Club Chaos Agents - All Things Hollish, Wacked, and Jacked

 

 

When it comes to mortgages, there are so many frequently asked questions. One mortgage topic that gets many misleading answers is mortgage insurance, specifically FHA mortgage insurance.

Why do I need FHA monthly mortgage insurance if I put 20 percent down?

Aren't FHA loans more expensive? (many refer to this because of the upfront mortgage insurance)

 

FHA monthly mortgage insurance will be there regardless if you put 20 percent down. If you put less than 20 percent down, you will have the FHA monthly mortgage insurance until you reach the 78 percent LTV level. (LTV = Loan-to-Value)  If you put 20 percent or more down, you will still have the monthly insurance for 5 years, guaranteed. Even if you put 19 percent down and you reach the 78 percent LTV in 3 years. This is a FHA guideline which is constant no matter what mortgage lender you use.

 

Comparing FHA loans with other mortgage programs, there are rumors that FHA loans are more expensive. Why do people say this?  In many cases it's because they are talking about the upfront mortgage insurance, which was reduced in October. Another reason would be because FHA raised the monthly mortgage insurance requirement back then also. If you break all of this down properly, depending on the borrowers credit scores and down payment amount, FHA loans are still cheaper in many scenarios.

Check out this scenario with 10 percent down and a credit score of 699. FHA loans vs Conventional loans with 10 percent down - What is not talked about much regarding conventional loans is it's very tough and or very expensive to get mortgage insurance on conventional loans with credit scores below 700 and or with less than 10 percent down.  Besides, Conventional loans will become more expensive come April 1st, 2011. Fannie Mae increases their pricing hits

 

 

Summary : One last thing that needs to be talked about is that you need a solid/strong loan officer who will not only be able to compare certain mortgage programs properly, but ask the right questions. An important question that gets over-looked are the borrower's goals, present and future.  I bring this up because I had a borrower who was buying a home that was worth $40,000 more than the purchase price. And by asking him the right questions, I was able to determine that he wanted a 5 year arm not only for the lower mortgage payment, but because he was planning on getting rid of the monthly mortgage insurance in less than 5 years with more equity in his property. I asked him, "what mortgage program will you be using when you refinance."  He had stated a FHA loan. Rut row... but as I mentioned above, you will still have mortgage insurance for 5 more years again, even if you refinance with 20 percent or more equity. The previous loan officer that he was shopping with and comparing me to never brought this up. Just because one loan officer might be cheaper in rate and or costs, it could still cost you thousands of dollars more when it's all said and done. Just food for thought when shopping for mortgages.

 

 

Are you a consumer with some questions, but not sure who to ask?

Are you a realtor who has questions or scenarios, and possibly work with a good loan officer, but could use some extra feedback?

You have some outside sites such as Trulia, Zillow, or even Active Rain, to where you can ask such questions?  But what happens if you get like 7 answers and 3 of them are varying or different. And who is to say that you can trust such answers. I see many questions on Trulia that are answered incorrectly, and even the mortgage questions answered by realtors.  Sorry, but if I were a consumer reading this, not knowing any differently and took those answers as gold, as correct... I could be in some serious trouble down the road. Example :

I have seen where one realtor told a borrower that FHA loans were better than USDA loans. Say what? First off, that shouldn't come from a realtor. Secondly, in most cases, the USDA loan will be better. Reminder : Each borrower is different.

I read an answer by a realtor that said you should put 20% down. Sorry, but I disagree with that comment for several reasons. One main point is that cash is king in today's economy, even if you have it. I gave many reasons why in this post. - Don't be cash poor - Cash is King Part 2 of 3 -

 

 

 

Overall, the problem with the internet and such sites as Trulia, is that anyone can answer questions.  And I have seen my share of incorrect or misleading posts on mortgage information on the internet. Not saying that I am God or that I know it all, but if I am not sure, I verify it through reliable sources.  So with that said, I put together a group of 9 loan officers from abroad, all representing different mortgage companies, and that we have over 150 years combined in the mortgage industry.  The Mortgage Myth Busters -

 

 

CLICK ME

 

 

Mortgage Myth Busters group description :

The Mortgage Myth Busters is a group of experts from different companies all over the country that share the commitment to provide consumers with the right answers to their real estate finance questions. Our unique approach of collaborating and combining forces enables us to provide factual mortgage information and invaluable insights especially during these trying times.

Our purpose is to educate and assist the consumer in navigating the often confusing process of obtaining financing. It is our goal to dispel the confusion, myths, and lies that surround the real estate and mortgage industry. We do this in hopes of earning your trust and eventually your business.

 

 

If you have any mortgage related questions as a consumer or as a realtor or even as a loan officer, they can be asked in our questions forum @ Mortgage Myth Busters Questions Forum -

 

You can also ask questions here :

Our Facebook Fan Page : Mortgage Myth Busters on Facebook

Mortgage Questions Group on LinkedIn : Mortgage Myth Busters Questions Group on LinkedIn

 

 

Conclusion : Thoughts?  Opinions?  Feedback? 

On a side note, some time in the future, we will have selected realtors from different states that will be answering real estate related questions on our site also.  thanks

 

 

 

 

How much abuse can one take?  How many times can one be beaten down, even if it's not physical abuse. The mind can be a delicate thing. I wouldn't think any of us would like any kind of abuse. So much abuse that it would make a person break down and cry. Well, this does happen within the mortgage industry from time to time. As a borrower, you need to understand the warning signs in order to act appropriately. 

I am not saying that all loan officers do this to their borrowers, but it does happen more than it should and people need to be aware of this. Just remember, not all loan officers are evil, but some will mentally break you in many ways. Let me explain....

 

 

I recently just obtained a new client, who I will call Jane Doe. She was pre-approved by a lender for an FHA loan in early May who then signed a contract on May 6th. The settlement date was set for June 30th, which would leave this lender roughly 50 + days to close this loan. Not only did they miss two commitment dates, but the settlement date also. Jane first contacted me on July 1st from a post of mine through Active Rain. I pulled their credit and ran my figures to see if they actually did qualify. Her mid score was a 638 and her boyfriend's was a 679, so they qualified with the credit scores. But I had many concerns not only about the credit report, but about the qualifying ratios. After speaking to her over the 4th of July weekend, I told her that I thought I could do the loan, but that I wanted to run this by my underwriter on Monday.

 

 

Monday night rolls around and I tell Jane that we feel like we can do this loan, but that we have a lot of work ahead of us. Because of the story that Jane told to me, I told her that even if she weren't to use my services, to seek out another lender no matter what. At that moment, she told me her biggest fear was to start all over. I knew this was coming, but under my breath I was furious. I have seen this time again. I had to point out that not only did they lie to her, break their promises about just needing another day many times, but started to ask for things 45 days later. For example, she has a $11,000 judgment and I told her that it needed to be paid off. She it didn't need to be paid off per the other loan officer. But when I spoke to her on July 7th, it now needed to be paid off. In my opinion, it was never ending.

 

 

Some things that you need to know. This loan officer was extremely hard to reach, but always said there were no problems. The appraisal was never ordered until I took over the file last week and neither was title. These were major red flags in my opinion.  Once Jane started to feel like she needed to leave this loan officer, she told them that she was considering going with me.  All fo a sudden, this loan officer was returning Jane's calls more often. And then on July 13th, Jane received this e-mail, not a phone call.

"I'm sorry I was out of my office all day today. The reason a commitment hasn't been given is because your credit score does not meet the required score needed to get the loan."

Huh?  8 days after the original settlement date!  Jane was frantic and after we spoke that evening for an hour, it sounded like she was my client for good. Not so fast, because I received this e-mail from Jane the next morning.

"Jeff,

We will not use the services of Infinity Mortgage for our mortgage need. The running of our credit reports 3 times by Infinity was not necessary. Therefore please do not make any further contact with me or any of my parties involved."

Wow... what the hell just happened. As you can see, this loan officer told Jane that we pulled her credit 3 times, which dropped her score. At this time, they could do the loan if they put 10% down. Wait, red flag. What about their company's credit score guideline previously?  Later that day, the loan officer said they had another lender that could do the loan, but at a much higher rate. The rate would be from 6% to 6.5%, yet my rate was 5% and my qualifying ratios were already to high. OUCH !!

 

I finally got Jane on the phone and pleaded with her.  She was upset and crying. She told me that she couldn't take it anymore. All I asked her was to get a copy of the credit report to prove to her that we pulled it once. She called me back and said, yes, you are correct. She also said boyfriend finally told her that she needed to stop talking to this other lender. Jane even told me that she would cry at night and that she couldn't focus on her job. But she wanted this house, that she was in love with it. Hence one reason why she kept with this lender and all of their broken promises.  She said, "Jeff, I was just hoping it would happen, hence why I kept believing this loan officer."

 

 

Moral of this story - If you see yourself in this kind of pattern early on, don't wait until the last minute, seek advice sooner.  There were more issues that I didn't mention that Jane went through. But after what she went through for two months, Jane reminded me of someone that kept going back to someone that would continuously abuse her.

In relation to the title of this post, Jane first denied that there were any problems with her situation, and made up excuses. As it progressed, she realized and recognized the problem, yet she kind of blamed herself. She then realized that she didn't deserve this and finally recognized that this loan officer was the one with a problem. Overall, it was very traumatic on her end. We are looking to settle on her property in the next 10 days. I did tell her that there were no guarantees, because every piece has to fit, and that this is an extremely tough deal. But she just appreciated honesty and someone that picks up the phone when she calls.

 

 

If you ever find yourself in this kind of situation early on, please don't wait, seek the advice of another loan officer.

 

 

 

Disclosure : I know this can be a touchy situation or subject for some. The title of this post was ti catch your attention and to make an extremely important point. It was not intended to offend anyone or bring up any ones past. And it was not intended to towards women only.  If so, I apologize, but I wanted to make my point clear.  Thank you...

 

 

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

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

For information about FHA myths & FHA rumors, please read : FHA Myths & Rumors

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc