PANDEMIC SPURS RISE IN MULTI-GENERATIONAL HOUSEHOLDS

 Life circumstances can sometimes change on a dime. Such is the case of household living situations since the pandemic began, causing social and economic upheavals for many families.

After the stay-at-home orders went into effect in many parts of the country in March, the National Association of Realtors noted a 15% increase in buyers who purchased a multigenerational home compared with before the pandemic hit, compared with 11% in the previous year. NAR's vice president of demographics and behavioral insights, Jessica Lautz, says, "One in six home buyers who purchased during the pandemic purchased a multigenerational home. That's an increase from 1 in 10."

Intergenerational homes can be anything from two (or more) attached, fully functional units in a duplex model or one home that offers private kitchens and separate entrances, like a rental unit in a single-family house. Or they might also be a detached accessory dwelling unit, typically a smaller home, in the backyard of a larger house. Adult children concerned about placing their parents in nursing homes during the pandemic have simply decided to keep things in their own backyards, just to be safe. Parents whose older kids lack employment or can't attend college are included in this "pod" living situation as well.

The ideal is, of course, to offer the other generation a degree of independence, with separate entrances and separate kitchen facilities. And homebuilders have been and continue to step up to the plate to provide this arrangement. "As you might expect, homes intended for more than one family tend to be a little larger, by nearly 22%, according to NAR data. "The typical existing home is 1,880 square feet and costs about $270,000. Yet a multigenerational abode is roughly 2,290 square feet and costs about 10.7% more, with a $299,000 price tag." These larger, higher-priced alternatives also take into account the pooling of several incomes, according to NAR's research.

The figures released by NAR account only for recent purchases.  "The actual number of intergenerational households that have formed since the start of the pandemic has actually increased by a staggering 61%."

U.S. Census data found that a record 64 million people—20% of the U.S. population—lived with multiple generations of adults in a single-family home.

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

How Does Refinancing Save Homeowners Money

 Question: How does refinancing save homeowners money?

There are two categories of refinancing, "rate-and-term" and "cash-out." Both can save you money.

The first type, rate-and-term, replaces your existing loan with one that has a better rate and/or terms. You might replace an ARM or balloon loan with a fixed-rate loan, for example. Or you may decide to lower your rate AND shorten your term. Some borrowers have been able to refinance from a 30-year loan into a 15 or 20-year loan, reducing the term, without appreciably raising their payments.

A borrower does not receive any significant amount of cash in a rate-and-term refinance; lenders generally consider that any cash proceeds above $2,000 pushes the loan into a cash-out category.

There are always certain costs involved in any mortgage transaction; there will always be fees for title, escrow, underwriting and document preparation, for example. Borrowers can add these fees to their new loan so as to avoid having to pay them in cash. Financing these items is not considered cash-out.

When you are deciding whether to do a rate-and-term refinance, you should evaluate it in two primary ways: first, how long will it take to recover the cost of doing the loan? For example, if the closing costs amount to $3,000 and the reduction in rate gives a saving of $1,500 per year in the first year, it will take approximately two years to "break even." For most people, this time frame is more than satisfactory, but you should make your own decision. The second criterion is net savings over some time period, say five years, ten years or more. 

Homeowners with adjustable rate mortgages (ARMs) may decide to refinance into a fixed rate loan, even though their rate may initially be higher, they might feel more secure knowing that their rate will never change. This is more of a defensive strategy to guard against the possibility of a higher rate in the future, but it may not "save money."

The other type of refinance, a "cash-out," is one where the borrower receives cash of more than $2,000 at closing. This is accomplished by getting a new loan that is larger than the balance of the old one plus closing costs. Borrowers can use that money for anything. Some homeowners have used cash-out refinances to pay off consumer debt, like car loans, student loans, and credit cards. Using home equity to pay off credit cards can drop the payment dramatically! But paying down installment loans can create a false economy. A $30,000 car loan with an interest rate of 6% will have a payment of $500, but paying off that loan with the proceeds of a home refinance will effectively drop the payment to $150—but does it really make sense to finance a car for 30 years? 

Hope this is useful.

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Don't be a 'Lone Ranger' when house hunting

If your idea of a fun weekend is making a list of open houses to visit and then running all over town to see if you can find that diamond of a home, then have at it. The only problem with it is that you're doing it without the knowledge and protection of a professional real estate consultant. Can you buy a home without one? Absolutely. Is it wise? Not really, especially when, in most cases, you pay nothing for the services of a buyer's agent.

Real estate is complex, filled with nuances and pitfalls better navigated by seasoned professionals who can usually spot something amiss a mile away. Here are a few of the risks you expose yourself to going it alone.

Negotiation is something kids learn to do at an early age. "I'll trade you my PBJ for your salami sandwich." When they get older, they may strike a compromise with the teacher for turning in an important project a day late. Older yet and they are negotiating a salary for a new job. But real estate negotiation is a different animal. It's not a place to "practice" the art of negotiation if you weren't good at it as a kid or even a grown adult. Real estate agents not only understand how to best use leverage to earn you the best deal possible. They also know when to advise you to walk away because they know how sellers operate. Despite their home being desirable, a seller whose sales price is unreasonably high (not in line with other homes for sale in the area that are of similar size, age, and condition) is not realistic. It means they are not that truly dedicated to selling their home any time soon. A house priced unusually low and being sold in "as is" condition may be a recipe for remodeling disaster. By not working with an agent, you can't tap into their insights and acumen for how to drive the best bargain possible – a loss that can cost you.

Market knowledge is not something you can glean by spending a few evenings online looking at houses and neighborhoods. The prices listed on real estate apps can't always be trusted. A Realtor knows this and will call each listing agent or owner to confirm what they see is true. Sure, you can make those calls on your own, but you just may shoot yourself in the foot by revealing your motivation to buy, leaving you a limited opportunity to negotiate. A agent offers insights into trends in the market over time, will have researched the area for development, commercial and school construction and will give you an estimate for how much you should be budgeting for your target property -- all of which can change constantly. It's what agents do in their sleep.

How do you know you've got the real skinny on a property? The vetting process is an important one, with real estate professionals being held to legal standards that require them to thoroughly vet a property for potential pitfalls – water damage, toxic materials, health and flooding hazards, the list goes on and on. They are not keen on being the ones being held responsible for encouraging you to buy a property that has serious issues without all those issues being disclosed in the light of day and in writing. They always, always recommend professional inspections be performed as well as obtaining hazard and environmental reports for the area. You could be buying a home on ground where there was once an airfield, with toxic substances still remaining in the soil where your children play. Or the house may be located in an area where some serious mining took place, leaving it vulnerable to sinkholes or foundation sagging.

Don't kid yourself. The paperwork involved in a real estate transaction is nothing to scoff at. Contracts, disclosures, addendums, transfers, inspections, and reports can bury you. And what about those loopholes you may have overlooked? You assumed the seller would leave all the pool equipment, the chandelier in the dining room, and the entertainment cabinets that perfectly fit the walls in the family room. But when you get the keys to move in, you discover they are gone. Why? You forgot to intentionally specify they remain when signing the purchase agreement. Realtors don't forget these things. In fact, they may go overboard in enumerating all the items that stay with the house just to play if safe.

While you should make sure you personally review any binding document before signing it, a real estate professional can greatly reduce how much time you spend on legal matters so you can get back to how you really want to spend your time – activities like choosing that new king-sized bed for the master bedroom. Or buying patio furniture for around the pool you always wanted and finally got.

And then there is FOMO — the fear of missing out. Going it alone means you are limited to word of mouth recommendations and only what you can find on your computer. You may not realize that a new home community is being built nearby that might knock the socks off the neighborhood you are considering. The right Realtor will bring detailed knowledge of the market in your area or neighborhood – as well as other potential markets nearby that you might not have considered but could be just what you are looking for. They cast a wide net when looking for your home, so why not leverage their knowledge? They'll have information on property taxes, closing costs, HOA fees (as well as the health of the HOA itself), and even supplemental taxes you might not find out about until after you moved in. Why? It's their job. So why not let a Realtor be the detective instead of being a weekend house-hunting warrior? You've got nothing to lose and a lot to gain.

The first step to buying your home is getting pre-approved for a home loan. Call me and lets get started. I can also introduce you to a Realtor that will look out for your best interests and help you find the perfect home.  

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Source: Lendersnetwork, TBWS

Minimum Down Payment For First-Time Home Buyers

Someone once asked me: With the way the economy 

has taken a toll on savings accounts, the traditional 20% down payment seems out of reach for many first-time home buyers like myself. Are more first-timers going the route of 5%-15% down payments? Or should I wait until I've got the 20% saved?

I can answer your question in two ways because you're asking two separate questions.

I take "realistic" to mean whatever makes sense for a buyer. There are some who believe that 20% is a "realistic" minimum down payment because it avoids mortgage insurance. Lenders view borrowers who make a smaller down payment as presenting more risk. Because of this, lenders require mortgage insurance to manage their risk. That insurance costs the borrower money.

If a buyer has enough money for a 20% down payment and closing costs and has something left over for cash reserves, 20% is fine. I say that with one caveat: if you carry any consumer debt with rates higher than that of a mortgage, it is FAR better to pay those more expensive items off with available cash than to put it into a home down payment. 

There are many loan programs designed for lower 

down payments 3% on conventional or

3.5% for FHA, No down payment for VA and USDA. Down Payment Assistance (DPA) is offered by FHA Government Grant program for 2% - 3.5% down payment help, that is considered a gift and doesn't have to be paid back. 

If a buyer doesn't quite have enough cash for a 20% down payment plus closing costs, waiting to save up the money can be very expensive. First, home values are increasing in most areas of the country today. This means that if there is an appreciation rate of 4%, the $300,000 home you have your eye on today will cost $312,000 a year from today. There is also the matter of rising interest rates. 

If you have the ability to buy today regardless of the amount of cash you have—as little as 3% plus closing costs can get you into a home—buying now is a good idea. Yes, there will be mortgage insurance (MI), but that is temporary; once you can demonstrate to the lender that your loan balance is 80% of the home's market value or less, if you have an FHA loan you will need to refinance to remove your mortgage insurance.. but generally once you have 20% equity you can get your MI removed. 

I hope this is useful. Call me if you want to get pre-approved and see how much you qualify for, then you just need to find a home.  

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Which FICO Score Is Most Important

 People often ask me:  Which FICO scores are most important for mortgage applications?

We GENERALLY use what is called the "mid score." Most people have three FICO scores—one from each of the three credit repositories (Equifax, Experian, and TransUnion). We discard the high and the low using the one in the middle—the mid score.

This is especially important when we are doing a "rapid rescore" or "credit bureau update." These both mean the same thing: using documentation acceptable to the credit bureaus, we can bypass the normal monthly reporting cycle for creditors. If we are paying down revolving debt, for example (credit cards), we will get a current statement from the borrower reflecting the lower balance. The credit report vendor will submit that document to the bureaus and get a new FICO score within about five days based on the lower balance. FICO scores begin to suffer when credit card balances exceed about 30% -50% of the credit limit. The credit report vendors charge a fee for the rescore service, and since we are only looking improve the mid score, only one or two bureaus need to be updated. This saves the borrower a couple of hundred dollars. I also have tools available that help to analyse your accounts and simulate a what if situation, meaning if I pay down this or that account how will it effect my credit scores. 

Credit standards are not as stringent as some believe. You can buy a home with lower scores than you might think. 

If you have questions about our credit, reach out. I'm here to help.

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Fun Real Estate Facts That Will Make You Smile

Sometimes it’s not the big real estate news about trends and statistics that send us falling onto our backsides — it’s the lesser-known facts that make us smile, make us think and realize the world is a crazy-messy place.

Inman News featured some amazingly entertaining real estate facts we’d like to share, and there is no time like the present — when we are reeling over stock market volatility and wondering what comes next — to get a bit of comic, head-scratching relief.

You want fries with that? Did you know that the McDonald corporation possesses one of the world’s most comprehensive (international) real estate portfolios? Franchisees do all the burger-flipping work while the Big D enjoys the land-holding and franchise fee revenues without worrying about the calories.

Some people are billionaires, but you wouldn’t know it by the way they live. Mogul Warren Buffet lives in the same house he bought in 1958 for a cool $31,500. Think his mortgage is paid off by now? A number of high profile celebrities have some frugal leftover tendencies as well, including Jay Leno, who made the choice to never spend his $15 million a year TV show salary, Leonardo DiCaprio, who drives a Toyota Prius, and Paul McCartney, who had his daughter pay her own way through college and asks party guests to pay for their own drinks.

You don’t have to sound brassy if you have a brass doorknob. You just don’t tend to pass on the flu as easily. According to a number of sources, brass doorknobs disinfect themselves, being the most antimicrobial metal of all. So next time you turn the knob or push down on a brass lever, you’ll have fewer worries that you may start sneezing because of it.

It’s a red letter day when you pay off your mortgage. The Scots not only think so — and they make sure you know about it. In Scotland when someone writes that last monthly mortgage check they run out and buy a bucket of and paint their front doors red. This mortgage-free announcement is thrilling to homeowners who definitely think it’s worth proclaiming.

Think a tiny paperclip is no big deal? Think again. Beginning in 2005, Canadian Kyle McDonald traded a paperclip for a pen, then for a doorknob, then a camp stove, a generator and on and on. He traded rent, favors, and even a movie role until he ultimately got a 2-story farmhouse for all his swapping efforts. Don’t let anyone tell you it’s not the little things that count.

Sometimes Public Enemy #1 is a nice guy. Some say this may be an urban myth, but the story continues to be told. Charles (Pretty Boy) Floyd, a Depression-era gangster not only robbed banks. He also served as a kind of modern-day Robin Hood, destroying mortgage documents in the process and freeing a number of citizens of their financial obligations. Sometimes the little guy comes out on top.

Capitalism produces winners and losers, but who’d a thunk the game Monopoly was designed by

a woman to teach us a lesson? Still a bestselling board game, the concept taught us to buy up property, stack it with hotels, and charge fellow players sky-high rents for the privilege of accidentally landing there. But the little-known inventor, Elizabeth Magie had no idea that it would encourage its players to celebrate values opposed to those she intended to champion. A devout and vocal socialist, Magie proclaimed ‘the equal right of all men to use the land is as clear as their equal right to breathe the air – it is a right proclaimed by the fact of their existence.’ Seems Americans never grasped that idea.

Although India is a land of haves-and-have nots, one of the haves built a billion-dollar home. It boasts 27 floors (six of them for parking), 3 helipads, is staffed with 600 people, offers a 4-story hanging garden and is complete with a movie theater. We’re not sure how many bathrooms one needs for a life well-lived, however.

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Sources include Wikipedia and many others.

Source: TBWS   

'Aging in Place' Helps To Fuel Housing Shortage

As the baby boomer generation has aged, it has also stayed put. And for all the innovations builders and product manufacturers have come up with to help seniors “age in place.” they may have also made it difficult for would-be home-buyers, causing a lack of housing inventory.

According to a new report from Freddie Mac, 2019 will see a significant shortage of available homes here in the U.S., failing to meet needs by 2.5 million units. It doesn’t help that at the same time millennials are buying fewer homes at this point in their lives compared with previous generations at similar periods.

As seniors continue to prefer to stay where they are as the optimal way to live out their remaining years, housing inventory has tightened nationally. According to the report, for people between the ages of 67 and 87, home-ownership rates dropped by 11.6 percent for previous generations but only 3.6 percent for the current (leading edge) generation of seniors, identified as having been born between 1931 and 1941.

New advances in information technology may be the culprit, as well as accessibility to better healthcare and education, with the report crediting those advancements as “boosting and extending” housing demand among seniors. The result? The current senior generation has become much slower in transitioning out of home-ownership than prior generations.

The U.S. Census Bureau says lost units will need to be replenished at a rate of 350,000 homes per year in order to bring the market to a “well-functioning” status. “Vacant homes increase liquidity in the market, enable prospective buyers to find a match, and give prospective sellers confidence to list their home for sale,” the Freddie Mac report states. “Vacancy rates are an important indicator of housing market vitality. Too high a vacancy rate reflects a moribund market, while too low of a rate reduces the efficiency of the marketplace.”

While this does not bode well for home shoppers, it will boost spending on renovations, according to Chief Economist Sam Kater. “We believe the additional demand for home-ownership from seniors aging in place will increase the relative price of owning versus renting, making renting more attractive to younger generations.” If that is true, however, those in a position to purchase the limited number of homes available may well see their property values increase more quickly than anticipated. 

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Source: Realtor, Reversemortgagedaily, FreddieMacTBWS

Mortgage Giants Freddie Mac and Fannie Mae Offer More Relief To Worried Homeowners

In a move sure to bring a sigh of relief to millions of distressed homeowners, loans backed by Fannie Mae and Freddie Mac will now defer all missed mortgage payments, tacking them on to the end of their loans already in forbearance.

Borrowers who took forbearance due to COVID-related issues will not have to repay their missed payments until they sell their homes, refinance their current mortgage or their mortgage matures. Under the program, the borrower begins making their mortgage payments again when they’re able.

For homeowners in forbearance due to COVID-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance. This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid.” The extension can continue up to 180 days beyond the 180 days granted by forbearance. 

The issue is that forbearance is not forgiveness; therefore, borrowers in forbearance have to repay their missed mortgage payments one way or another. The GSEs’ (government-sponsored loans’) new payment deferral allows borrowers who took forbearance to shift as many as 12 months of mortgage payments to the end of their loan and is available to homeowners who have completed a COVID-19 related forbearance plan and are able to continue making their full monthly contractual payment but cannot afford full reinstatement or a repayment plan to bring their mortgage loan current.

According to Freddie Mac, the maturity date, remaining term, interest rate and payment schedule of the borrower’s mortgage remains the same as it was before. In addition, Freddie Mac said that utilizing the payment deferral option does not prevent a homeowner from someday being eligible for a Freddie Mac modification if payment relief is needed in the future. This option will begin being offered to borrowers on July 1, 2020.

For more information on how this all works, I am available to answer your questions. 

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

A Fun Look Back At The Homes Of The 1920s

It has now been 100 years since the start of the Roaring '20s when flappers danced in Great Gatsby. Prohibition was still a decade away. As for housing styles, it's fun to compare today's homes to those a century ago, dresses above their knees, jazz began permeating the night club scene with insane rhythms, and men dressed like the Great Gatsby. Prohibition was still a decade away. As for housing styles, it's fun to compare today's homes to those a century ago.

Back East, in places like Quincy, MA, "streetcar suburbs" were growing quickly, containing American Foursquares, Dutch Colonials, and "Quincy Capes" that were built alongside multi-family homes. House and Hammer's Jon Gorey, who lives in that area, says 1920s floor plans seemed to be made for entertaining and boasted 12-ft ceilings throughout. "The downstairs rooms are almost always connected all the way around in a circular flow pattern — which, any child can tell you, is perfect for racing around in circles. Instead of doors between rooms, there are often wide, cased openings. And when every room opens into another, and another, it helps to relieve any claustrophobic inklings you might otherwise get in a small house."

Homes in the wild west were built with different building materials than those used in colder climates. As historians note, the Los Angeles of the 1920s was roaring like it never had before. Hollywood was in its infancy and the "Go West, young man" mentality had people from all over the country dreaming of a different life. Realtor David Lubell, who specializes in selling historic Los Angeles homes, says that Mediterranean architecture began dominating southern California, derived from styles of the Iberian and Italian peninsulas. "Of course, the climate in southern California makes this a sensible outcome, but the story is more complex than just the weather," says Lubell. "More than two centuries of Spanish-Mexican settlement also had a tremendous influence on the stylistic choices in Los Angeles. The indigenous peoples use of adobe mixed with the Spanish Colonial forms set the foundation for a different kind of architecture than in the rest of the United States." This is, of course, even more prevalent in parts of the American Southwest.

This is also when modernism began to find its footing, beginning with the opening of Bauhaus, the German art school that combined crafts and the fine arts and began to spread its design love everywhere. Art deco touches meant homes were flashy, sophisticated, and fun all at the same time. Geometric shapes, shiny fabrics, stylized images of skyscrapers and airplanes, and exotic touches from Africa, Egypt, and the Far East were brought together to form an eclectic and exciting home interior. 

As for the nuts and bolts of homes of the 1920s, lath-and-plaster was still the ticket. Galvanized pipes were employed both within the house and for sewer lines as well. No one back then knew they corroded over time. And the now-infamous knob-and-tube wiring was everywhere. So if you were to buy a 1920s home that had never been updated, you'd be looking at replacing all plumbing and electrical conduits as well as the electrical panels. Toilets of the 1920s had long cords attached to tanks placed high on the wall, and tubs were surrounded by 360-degree curtains. Interestingly enough, you can still find manufacturers who make those strange looking toilets and, of course, clawfoot tubs are still the rage. How about those craftsman homes, such a beautiful home that still provides many homeowners with continued enjoyment to this day. 

Kitchens were large, usually with a large informal dining table in the center. And for those who could afford it, iceboxes were traded in for modern electric refrigerators, introduced in 1920. No longer did homeowners need to wait for the ice to be delivered by a guy in a truck. It was now contained in trays in a freezer compartment, ready to break out for cold drinks at a moment's notice.

So as you look to consider doing some updating to your home in the coming decade, remember that it was the 1920s that began a tradition of distinctive style in home interiors. It was a prosperous (and sometimes irreverent) time in U.S. history. The elements of it that have been preserved to this day are living proof good architecture and design can stand the test of time.

I hope this has been fun come back soon. 

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219

Source: TBWS

How To Select A Loan Officer

Someone once asked me: If you were shopping for a Mortgage broker. How would you select one? Do I need a mortgage broker to get a mortgage?

You might believe, the interest rate is one of the last reasons to choose a lender. I say this because almost all loans get ultimately sold to the same pool of investors-Fannie Mae, Freddie Mac or Ginnie Mae. Lenders earn their money by originating and funding loans which they then sell to investors for a small profit. The investors pay a set price for these mortgages, depending on what the market is doing on any given day.

It's important to know this as a consumer so that you realize that there isn't a huge spread in rates between one lender and the next. You should be looking for different criteria for choosing a lender to purchase or refinance a home.

You asked about mortgage brokers, but it might be a good idea at this point to talk about some terminology. A mortgage broker is a licensed person who acts as a go-between for lenders and consumers. The broker will typically receive a fee from the lender for those services. It does not usually cost more to use the services of a mortgage broker.

There are also mortgage bankers. Although you might think a "banker" is someone sitting behind a fancy desk in your local Too Big To Fail bank, the term is actually broader than that. A mortgage banker is someone who originates and funds mortgages in the name of his or her company. They will then sell the funded loan to the investor for a small profit. It does not cost more to use the services of a mortgage banker or a commercial bank when you are seeking a mortgage. 

You might ask what the difference is between a "banker" and a "broker." Both do essentially the same job, but under today's regulations, there are minor differences between the two types of loan originators. A broker is considered the "originator" under the new regulations. A banker is seen as a "creditor." The disclosure documentation is very slightly different between the two, but in most cases, there are functionally the same. A banker, however, may have a bit more flexibility when it comes to getting your loan funded. 

Let's consider that "broker" and "banker" are essentially interchangeable terms. Many people who used to be brokers are now bankers. Some don't even change the name of their company or their location. 

I'd suggest that a better way to ask your question might be to ask, "Am I better off going to my neighborhood Too Big To Fail bank or finding an independent lender (broker or banker)?" Here is what you should look for when you look for a mortgage.

First, you should be aware that getting a mortgage today involves more moving parts than previously. This means that having a loan officer to guide your application through the process is very important. It doesn't matter whether your loan officer is a banker or broker; what matters is that you have a point of contact to answer questions and let you know how the process is going.

A good loan officer will also help you as a trusted advisor; they should be able to let you know if there are ways where you might tweak your credit score so as to get better pricing on your loan. For example, raising a credit score from 735 to 740 could save $1,000 on a $400,000 loan. Accomplishing that could be as simple as reducing the balance on a single credit card.

Your loan officer should also have a good feel for the performance of the market. Mortgage rates change every day, based on the price of a type of bond called a Mortgage Backed Security (MBS). The price of the MBS changes during the day according to market activity. It directly affects the rates for mortgages. To give you an idea, if the price of the MBS goes up from one day to the next by .25% (that would be $.025 per $100 of bond value), the cost of a mortgage will improve by .25%. That means that a $400,000 mortgage would be $1,000 less expensive. 


This doesn't mean that the cost of your loan is constantly fluctuating. There will come a time in the mortgage process when you have to "lock" the rate. This means that the lender is now committed to fund the loan at an agreed price and terms, regardless of what happens in the market. If your loan officer believes, from being aware of the market activity that rates might improve over the near term, he or she may advise you not to lock right away. Conversely, your loan officer may believe that rates may increase soon based on market activity and would encourage you to lock early, thus protecting from rising rates. No one is right all the time, but you're far better off dealing with a lender who understands the mortgage markets.

To answer your question—FINALLY—the answer to your question is no…but regardless of whether you go to a Too Big To Fail bank or an independent lender (broker or banker), your interests are best served by finding someone whom you can trust as a resource and trusted advisor. 

I hope this is helpful. Good luck!

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 

Roxy Redenbaugh, Broker

Sr Mortgage Consultant

Residential and Commercial

www.roxyloans.com

The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,

NMLS#269926 Company NMLS#1930219