Cindy Hartman, REALTOR®,e-PRO® The American Dream is Alive and Well!

Questions to ask when selecting a loan officer

 

When talking to a mortgage lender/banker prior to making a mortgage application, you may find it helpful to ask the following questions in order to make an informed decision.

 

  1. Are you a full time lender rep or mortgage broker?

 

  1. How long have you been doing loans full time?

 

  1. How many loans do you do in a year?

 

  1. Based on our situation, what is the best mortgage for us? Why?

 

  1. What is the most popular loan you offer? Why?

 

  1. How long will it take you to process and close the loan?

 

  1. About your … Rates.....Terms.....Fees … are they all negotiable?

 

  1. What are your standard fees? Are there any special fees?

 

  1. What is the longest rate guarantee you will give?

 

  1. What if rates go down during this lock-in period?

 

  1. What does it cost to lock-in an interest rate?

 

  1. Will this loan be sold on the secondary market or will it be placed in your portfolio?

 

  1. What is the difference to me?

 

  1. If private mortgage insurance (PMI) is required, at what point can it be eliminated?

 

  1. What is the procedure for eliminating private mortgage insurance?

 

  1. What is the up-front charge for private mortgage insurance and what is the renewal fee?

 

  1. Should we include it in our mortgage or pay it in advance? Why?

 

  1. What is the process we will go through, between the mortgage application and the day our home purchase closes?

 

  1. When does the mortgage servicing department pay the property taxes to insure the income tax deduction for that year?

 

  1. How many months worth of property taxes and insurance are required for the reserve account?

 

  1. If obtaining an adjustable rate mortgage, describe how and when the loan can be converted to a fixed rate mortgage and what charges will be involved. Will another appraisal be required?

 

  1. If obtaining an adjustable rate mortgage, what is the margin, index, and anniversary for adjusting the payments?

 

  1. Is the loan assumable? Under what conditions?

 

  1. Can I pay off my loan early? Is there a penalty? Can I pay extra on my loan? How is it applied?

 

  1. What do you need from us to get our loan approved?

 

  1. When is the house payment due and when is the late fee incurred? What is the late fee?

 

  1. Do you have any concerns about our ability to get a quick loan approval?

 

  1. How long do we need a "Finance Contingency" to be in our offer to purchase?

 

Note!!! Each credit report that you get will reduce your FICO credit score. This includes almost any application for credit, even rentals and cell phone applications. If you plan to shop lenders, have your credit checked by the one you are most likely to use then take a copy to the other lenders. If you use someone else, they will have to run another credit report. Please feel free to contact me for a reference to a quality lender. Leave me your name, e-mail and phone and I will have them contact you.

 

Welcome to the adventure of buying a home! If you want an experienced professional on your side, call:

 

Cindy Hartman, REALTOR®, e-PRO®         

RE/MAX 100

Office: (800) 493-4545

Cell: (240) 346-9097

CindyHartman@Remax.net

www.HomesBuddy.com

 

*Article by Dennis Smith, visit www.SanDiegoHomes4u.com for more original content like this.

Creative Financing

Seller Financing
As the seller, you have the option of financing the buyer's purchase with the equity you have in the property. You can finance part or the entire mortgage for the buyer. Before setting-up a private mortgage, it is wise to consult with your attorney.

Carrying Back a Second Mortgage
In the case of "carrying back a second mortgage", the seller loans the buyer part of the seller's equity. In this scenario, the buyer would finance the majority of the loan with a traditional mortgage lender and finance the remaining amount with the seller. Typically the buyer would pay a slightly higher interest rate on the loan financed by the seller.

Financial Issues

The Purchase Price
The seller and buyer's mutually agreed upon purchase price for the property. As the seller, you should know up-front that the buyer would like you to finance the deal. Knowing that you will be financing the deal may affect your willingness to make adjustments to the sales price.

The Down Payment
The size of the down payment may affect the buyer's commitment to honoring the mortgage contract. The larger the down payment the buyer invests, the stronger his/her motivation to protect the investment. In addition to making the monthly payments, the buyer's commitment to the investment would include a willingness to maintain and upgrade the property, as well as make tax and insurance payments.

The Interest Rate
At a minimum, the interest rate you charge should match current interest rates traditional mortgage lenders are offering for loans of the same term. You may want to charge an additional percentage point as compensation for the work involved with servicing the loan.

The Buyer's Credit & Income
You'll want to review the buyer's credit history to determine the buyer's willingness to pay his/her debts. A credit report will give you a better understanding of the buyer's financial history. Red flags would include late payments and loan defaults. If a buyer has a less than commendable credit history, you may decide not to finance the loan or you may require a larger down payment. In addition to the buyer's credit history, you'll want to review the buyer's income sources. Is the buyer's salary sufficient to make the monthly payments? Does the buyer have additional income sources that could be accessed if the buyer lost his/her job?

Amortization
The amortization period is the length during which the loan is repaid. The longer the amortization, the longer you are at risk that the buyer will default on the loan.

Balloon Payment
A common practice is to have the full amount of the loan due on a certain date, usually in 5 to 10 years. As the lender, this gives you a profitable short-term investment with the provision that your principal investment will be recouped in just 5 to 10 years.

The buyer is usually in a better position to secure traditional financing after 5 to 10 years. Both the buyer's equity in the property and record of timely mortgage payments can help the buyer secure a loan to cover the balloon payment.

Escrow for Tax and Insurance
Lenders typically require borrowers to pay 1/12 of their annual taxes and insurance costs as an escrow payment due with each mortgage payment. Then, the lender makes the borrower's annual tax and insurance payment. While this adds time and hassle to the seller-financer, it also protects you from the unfortunate situation of having a buyer make his/her mortgage payments but not tax and/or insurance payments.

Lender's Title Insurance
A smart investment is a lender's title insurance policy. The policy protects your lien on the property from being defeated by a prior lien or other interest in the property, which, if exercised, would wipe out your security. Things that can affect your rights as the seller-financer include marriage, divorce, death, forgery, a judgment for money damages, a failure to pay state or federal taxes, and more. Be sure to include the cost for your lender's title insurance as one of the buyer's closing costs.

Closing the Sale
Both buyer and seller will be responsible for paying the usual closing costs. You will also want the buyer to pay all the costs associated with setting up the mortgage financing. This would include the cost of having your attorney create the mortgage note.