Friday, November 2, 2012
Jack of all trades
In what I hope to be a series of blogs, I wish to shed a little light on the mystery of mortgages. The most difficult and frightening aspect of buying a home these days is the trip to the lender. They are seen as the destroyer of dreams, the harbingers of bad news, and money thieves. They have never been thought of highly, but the “credit crisis” has only darkened their images.
Like members of any profession there are good ones and there are bad ones. When shopping for a dentist or accountant most people ask their friends for recommendations. This is a good place to start when looking for a lender. But first, let’s clear up a couple of definitions:
Direct lender: This is not a phrase often heard outside of the banking industry. This is the local bank employee who handles the loan you get at that bank. It is a person employed directly by the lender and only represents them. Pros: you know exactly who you’re dealing with and there are no additional fees. Cons: they represent only one lender.
Mortgage broker: this is a licensed real estate agent (in the state of California) who specializes in loans. They will shop for the best loan and if they do enough business, they can get you rates from that same bank that are lower than you would get dealing with them directly. Pros: more choices. Cons: additional fees.
So, which is better? That depends upon what you need. Do you have an ongoing relationship with a bank? Then the direct lender might be best. Is this your first loan? Then maybe you need someone to both shop and fight on your behalf. Someone who knows how to present you in the best light. Someone who only gets paid, if you get a loan.
Like members of any profession there are good ones and there are bad ones. When shopping for a dentist or accountant most people ask their friends for recommendations. This is a good place to start when looking for a lender. But first, let’s clear up a couple of definitions:
Direct lender: This is not a phrase often heard outside of the banking industry. This is the local bank employee who handles the loan you get at that bank. It is a person employed directly by the lender and only represents them. Pros: you know exactly who you’re dealing with and there are no additional fees. Cons: they represent only one lender.
Mortgage broker: this is a licensed real estate agent (in the state of California) who specializes in loans. They will shop for the best loan and if they do enough business, they can get you rates from that same bank that are lower than you would get dealing with them directly. Pros: more choices. Cons: additional fees.
So, which is better? That depends upon what you need. Do you have an ongoing relationship with a bank? Then the direct lender might be best. Is this your first loan? Then maybe you need someone to both shop and fight on your behalf. Someone who knows how to present you in the best light. Someone who only gets paid, if you get a loan.
Firewood 101 – continued
When choosing a lender, know what kind of loan you need and what programs are offered by a lender. Your real estate agent should be able to help you with this. There are many different lenders and many different products:
If you are a first time home buyer there are products through government agencies. To broker these loans a loan agent must be certified through that agency. There are programs through the Federal Housing Authority (FHA) and in California there are programs through CalHFA.
Are you a teacher, Firefighter or Police Officer? There are both a Federal programs and CalHFA programs.
Are you self employed? Then you will need a lender who can either do no income verification (almost unheard of at this time) or understands how to work with Schedule C’s and 1040’s
Buying an investment property with more than 4 units? This is considered a commercial loan and requires a commercial lender.
There are other things to consider when choosing a lender. I believe that one of the more important factors is their communication skills. To get the best loans you have to ask questions, lots of questions. How well do they answer all those questions? Do they get back to you in a timely manner? Are they accessible? Always talk to more than one lender to compare both loan programs and their communication styles. Talk to them about your situation and see if you get specific answers. They all want to sell you something, but do they have something you want to buy? Are they truly knowledgeable about the different programs offered? Let your Real Estate agent know what you think of the lenders you talk to. We want to know when someone is not giving a high level of service or if you have found a new name to add to our personal lists of recommended lenders.
If you are a first time home buyer there are products through government agencies. To broker these loans a loan agent must be certified through that agency. There are programs through the Federal Housing Authority (FHA) and in California there are programs through CalHFA.
Are you a teacher, Firefighter or Police Officer? There are both a Federal programs and CalHFA programs.
Are you self employed? Then you will need a lender who can either do no income verification (almost unheard of at this time) or understands how to work with Schedule C’s and 1040’s
Buying an investment property with more than 4 units? This is considered a commercial loan and requires a commercial lender.
There are other things to consider when choosing a lender. I believe that one of the more important factors is their communication skills. To get the best loans you have to ask questions, lots of questions. How well do they answer all those questions? Do they get back to you in a timely manner? Are they accessible? Always talk to more than one lender to compare both loan programs and their communication styles. Talk to them about your situation and see if you get specific answers. They all want to sell you something, but do they have something you want to buy? Are they truly knowledgeable about the different programs offered? Let your Real Estate agent know what you think of the lenders you talk to. We want to know when someone is not giving a high level of service or if you have found a new name to add to our personal lists of recommended lenders.
Black Hawk Vacation Time!
In this job I have to be a Jane of all trades, master of few. I need to know a little bit about taxes and accounting, business and real estate law, plumbing, roofing, landscaping, oh the list goes on. I need to know this not because I should give you advice in these matters, but so I can spot the red flags. Those situations that require me to tell the buyer or the seller they need an expert.
When I worked in Oregon I had a list of attorneys for just such times. Many of the homes there could not be sold with a conventional mortgage. They needed owner financing, which requires a contract written by an attorney. The first name on my list was an attorney who never wrote a boilerplate contract. She could write sales contracts off the top of her head and they were brilliant. She could cover all the bases for that particular sale and I always felt that my clients were well taken care of.
The second attorney was recommended to be by another broker. She called him the “pit bull”. She admired him so much because she had to face him in a deposition. He grilled her for three hours straight. She said that if she had actually done something wrong, he would have gotten it out of her.
The third attorney was a man so mean and so nasty, both in person and by reputation, that the mere mention of his name to the opposing side would cause surrender.
Only once did I have to use the list to tell clients I had seen those red flags and that I thought they should hire either the pit bull or the nasty one. They went with the nasty one and the problems were resolved the next day.
So, what am I a master of? Well, I’d like to think it’s my negotiating skills or my organizational skills. There good. I’ve had lots of practice. But people tell me that my best skill is as a listener. I guess I prize that above all. For without the ability to truly listen, there would be no point in having any of the other skills. Often the blogs I write here are in response to something I heard a client say or their tone of voice. I don’t listen just for words, but how you say them. I hear a lot more than people realize. So, my response is often in these pages.
When I worked in Oregon I had a list of attorneys for just such times. Many of the homes there could not be sold with a conventional mortgage. They needed owner financing, which requires a contract written by an attorney. The first name on my list was an attorney who never wrote a boilerplate contract. She could write sales contracts off the top of her head and they were brilliant. She could cover all the bases for that particular sale and I always felt that my clients were well taken care of.
The second attorney was recommended to be by another broker. She called him the “pit bull”. She admired him so much because she had to face him in a deposition. He grilled her for three hours straight. She said that if she had actually done something wrong, he would have gotten it out of her.
The third attorney was a man so mean and so nasty, both in person and by reputation, that the mere mention of his name to the opposing side would cause surrender.
Only once did I have to use the list to tell clients I had seen those red flags and that I thought they should hire either the pit bull or the nasty one. They went with the nasty one and the problems were resolved the next day.
So, what am I a master of? Well, I’d like to think it’s my negotiating skills or my organizational skills. There good. I’ve had lots of practice. But people tell me that my best skill is as a listener. I guess I prize that above all. For without the ability to truly listen, there would be no point in having any of the other skills. Often the blogs I write here are in response to something I heard a client say or their tone of voice. I don’t listen just for words, but how you say them. I hear a lot more than people realize. So, my response is often in these pages.
Thursday, November 1, 2012
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