The Ventura Mortgage Guy

Today, the use of a professional mortgage broker is one of the key strategies used by sophisticated borrowers.

Understand, I have worked for direct lenders (big banks) and as a mortgage broker. You can find professional loan officers in both environments.

But the topic of this article is why use a mortgage broker, therefore let me continue.

A mortgage broker is an independent real estate financing professional who specializes in the origination of residential mortgage loans. Mortgage brokers normally pass the actual funding and servicing of loans on to wholesale lending sources. A mortgage broker is also an independent contractor working with (on average) as many as 20 lenders at one time. By combining professional expertise with direct access to hundreds of loan products, your broker provides the most efficient way to obtain financing tailored to your specific financial goals.

In the volatile home lending market, mortgage brokers can serve as safeguards, offering their clients security, safety, and peace of mind. One of the broker’s most important functions is escorting your loan application through the entire process, constantly patrolling the transactions looking for possible breakdowns. A professional mortgage broker can wade through the mountains of rate data and program options, researching current market conditions to find the most accurate and up-to-date information about cost effective options.

There are literally thousands of variables that can affect the outcome of your mortgage transaction. That’s why you need a mortgage broker to act as a liaison between the title and escrow companies, real estate agent, lender, appraiser, credit agency, the underwriters, the processors and any other services which may affect your transaction.

A mortgage broker also:

• Discusses and expain financing program options
• Provide detailed spreadsheets on the total costs of the transaction
• Explains all associated costs to the loan application
• Explains the loan process from application to closing
• Provides you with a good faith estimate of costs and fees
• Communicated with you in a timely manner througout the entire process
• Coordinates the final closing of your transaction

As you can see, when you are preparing to take on your biggest investment, your mortgage, you need a professional handling all the steps to ensure a smooth transaction.

Ok-you now understand what to look for in a loan officer based on my previous post. Now let’s talk about rate shopping. But, let me be clear, shopping for a rate and not taking in consideration the person or entity that will orchestrate the rate to the finish line is crazy. I have seen to many times, people changing rates from one lender to another only to become very frustrated due to excess fees, or delays.

With that being said:

1. If it seems too good to be true, it probably is. Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, then you better ask a few more questions. Is there a prepayment penalty, are there extra fees, what is the length of the lock-in.  Many quotes that are given are for the shortest lock (meaning 7 or 15 days). In reality, you will not get your application turned around in that amount of time, therefore you would need to lock in for a greater length. Locking in for a longer period costs you more in points. Also if fees are minimal, is it built into a higher interest rate?

2. You get what you pay for. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process in the hands of the lowest bidder. Best case, expect very little advice, experience and personal service. Worst case, you may not close at all. Some times it is too late and yo find out that you can not close (especially with all the changes in the mortgage guidelines) and now when you go out to find another rate and source the rates have increased. Or course if you want the cheapest rate, head out to the Internet..yikes! The stories about last minute changes, increase in rate and fees or worse yet, not closing on time are usually Internet transactions. Ask any competent Realtor and they will suggest (demand) that you speak with a local experienced lender. This is the largest financial transaction you will more than likely be involved in, don’t risk it.

3. Compare apples with apples. First, make sure you are comparing quotes from the same day. Second, review lender fees and points against another lender fees and points. What I mean is that if you look at the bottom line, some lenders may skimp on the third party fees in hopes that it makes them look less expensive.

4. Understand that interest rates and closing costs go hand and hand. This means that you can have any interest rate you want, but you will pay more in points. On the other hand, you can have less fees, discounted points or no costs at all but you will have a higher interest rate. One strategy is not better than the other. It depends on your current situation and long-term goals. A professional loan officer will guide you through this process.

5. Finally, you must understand that interest rates and points can and do change daily and even hourly. If you are comparing lenders, this is a moving target on an hourly basis. For example, if comparing two lenders, you must get a quote from each of them on the same day and at the same hour to be exact. You must also know the length of the lock as well to compare the tow lenders. As mentioned above, one could quote a 15 day rate and another a more realistic 45 day lock.

Bottom line, ask the right questions, determine which lenders are competent and will provide the service that is required on a transaction as big as this and then if choosing between two compare on the same day.