. When writing an insurance policy some agents do better than others in estimating how much to insure your home. You do not want to be held to the amount they come up with. Many times people only look at price and not what their home is actually being covered for. Poor agents will also cut coverage to get the premium to look good and land a sale. This can really put a customer in a world of hurt. Just look at the fires in California. $700,000 homes were burnt to the ground and they were only insured for $500,000. That is a $200,000 burden left up to the customer. With expanded replacement cost, the policy will pay up to 120-125% of your homes value. This gives you an extra cushion in the event your home was under insured! (Keep in mind it only pays out if you need it).

Inflation Protection - Most good policies have this. This adjusts your policy each year for inflation. I am sure you have seen your $150,000 insurance policy jump to $154,500 in its second year. This increase is due to inflation protection. This is needed because it will cost more to re-build your home in the years to come than it will today.

Other Structures - This is coverage for any detached structures. If you don't have any, it will stay at 10% of your dwelling amount. If you have more detached structures to cover than the 10% allowed, you will want to make sure it is increased.

Personal Property Replacement Cost - We all know what this is, but believe it or not there are still policies out there that have limited replacement cost or actual cash value! Stay away from these. Full replacement cost is the only way to go! Also look at the amount you are covered for. Some companies cover 75% of your dwelling amount. Others offer less. Just get the most bang for your buck!

Loss of use - If you are unable to live in your home due to a loss, your policy will pay for the expenses you incur while living elsewhere until your home is repaired. Some policies cap the amount here. Make sure you feel the limit is sufficient. Good policies will state "Actual Loss"

Liability - The minimum amount is $100,000. This is too low. $300,000 is the minimum you should have. You can of course have more. If you have an umbrella policy you can keep your liability at $100,000, but if not make sure it is increased. There are too many sue happy people out there and you want to be protected!

Medical Payments - This is not like your car insurance med-pay. This is only for others on your property. Not many people go with more than $1000. Just make sure your liability is high and you should be fine. Make people file suit if they are on YOUR property and try to collect money off of your policy!

Deductible - Your deductible is up to you. Go with an amount that makes you feel comfortable. $1000 is most popular today and makes the most sense. This reduces your premium and will also help ward off small piddly claims that will raise your rates. What good is a $500 deductible if you claim something that is $700? You save $200 and your rate goes up $20 a month. Then if you would happen to have a 2nd loss, you would have 2 claims and are in danger of non-renewal or a huge rate hike!

Earthquake Endorsement - Some people have this and others don't. Make your own decision,but realize that if your home is damaged due to an earthquake or earth movement, you are out of luck! This isn't too expensive so weigh the pros and cons. Earthquake deductibles are typically 10% or so. This equates to $15,000 on a $150,000 home. This may also factor into your decision.

Water or Sewer Backup Endorsement - This is something many people think is included in a policy and it is not! Water damage is covered, but not sewer! Your can purchase specified amounts of protection. Be sure to look into this and ask your agent.

Identity Theft Endorsement - This is a newer item, but is gaining in popularity. If someone steals your identity and causes you harm, it can cost some time and money to clean things up. This will pay for it and provide a representative to help facilitate the process!

Scheduling Items - The most common item to schedule is jewelry. Your policy has low limits for specific items. You will want to schedule valuable or priceless items.

This is a quick summary of the parts of a home insurance policy. Keep all of these points in mind when deciding who you are using and what coverages to include. Just remember you are buying piece of mind and financial security when you pick your coverages. Don't focus solely on price and find an agent that will work hard for you. I hope this helps. Here are a few links to some of the larger insurance companies.

State Farm Insurance - http://www.statefarm.com/
Liberty Mutual Insurance - http://www.libertymutual.com/
Allstate - http://www.allstate.com/
Shelter Insurance - http://www.shelterinsurance.com/
American Family Insurance- http://www.amfam.com/

Your comments are welcomed!

Private Mortgage Insurance is Tax Deductible in 2007

I've been watching the information regarding Private Mortgage Insurance (PMI) and the new bill passed to allow for PMI to be tax deductible. And I have found some interesting limitations to the program. In the past, the way around PMI was through PiggyBack or Combo Loans. By breaking the total loan amount into portions of 80% and 20%, in affect the lender would be loaning you the down payment. There were also lenders that used what is called "lender paid PMI", where the lender would pay the insurance for you, and then recoup that expense in the form of a higher interest rate. And the benefit to these programs was that all of the interest associated with these programs could be used as a tax deduction.

Well now, the government is saying that since PMI behaves in a similar manner as interest rates, why not let the borrowers receive the same tax benefits. BUT, there are significant limits on who and how a homeowner can use this deduction.

First, you can only use the deduction for mortgages closed in 2007. If you began a mortgage in 2006, you won't be able to take the deduction in the 2007 tax year unless you refinance.

Two, you only get the full deduction if your adjusted gross income (AGI) is less than $100,000. The amount you can deduct decreases by 10% for every $1,000.00 over %100,000.00 per year. Meaning, if you make $110,000.00 per year, you cannot receive any deduction.

Third, this is only good for 2007. In order to use this deduction in the future, Congress will have to vote to renew for upcoming years.

Lastly, in order to receive this deduction, you have to itemize your schedule of deductions on your taxes. If you take the standard deduction, this has no benefit for you. And in all practicality, you need to owe $130,000.00 or more for it to be worth your while.

So, you can see that it is a very slim window of home buyers that can benefit from this bill. This was the intent of its creators. They were trying to show the most benefit to those who need it most, lower income borrowers with mortgages under $100,000.00

Rent vs. Own

The big question:

Should I rent or own? What makes the most sense at this point in my life? These are all very frequently asked questions. First, my advice to you if you are considering jumping into the biggest expense of your life. Buy within your means. Stay within your budget and homeownership will be the best choice you have ever made. Next, some pro's and cons of renting vs. owning.

Renting Pros:

Low commitment. Most rental leases are year-to-year and sometimes even month-to-month. If you find you don't like the area you are living in, moving out is just around the corner.

Maintenance Convenience. When something breaks or is not working properly at your apartment you just call your landlord and they send someone out (hopefully in a timely manner) to fix the problem. Also at the landlords expense.

Renting Cons:

No sense of home. You don't get a sense that your apartment is really ever yours. You always feel like a guest paying to stay there for another month or year.

No Tax Benefit: When renting a home you don't receive any tax benefits. When owning a home your mortgage is tax deductible at the end of the year.

Owning Pros:

Home: The word home means something. It just makes you feel all warm and fuzzy inside. You just don't get the feeling of warm and fuzzy when you say apartment, do you? What does home mean? Home means privacy, ownership, and freedom to do whatever you want.

Building Equity: When owning a home you feel like you are not just waisting your money every month or spinning your wheels in a sense. You are paying down your own mortgage not your landlords!!!

Tax Breaks: You can deduct your mortgage at the end of year.

Owning Cons:

Home Maintenance: Owning a home is expensive. The days of calling your landlord for a problem are over. If you have a problem you not only have to fix it but you also have to pay for it. This can get fist time homeowners in a real financial bind if unprepared.

Moving: If you find the home you bought was not the home of your dreams, moving can be a bit more difficult vs. renting an apartment. You can either put your home For Sale By Owner and hope for the best or pay a realtor to do the work for you.

Again, your comments and questions are always welcome.

Professionalism, It will payoff!

What does it mean to be professional? Webster defines "professional" as; relating to, or characteristic of a profession b : engaged in one of the learned professions c (1) : characterized by or conforming to the technical or ethical standards of a profession (2) : exhibiting a courteous, conscientious, and generally businesslike manner in the workplace.

How many times have you gone out to eat and received unprofessional service, whether it is a rude waiter, cold food or a dirty table. What about a mechanic working on your vehicle? I'm sure we have all experienced the "check-up" scam. Dateline ran a series several years ago about mechanics being unprofessional and taking advantage of "clients", loosely put. They do needless work on your auto, or "up-charge" for services that are normally a fixed price. What about calling in a customer service #? Just yesterday I called to try and locate a service technician to fix a problem with my television. I first called Best Buy, where I purchased the TV in 2000'. After being on hold for 10 minutes then answering several different questions, I was told that they had no service rep in the area. I then proceeded to call Circuit City but since I did not purchase the unit from them they were unwilling to help me, what a great way to earn my business the next time. I then called someone locally and again they only service TV's that they sell. Finally, I called the company that made the TV and after several minutes located someone locally who could fix the problem. This entire scenario took over 1 hour to complete. What's my point?

Do business with someone that you trust, who takes their job seriously, and who is professional! Ask around, do some research, talk with people locally. I believe you will find that the extra effort will be worth while!

Your Mortgage Professionals in Columbia, MO

New For the 2007 tax year!

Effective for the 2007 tax year, a new tax deduction could make homes more affordable by allowing many Americans to write off premiums for private and government mortgage insurance. Borrowers closing purchase loans in 2007, who have annual incomes of $100,000 or less, could be able to get a low down payment mortgage and deduct the full cost of their mortgage insurance premiums on their federal tax return*.
MI Tax Deduction is applicable to a variety of programs, including:
• Fannie Mae Loans
• Freddie Mac Loans
• FHA Loans

New Tax Deduction Makes Housing More Affordable
Contact MICA (The Mortgage Insurance Companies of America) www.micanews.com for more information.
*Consult your tax advisor for limitations.

Mortgage Myths and Misconceptions

Mortgage products are always evolving, and lenders are constantly trying to build a comprehensive portfolio of products to capture as much of the market as possible. Distinguishing between fact and fiction can reveal many loan tools that can ultimately save you time and money. Whether you're purchasing or refinancing, you may be misinformed due to some common mortgage misconceptions. As with any big purchase, be sure to weigh all options to decide which is best for you.

Myth #1 - A 30-year fixed mortgage is the best mortgage option out there.
If you are in your final home or plan to live in your home for a very long time, a 30 year fixed mortgage is the way to go if you can find a low interest rate. Today, the average homeowner will stay in a house for nine years. If you're a first time home buyer, that average goes down to just a few years. If you fall under this category, an adjustable-rate mortgage (ARM) might be better for you. While interest rates on fixed mortgages are fairly low right now, ARM rates may be lower (but not always). There are even interest only options that can give you the lowest possible payment. These introductory rates could last up to 10 years before it is time for them to adjust. It all comes down to your own personal situation and goals. Do the math and analyze each option and decide what fits best for you. None of these are bad options. They just have advantages for different situation. Remember, these products were developed for a reason .Learn more about your loan options.

Myth #2 - You have to save up for a huge down payment before buying a home.
Some people feel that a minimum 10 percent of the purchase price is required for a down payment on a home. Some even go as high as 20 percent. However, there are many lenders out there with loan programs for home buyers that can only afford five percent or less on a down payment. Some lenders will even accept zero down. So, if you're living paycheck to paycheck right now and feel like you're stuck in a vicious bill cycle without an opportunity to save, don't panic. There may be a loan option out there for you.

Myth #3 - If you don't pay 20 percent down, you have to buy mortgage insurance.
This is not necessarily true. Now there's an option out there called piggyback financing or a combo loan that can help you avoid purchasing mortgage insurance. A piggyback loan is a second loan designed to minimize your down payment. Your first mortgage loan covers 80 percent of the purchase price, and, depending on how much you can afford, the second loan can cover up to 20 percent of the remaining costs. There are a couple advantages to taking this route. First of all, it maximizes the amount of house you can afford by decreasing your down payment. Second, it allows you to use the entire tax benefit of your mortgage. The interest on a piggyback loan is tax deductible, while the premiums for mortgage insurance are not.

(NOTE: The new tax bill is working to make mortgage insurance tax-deductible! Check back for more news and updates on this!) There are also lenders that have more affordable mortgage insurance than others. Your situation may call for a much cheaper mortgage insurance premium than your buddies. As always, just look at your options and ask your mortgage advisor for their advice.

Myth #4 - Refinancing your mortgage extends your loan term by another 30 years. Many homeowners are reluctant to refinance for fear of starting over on their payment plan. However, there are ways to get a lower monthly payment and still stay on track to finish at the same time. All you need to do is ask your lender to amortize your payments to a shorter payment schedule. There are also ways to accelerate your amortization if you are unable to lower your term when you refinance for that lower rate or cash out. Learn more about refinancing.

Myth #5 - Bad credit takes away your chances to qualify for a loan.
If you have a damaged credit history, you could still be qualified for a home loan. Things like bankruptcy, repossession or paying bills late can make you a very high-risk loan candidate. The truth is, there are a lot of lenders out there that make it their business to help home buyers with less than perfect credit. Learn more about your credit score at http://www.myfico.com/. If you have damaged credit and want to see what you qualify for, click here!

Myth #6 - You need to pay off your mortgage as quickly as you can.
Usually, homeowners feel like they need to get rid of their monthly mortgage payments as soon as possible. However, the interest rate on your mortgage can be deducted from your federal taxes. This is where the term effective interest rate derives. Your effective rate considers your tax savings. Therefore, it may make more sense to pay off other forms of debt first, such as high-interest credit cards or car loans. It can be a good idea to pay off a mortgage early, if doing so helps you achieve your long-term financial goals and if you have no other debt.

Myth #7 - It doesn't matter where you get your loan, all lenders offer the same products.
This couldn't be further from the truth. Different lenders have different incentives and they might not have your best interests in mind. Most banks and credit unions usually don't have the variety of loan options that a mortgage broker will. Because mortgage brokers carry a wider variety of loan products, you can find a mortgage that best fits your specific financial situation. Remember a mortgage broker works for you, and they don't get paid until your loan closes. So, like you, they have a vested interest in seeing your loan through in the most efficient manner possible. The bottom line? If you have a unique situation or specific goals, seek the advice and services of an experienced mortgage broker. More times than not, they'll have a number of products to help reach homeownership.

Your comments are welcomed!

Is The Cash Out Refinance Dead?

OK, so we've had a period of increasing real estate values and rates have remained low to allow for a refinance boom. During this boom, there was a large trend of people taking cash out against the equity in their homes, and fortunately the property values were increasing so there was plenty of room to take that cash out. Well, things are beginning to shift. Many real estate markets are beginning to correct. Meaning that the values are beginning to fall due to a surplus of properties. We are seeing some (not a huge amount, but some)of that here in Columbia, MO. So what does that mean for refinanciers? It means there isn't enough value in a lot of properties (relative to the amount owed) to pull any cash out. In some cases, people who did a cash out in the recent past will find themselves owing more on their house than the market will bare. This is called "upside down" in your home. There are still some good opportunities and justifications for refinance, but as property values trickle down, the opportunity to take any equity in your home in the form of cash is dwindling.

Unethical Appraisal Will Get You 20. . .

This is the perfect example of why you should do business with people you know and trust. This article comes to us from the Kansas City Star.

KANSAS CITY, Mo. -- Former Jackson County Executive Katheryn Shields and her husband were indicted Thursday on federal charges of taking part in a mortgage fraud scheme.
Shields, 60, and her husband, attorney Phillip Cardarella, 59, and nine other people are charged with one count each of conspiracy and 11 counts each of wire fraud.

"They have not been able to find anything illegal. And in this indictment, there is nothing illegal that either my husband nor myself has done," Shields said.
Federal prosecutors allege that the couple were approached by a group of individuals last fall who offered to sell their home, which was listed at $699,950, for $1.2 million.
The couple was to receive $707,000 of that amount, the remainder being split among other co-defendants and explained to lenders as a "management fee." To get the mortgage approved, the defendants allegedly provided lenders with fraudulent financial information and inflated property appraisals.

Officials said the FBI stopped the transaction from going through.
Others charged in the case are James Elliott Coleman, 58, Raymond Walter Zwego Jr., 58, and James R. Rhoades, 48, all of Kansas City; Larry E. Barshaw, 56, and Linda M. Thompson-Barshaw, 57, both of Kansas City, Kan.; Monty J. Kinman, 25, of Overland Park, Kan.; Rick A. Peterson, 32, of Lenexa, Kan.; Jeremy A. Plagman, 29, of Lee's Summit, Mo., and Michael Rodd, 52, of Olathe, Kan.
"Cardarella told Zwego that he was aware of and would go along with the fraudulent arrangement," U.S. Attorney Bradley Schlozman said.

Phillip Cardarella
Meeting with reporters after Schlozman's conference, Shields and her husband denied being part of a conspiracy, saying they had simply tried to sell their house, which had been on the market for 18 months.
"There's nothing illegal about selling your home for more than you list for it," said the couple's attorney, Curtis Woods.
The couple said their signatures were forged on a real estate sales contract. Cardarella also said he knew only a few of the other defendants and that Shields knew none of them.
Running For Mayor
Shields spent 12 years as Jackson County executive -- the county's highest elected office -- but did not run for last year for a fourth term. She is now among several candidates running to succeed Kay Barnes as mayor of Kansas City. The city elections are this spring.
Cardarella told KMBC's Micheal Mahoney that they are victims in the case and that the indictments are "a political fix" and "political BS."
The defense attorney called it a bogus charge. Both Shields' husband and attorney said the former county executive did little in the deal except to sign the final papers.
"I look forward to the trial. I wish we could go before a jury on Monday," Shields said.
Mahoney reported that a news conference announcing the charges was delayed several hours because Cardarella was apparently trying to testify before a grand jury.
"They were intent on browbeating those grand jurors and preventing me from telling the truth. And it still took them four hours to bring back an indictment," Cardarella said.
Meanwhile, Shields said she still plans to run for mayor.
"Because I know that when all the facts are in, it will show that neither I nor my husband did anything wrong, and this is the continuation of a political witch hunt," Shields said. "I think I've been subjected for the last three-plus years to political terrorism and I will not give in to political terrorism."
Schlozman said this is not a political prosecution; he said he's an interim U.S. attorney and that his office doesn't worry about local politics.

Columbia, Missouri and the Housing Doom!

What does a housing boom mean? Well for the past 5 years Columbia has been the definition of this term. Homes being built left and right, new developments popping up all over town, commercial structures being sought out on every street corner and to facilitate this lending institutions and Realtors bouncing out of the wood work.

My how times have changed. The inventory of homes has sky rocketed, vacancy rates are at all time highs, and lending institutions are closing. Just over the past year we have seen HomeStar Equity Mortgage leave town, Mortgage Trust has closed, First Community Mortgage has left, TE Mortgage is now gone and the list continues.

Builders are also getting creative in finding ways to deal with an inventory problem. As reported in the Columbia Tribune on January 6, 2007, one of the largest builders in Columbia (Brandon Pace Construction) has begun a process of auctioning 24 homes. Why are some builders getting creative? This is because the market has such a plethora of inventory that homes are simply not selling like they used too. The market has become saturated with homes, would be buyers have gotten scared over the uncertainty of the housing bubble, rising interest rates and high oil prices. Look around Columbia we have multiple developments still being done. The biggest development ever in Columbia, Old Hawthorne has finally begun it's first home, to accompany this we have Copperstone, The Vinyards and Arbor Pointe just to name a few.

What must happen in order for the Columbia bubble to recede? Exactly what seems to be taken place at this very moment. Builders must halt building so many homes, building permits are down and new construction is slowing at a very fast pace. The inventory of homes must significantly decrease, unfortunately there are so many homes out there I believe this will take all of 2007' to accomplish. To help the situation the Fed must help us with rates and oil prices must fall. The later has already begun, oil prices are at an 18 month low. They have gone from upwards of $76 a barrel to below $54. Unfortunately for us the Fed moves at a turtles pace in a rabbits world!

Your comments are welcomed!

A Good Realtor as Your Buying Agent Can Be a Huge Help

It is an exciting time to be buying a home in the Columbia area! In this market you have many choices when it comes to real estate agents. Word of mouth is very important. You will want to ask around a find someone who you can trust and that will work hard for you. Yes, you need to find a home in order to execute a home loan. Yes, many sellers will require that you are pre-approved before you can make an offer. We at Professional Mortgage Group, Inc. can help you with a fast pre-approval! Just apply here!

The following is a list of real estate companies that can assist and we have enjoyed working with in the past:

Re-max Boone Realty
House of Brokers
Plaza Real Estate Services
Central Missouri Real Estate LLC
First Tier Realtors
3D Realty
The Jones Company
Reece & Nichols
Coldwell Banker
Progressive Realty
Gaslight Properties
Century 21 (The Spencer Group)

Realtor.com is a good source to search for listings in your area or anywhere in the United States. You can run an advanced search for what you are looking for and several listings are at your fingertips in seconds. Click on the listing and see pictures and details on the property. It also can put you in contact with a listing agent.

The Real Estate Book has numerous listings and who is listing homes in your area. This may help you narrow your search if you are unsure of whom you would like to use as your buyers agent. If you are selling a home, this may also help you choose a listing agent!

Surf these sites and do a little research. Find a realtor you are comfortable with and one who is well respected. Remember, a buyer’s agent works for you, but is paid from the sellers proceeds. A good agent will earn your trust, and their commission, by getting you the best deal on your new home.

Happy House Hunting!

Combo Loans or 80/20 Loans, A "No Money Down" Alternative

“What is a Combo Loan?”
It’s a simple way of breaking a 100% loan into two portions. Typically 80/20, 85/15, or 75/25. Each portion is its own loan, and there are very significant advantages and benefits to the borrower who chooses to put no money down.

“Are Combo Loans complicated?”
No. They use the same information to determine loan approval for both loans at the same time. And, there will be just one closing like any other loan. These are two different loans, but they are usually held by the same lender. So you can make your monthly payment to one company. Just like any other mortgage.

“Why a Combo Loan?”
Avoid Private Mortgage Insurance (PMI). This is the biggest advantage in choosing a Combo Loan. Private Mortgage Insurance, or PMI, is insurance for the bank. Unless you are prepared to invest a 20% down payment, lenders will require you to purchase mortgage insurance for their protection. It serves no benefit to you, the borrower, it only benefits the bank. In your situation this could equate to an additional $160.00 per month. You'll also have the opportunity to receive the full tax benefit from your mortgage. All of the interest associated with both loans may be deducted from your personal income tax. PMI is not deductible. Additionally, you can accelerate payments and pay the smaller loan quicker if you choose. Thus, building more ownership in your home quicker. and the blended rate is lower. In many cases, there are rates available for a single loan covering the entire loan amount. And although they do not have PMI, the single loan rates are usually higher than the blended rate of a combo loan. Lower blended rate = Lower monthly payment.

“Blended Rate?”
Do not make the mistake of adding these rates together. This is not the case. You are borrowing different amounts at different rates. For example an 80/20 Combo Loan with rates of 7.0% on the first $100,000 (80) and 10% on the next $25,000 (20) does not equal $125,000 at 17.0%. Instead, your blended rate would be the combination of the rates and the respective portions to which they are assigned. Your blended rate in this situation would be $125,000 at 7.6%. So, by accepting an additional 0.6% in rate, you will eliminate the need for PMI or $160.00 per month, and receive the opportunity for an additional tax deduction.

Why use a Mortgage Broker?

Over the past 10-15 years the lending industry has really evolved. Prior to the popularity of brokers, if you needed mortgage financing you simply walked down to the local bank, which was owned and operated by someone in the community, and applied for financing. My how times have changed, why?

First, most of the "home town" banks have been bought out or merged with large corporate banks like Bank of America, Regions Bank, or Commerce Bank. With this happening on every street corner the focus became less on the "client" and more on growth, deposits and profits.

Second, the evolution of the "mortgage broker". These individuals, if you find the right one, offer much more competitive products than your typical regulated commercial bank. What's the difference? Mortgage brokers typically have lending avenues with several banks at least 5 and more often than not upwards of 20. What does this mean for the client. More choices, more companies bidding for their business and an individual working on commission. Brokers do not get paid by the lending institution unless they get your loan closed!

Banks usually have access to only their products. On rare occassions they will use other institutions, however this is not common. Also, bank loan officers typically have a base salary to compensate their loan closed revenue. This means that they have a constant stream of income coming to them regardless of the status of your loan.

Mortgage brokers fill a much needed void in the lending industry! Much like anything else in life, do business with someone you trust and has testimonials or references. Finding the right mortgage broker can save you a lot of time and money.

Your Comments are welcomed!

OTC-One Time Close Construction Loan

We now offer customers OTC loans. OTC stands for One Time Close. It is one loan that consists of three. It covers the purchase of a lot, construction, and permanent or end loan. This makes construction loans easier for everyone.

The purchase of the lot or land is just that. When building that dream home, you must own the land it sits on. Most times, the land that is being used to perform the new construction of the house being built is not owned free and clear. OTC allows you to purchase that lot or piece of land with this loan. Once the land is selected and is purchased, next comes the construction part of the deal. During this, you choose a period of how many months it will take for the home to be completed. This could take as little as six months or as long as eighteen months on average. Of course, you need to have a general contractor to give you a bid on the project and an estimate of how long it will take for completion. The construction expenses are set up on a draw which can be made by the builder, borrower, or both. The rate of the construction loan is temporary and is usually tied to prime rate + 1%. When construction is completed, the loan needs to go into a permanent loan status. This is the loan that is your traditional long term loan. What's nice about OTC, is that rate for the permanent loan is already locked in for what you agreed on at closing of the lot and construction loan. The rate on the permanent loan will be much better than that of the temporary loan during the construction period. On average from start(when documents are received from borrower) to finish(when loan is being closed) of the loan process is twenty-one business days.

OTC is a great program for people wanting to build that dream home and have no worries on how to get all three loans approved. Do not hesitate to contact us here at Professional Mortgage Group, Inc. to discuss some OTC possibilities.

Mortgage Links, Information is Power!

I am consistently asked questions by my clients to help them understand our industry. I always give solid advice which ultimately leads to a quality loan product for my borrower. When my clients leave the closing table, they are fully aware of their product and the hard work everyone has contributed to get them into their new home.

This Blog is another resource created to educate our clients about the mortgage industry and the loan process. I've received feedback from several clients regarding websites that they found helpful during their home buying experience. I've put together a quick list of some of these useful sites. I encourage you to browse any or all of these.

http://www.realtor.com/. This is a great site to search for home listings.
http://www.zillow.com/. Featured in a previous post and can help calculate market value of your home
http://www.fanniemae.com/ They are the largest buyer of securitized mortgage paper.
http://www.freddiemac.com/ Another large buyer of mortgage paper.
www.bloomberg.com/markets/rates/ Mortgage and bond rates.
http://www.mortgage-x.com/. Helpful site for mortgage calculators and information.
http://www.bankrate.com/. More calculators and informational tools.
http://www.google.com/. Everyone has heard of Google! Use this site to search for anything!
http://www.wellsfargo.com/ Large well known bank with some nice educational content.
http://www.countrywide.com/ Another well known mortgage lender with good educational tools.

Be sure to check back to this blog for new postings. You can even subscribe by clicking here. Subscribing is a spam proof and virus free way to get the information you choose to review. That's what makes this blog such a good resource. Instead of searching the Internet for 20 different websites for information on residential lending, please use this forum as your resource. We'll take all the information in and make it available to you in one convenient page. You can find links on the right hand side that are updated every hour. And, we will continue to discuss new and developing trends in the industry. As always your feedback is welcome.

HAPPY NEW YEAR!