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Mortgage Brokers VS Mortgage Bankers

You’re just swinging in your hammock on a sunny summer day when an ad pops up on YouTube for home equity loans. It sounds like a pretty good deal and you have been wanting to put a pool in for years, but it’s a bank you’ve never heard of, and a quick message to your group chat reveals that no one you know has, either.

What you might have witnessed was an advertisement for a mortgage broker. Like a mortgage banker, a mortgage broker can find a mortgage loan for your situation, but that’s where the two start to diverge.

Brokers and Bankers and Mortgages, Oh My!

Let’s start with some simple explanations just so we’re all on the same page.

Mortgage Bankers are people who work for a specific bank, like Main Street Bank USA, and help customers of the bank (and potential customers) apply for mortgages that Main Street Bank USA funds. They only write loans for their employer, except in a few special cases. They’re typically paid a salary by the bank they work for, whether your loan is $50k or $500k.

Mortgage Brokers, on the other hand, have permission to sell loans from a portfolio of wholesale investing clients. These may be traditional banks like Big Bank USA (these are fake banks, just so we’re clear), or they may be investment groups like In It For The Interest, LLC. There’s nothing inherently wrong with this, but because a broker makes their money solely on commission, unscrupulous ones may be tempted to put their own interests above yours. Always vet any type of lender, for peace of mind, if nothing else.

How Mortgage Bankers Work

Mortgage bankers may have a more limited product line they can use to finance your home-related loan, but they have a great deal more control over them because all the underwriting is done within the bank itself. Your local branch might not originate loans, but there’s someone nearby that your banker can call to check status and collaborate with to solve problems like a loan that you’re all by a hair’s width from being able to qualify for.

When a banker takes your application, they may literally forward it to the next room, where local people get to work to verify your income, length of employment and so forth. If you have your checking account with the same bank, you can often skip the tedious submission of income document after income document, since they can pull a lot of information from that checking account.

When the underwriter is comfortable that you’re able to qualify for the loan you’re seeking, they call the title company that you (or you and the seller, in the case of a purchase) agreed to use. They probably already have a relationship with this company since it’s nearby. When they send documents over, the title company doesn’t wonder what to expect from your closing.

How Mortgage Brokers Work

Mortgage Brokers take your application up front, then shop their lenders to see who can make you the best loan based on your credit history, income and desired loan amount. Often, brokers can do things that bankers can’t, even though a banker knows the loan originator by their first name. For example, helping people with troublesome credit is sometimes an area of specialization for brokers. They have access to all sorts of unusual loans that can turn a hopeful into a homeowner, or at least a pool owner.

This is both bad and good. On one hand, you got a loan — woohoo! — but on the other, you’re going to pay for it. These kinds of loans are rarely cheap because the broker’s fees have to be figured into the equation somewhere. Remember, they get paid on commission, not on salary. A normal broker fee can be as much as two percent of your loan amount.

When a mortgage broker pulls off a miracle you were really counting on, though, that two percent seems pretty cheap. Really, it’s all relative to your needs and what’s realistic for your financial situation. Before you choose a broker, make sure that you’ve really vetted them because each company and broker can be as wildly varied as the portfolios they have to sell. Ask around, check online reviews, ask your Realtor their opinion. Chances are good that someone knows a reputable broker that they can set you up with rather than letting you jump in blind.

Which to Choose… and Where to Find Them?

If you’ve decided that you’re absolutely committed to putting in that pool this summer, you’ll need a reputable lender to help you finance all the cement and whatnot. Luckily, both mortgage bankers and mortgage brokers are members of the HomeKeepr community! Log in to see who your Realtor recommends and then give them a call. You’ll save time in lender meet and greets, letting you trade that hammock in for a pizza slice shaped raft sooner.

Is a Home Warranty for You?

Whether you’ve recently purchased a home or are considering renewing the home warranty that came with your home, chances are good that you’ve got questions. Big ones. You’ve probably heard a lot of different things about home warranty programs, ranging from really awful to crazy and near lifesaving. Like anything that remotely resembles an insurance program, there’s a lot of nuance behind individual experiences.

What is a Home Warranty?

You can think of your home warranty as a type of insurance if that makes it easier to understand. It’s technically a service agreement, kind of like what you’d get with a new car. Individual warranty programs have contracts with individual service providers who will come out and diagnose your problem, arrange for parts and then return ready to fix it. The quality of any single home warranty program, then, is only as good as the contracts that the company has with its service providers.

The yearly costs involved range widely, with very basic plans with limited coverage starting around $300 and comprehensive plans that include things like pool repair pushing the $1,000 mark. There’s also typically a service call charge and there can be an upper limit on the costs the warranty will cover.

Depending on the age, size and complexity of your home, that $1,000 plan still may look pretty good next to actually making needed repairs out of pocket. It’s all a matter of perspective.

How Does a Home Warranty Work?

It cannot be stressed hard enough that you should read the entire document before agreeing to a particular home warranty. Although they may seem the same, what one company will cover may be completely excluded by another. Your Realtor should be able to guide you toward a product that they have had a good experience with and consistently delivers good results. If they can’t, call the Better Business Bureau and read reviews online to be certain the company you choose will deliver the goods.

Working with a reputable warranty company is a simple process. It goes something like this:

1. You notice that the sink is backed up unexpectedly. Running the disposal doesn’t help and you’re not a plumber. You don’t even play one on TV.
2. You call the number to your warranty company.
3. An operator answers and asks for identifying information, along with a brief description of the problem.
4. You explain that your sink is full of water and you’re worried you may soon drown if someone doesn’t come to help.
5. Your operator collects all the necessary information, triages the case as either emergency or not, and does one of two things: gives you the number to a service provider OR promises to contact one on your behalf.
6. No more than a day later (depending on your urgency level), the provider calls you to arrange an appointment.
7. The appointment is set, the service provider comes out and figures out what the problem is. If it’s an easy fix, they may deal with it right then. If it’s a costly repair, they’ll need to go back to the warranty company and try to figure out how much is your responsibility and how much the company will cover.
8. You authorize a costly repair, it’s made, you pay your part and go on with your life. Or you decline it, kick the dirt and call the warranty company back for a second opinion, then go through the steps above again.

Warranty programs can be hit and miss, there’s no doubt about it. Sometimes the things they cover versus the things they don’t seem completely arbitrary. But, there’s plenty of competition in this arena that will allow you to get into a program you can afford and will be able to use if need be.

The Biggest Warranty Program Con

This has already been touched on, but bears repeating. The biggest drawback to a home warranty is the very thing that leads some people to believe that they’re cons: they don’t cover everything. Again, this is highly dependent on the program and service level you select, but you have to remember that a home warranty is not the same as homeowner’s insurance.

Acts of Nature, shifting foundations, broken sewer lines and broken windows are among the biggest pain points for home warranty users. These items are often not included because of the massive expense they represent, as well as the fact that many are already covered under your homeowner’s policy.

There’s absolutely every reason to read your warranty paperwork thoroughly so you know what will be and won’t be covered. That way you’ll be armed to fight a refusal to pay thoughtfully and efficiently should it occur in error.

Intangible Benefits Come With Warranties

There are a few people who end up winning the lottery with their home warranties. They move in and everything they touch just starts breaking. These are items that showed no sign of serious wear and were installed correctly, their breakdowns were wholly unexpected. But suddenly, that homeowner has a new furnace and air conditioner, the pool pump’s been replaced and so on. This really does happen, and even at $800 a year and $75 a piece for service calls, it represents an incredible savings.

However, most people don’t get that lucky and if they use their warranty at all, they only need it once or twice during their ownership. This is why it’s important to consider the intangibles with these programs. Sure, your breaker box seems fine today, but would you know what to do if it started malfunctioning? That’s where the home warranty really provides a powerful value.

People don’t buy home warranties to save money on home repairs. They do it to control their repair costs over the long term. Usually, they will spend a lot more on the home warranty than they would just hiring their own contractors, but these same people admittedly don’t know who to call or how to vet a potential service provider.

Service provider vetting is a service that the warranty company provides with their yearly fee. Peace of mind, at a cost, is the thing that many home warranty buyers end up choosing. For the highly risk averse, it’s a total win — these people can go on with life and not have to give home repair another thought.

What If You Could Find Vetted Service Providers and Still Save Money?

If you’d rather have a relationship with your plumber, roofer or other service provider rather than have one with a call center, a home warranty might not be right for you. Instead, you should connect with a referral community like HomeKeepr where you can get to know your people on a personal level, thanks to your Realtor’s recommendations.

There’s just something about telling your friends that “my electrician Greg came right over and fixed the faulty wiring,” rather than “I called the warranty company and some guy showed up” that can give you a huge feeling of security in homeownership, whether these are your first steps or you’re well on your way to your next address.

Housing Trends Portland Region and Portland Region Real Estate Market Updat

Housing Trends Portland Region and Portland Region Real Estate Market Updat

...Housing Trends eNewsletter- LaTasha Hershey

...Housing Trends eNewsletter- LaTasha Hershey

4 Mortgage Programs For Homebuyers

Whether you’re thinking about buying your first home or you’ve been contemplating an upgrade, you probably already know that there are several different kinds of home mortgages, some that seem pretty much alike at face value. FHA, VA, USDA — what does it all mean?! We’re about to take all the stress out of choosing the mortgage that’s right for you and your family (even if that family is just you and Spot the cat).

Mortgage Basics in a Nutshell

There are a few different elements of a mortgage that are important to understand before we move forward in this process. You already know stuff like interest rates and what your payment and interest payments are, but there are other things that might not be quite so well settled in your mind. Most homeowners have questions about the following mortgage related definitions:

Loan features. When you get a mortgage, it often has other stuff that comes with it. After all, this isn’t the same as borrowing money from your mom, banks have fancy lawyers who make sure they earn their keep. You may notice features like “assumability” and “prepayment penalty” listed on your initial loan form.

Assumable loans are loans that you can literally transfer to another person when they buy your house. This is useful when interest rates are climbing, sometimes people will pay more for a lower interest rate mortgage they can take over.

Prepayment penalties are very bad and you don’t want this. Basically, you’re punished for paying your loan off early. Typically, they’re part of subprime lending, but you never know when one might pop up elsewhere. Since “prepayment” includes the payoff from selling your home, there’s no winning with this one.

Mortgage insurance. There’s been a lot of talk about mortgage insurance, both for better and worse. To put it simply, mortgage insurance makes it possible for you to bring a downpayment as little as about three percent to closing with FHA or conventional type mortgages. It’s a type of insurance that you pay for in case you were to default on the loan. If you do, the insurance company pays out your coverage to your bank, reducing the amount you may be responsible for if the house can’t bring enough at the foreclosure sale to cover your remaining note.

Down payment. Down payments are your initial investment in your home. Many times, home buyers are surprised to see that they have to bring both closing costs and a down payment, having assumed the two were the same. The down payment goes to the bank as proof of your commitment. We’ll get to closing costs.

Closing costs. Closing costs are the bane of buyers everywhere. They can seriously mount as things like appraisals, title insurance, fees to the bank (separate from your down payment) and prepaid items like taxes and homeowner’s insurance add up. Some programs will allow you to ask the seller to pay these on your behalf, but the amount you can ask for is limited to a percentage of the sales price and based on the program you’re using. For many homeowners, closing costs will be similar in price to their down payment, which is where the confusion typically starts.

Pick Your Poison: The Four Basic Home Mortgage Types

Understand that these are not the only mortgages out there, but they are the ones that you’re most likely to use in order to buy a home. Each has its own set of benefits and drawbacks, which we’ll discuss briefly.

Conventional Conforming

If you’ve heard of Sallie Mae or Freddie Mac, you know the family of conventional loans. These loans are written by a wide range of banks, from your hometown locally owned to the fanciest mortgage broker. “Conforming” loans meet Sallie and Freddie’s high requirements, including maximum sales price.

Pros: Generally, you’ll get a better deal on mortgage insurance that automatically drops off (meaning you no longer have to pay it) once your home reaches a 78 percent loan to value ratio. Also, you’ll pay less in closing costs and your debt to income ratio can be somewhat flexible as long as look really good on paper.

Cons: These are generally the hardest loans to qualify for. Even though there are now three to five percent down payment options, your credit score will need to be around 700 (better is better) and your other ducks should be lined up nice and straight. Consistent employment, savings that can be designated as “reserve funds” and few to no scabs on your credit report are helpful.

Federal Housing Authority

The FHA started insuring loans after the Great Depression as a way of helping people get back into owned property. It basically created the 30 year fixed interest mortgage and continues to carefully oversee which homes can and cannot be purchased in its name.

Pros: Good option for first time buyers because of low down payment and credit requirements. FHA will accept “soft” credit lines for people who haven’t established credit yet or have very little, so keep that utility bill paid on time. The program allows up to six percent of your closing costs to be financed into your loan, as “seller paid items,” which can help reduce the actual cash you need to close.

Cons: FHA requires a lot more in closing costs because of the additional upfront mortgage insurance deposit. In addition, if you have less than a 10 percent down payment, under the current programs you’ll be forced to keep paying mortgage insurance for the life of the loan, giving you no options but to refinance or sell down the line if you want rid of it (it’s costly, you want rid of it). Not every banker wants to deal with FHA loans because they can be time consuming to write, so you may have to shop a bit to find a good bank.

Veterans Administration

As part of the benefits that active military members and veterans receive from the government, VA loans are built on a merit-based system. Career military and those honorably discharged early are generally eligible, but short-term members or Reserves may have to meet additional requirements. Anyone who can get this loan will need to bring a Certificate of Eligibility in order to get the ball rolling with an approved lender.

Pros: Favorable interest rates, extremely flexible guidelines and absolutely nothing required as a downpayment (often little to nothing required at closing!) There’s no mortgage insurance, just a one time “funding fee” that varies with your service type, downpayment and times you’ve used your Eligibility.

Cons: Really, there aren’t any. You can’t get this if you’re not military, though, so that could be a con if you really wanted this most excellent loan type.

US Department of Agriculture

In rural areas, the US Department of Agriculture will offer mortgage lending as a way of helping to keep the local economy flowing. Homes don’t have to be on an acreage, but they do need to be located in communities with under 35,000 inhabitants.

Pros: Like VA, USDA are fairly easy to qualify for as the buyer. They can also be zero down loans, though the more you can bring to closing the better. Payment assistance and other types of help are sometimes available for very low income borrowers.

Cons: The house you’re buying will undergo significant scrutiny in order to be approved for the program. In all loan programs, your house has to qualify, but the hurdles USDA puts in front of the building are much larger than most other programs. This is good for you, because it means you’re getting a great house, but it makes the process take a lot longer and can be scary for sellers. In addition, there’s a cap on income for potential borrowers.

Need a Mortgage? Who Ya Gonna Call?

HomeKeepr! Wait, that’s a different thing. But, seriously, whether you’re looking for more answers to your burning lending questions, need a plumber to fix your leaky faucet or a party planner to celebrate your finally closing on that loan, your HomeKeepr community has contact information for them all. Just log in and check out all the specialties your HomeKeepr family has to offer — they’re recommended by your Realtor, so you know you can count on these experts.

WHAT IS THE REAL ESTATE MARKET LIKE IN PORTLAND, OREGON?

Should You Jump Into the Current Real Estate Market?

Deciding you’re ready to buy a house is a big moment in your life, whether it’s a first time purchase or you’re snatching up yet another investment property. The home buying process is fraught with dangers, both real and imagined, as well as very real financial risks.

That’s why there are so many pieces of advice about when to buy a house. The truth is that there’s no one answer for anyone. Because market conditions can vary dramatically, there’s no way to safely predict if or when the neighborhood you’re looking at will be ripe for the picking. These are the times when having a really knowledgeable Realtor comes in handy.

Today’s Real Estate Market: An Overview

You should have some idea of what you’re walking into before you jump in the real estate market. Sometimes, there’s way too much supply (too many houses for sale) and not enough buyers — this is a “buyer’s market,” and that’s who has the upper hand in negotiations. Sometimes there are too many buyers and not enough supply — a “seller’s market.” Often, there are roughly balanced parts supply and buyers, which makes for a very healthy and predictable market.

We’re not in a healthy and predictable market at the national level. There are currently way too many buyers who want to buy at any price and not nearly enough new homes being built, nor are there enough existing homes to meet demand. Generally, this would push prices up. However, since interest rates are increasing, some buyers are starting to get squeezed out of the market entirely, which should be pushing prices back down, but doesn’t seem to be.

What we seem to have right now, as of the writing of this blog, is a market that’s sort of stalling. Normally, the summer is the craziest time of the year for Realtors — no one wants to pull their kid out of school mid-year to move across the city. And although many Realtors are reporting that they have plenty of potential, well-qualified buyers, they’re fighting over scraps as the supply continues to shrink.

Should You Be Trying to Buy Right Now?

Depending on who you are and where you are in your life journey, the competitive, weirdly stalled market we have this year may be as good a time as any for you to buy. Below is a brief breakdown of major buyer types and how the market could affect them if they were to buy today:

First time homebuyers. Jumping into the real estate market as a first timer is always a little terrifying, but the current market may give you a serious complex. If you’re buying a house to live in, not one that you expect will make you a bundle down the road, and your life is fairly settled, there’s no time like the present to go down the home purchase road. Just bear in mind that you will probably have to write several offers before you land that starter home — give yourself plenty of time for houses that will get away.

Maturing family. When you’re looking for that last house, the one you’re going to send your kids away to college from, the most important thing is finding a house that’s suitable for your family. There’s no time that’s better or worse for this purchase, especially if your plan is to hold it indefinitely. Sure, you may end up paying a little bit more now than you would have a couple of years ago, but the value you get from living in the house, as well as natural appreciation, generally ensure you come out a little bit ahead. It beats renting, anyway.

Empty nester. Aging in place is the thing these days, and for good reason. That just creates one big problem: not enough inventory that will accommodate mobility equipment like walkers and wheelchairs that you may ultimately need. Housing starts are really rising, though, so you might as well visit a few Open Houses to see if there’s a builder out there that you can picture building the home where you’ll retire. Although existing homes can work for your needs, new construction gives you the option to create an age in place friendly universal design from the foundation up.

Investor. Investors! You are literally the only group on this list that should be seriously concerned about the timing of your purchases. Since owner-occupied homes tend to be held for the long term, the risk to those buyers is minimal, but you’re looking to buy and almost immediately start making money.

Finding a good price on a listed home may be tricky right now, but switching gears to the building of new homes will introduce a lot of competition. Buying and holding properties as rentals could pay off, but only if you really buy them right. Now may not be a great time for you to buy if you have investments that are already paying for themselves. It would, however, be a pretty good time to unload properties that you’ve fully depreciated or those that just really don’t fit in with your portfolio.

When it comes down to it, the biggest factor you should be considering when purchasing real estate that you intend to occupy is whether or not you’re really ready for homeownership. A close second, of course, is whether or not you can really afford a house, but your Realtor and mortgage lender will help you with that part.

You’ll have to decide for yourself if today is a good day to buy, there’s no way to know what the market will look like in five to 10 years when you may want to buy again.

Let Your Realtor Be Your Guide…

Just like the HomeKeepr community helps you find home pros that can fix just about any problem you might have related to your current or future home, your Realtor is the best person to go to when it comes to the question of timing your real estate purchase. If they tell you to punch it, then all systems go.

Don’t forget your HomeKeepr family as you move through the various buying stages, from securing your mortgage to having your home inspected and appraised. Finding the experts you need is as simple as logging in to HomeKeepr!

County growing, but not as fast

County growing, but not as fast: Clark County’s population is still growing at a fast clip, but the growth rate may have reached its peak.