Q. Can’t I get a better rate at a big Bank?
Some may think that being a small operator means we are more expensive. NOT TRUE!
Working with wholesale lenders and offering a boutique service experience allows us to compete and typically beat the terms offered by major national lenders. Our staff is lean and we don’t have numerous levels of management on our pay roll. Efficient quality people eliminate the need for excessive management and significantly reduce expenses allowing us to compete with the mortgage providers of all sizes. Mortgages are traded in the Mortgage Backed Security market and our numerous wholesale lender conduits provide a much more direct and efficient link between you and Wall Street.
Each day any number of our wholesale partners may decide to be a little more or less aggressive in the market place as compared to other lenders dependent upon the individual lenders availability of funds, need for profit or capacity to take in new loans. Before we place your loan with a specific lender we survey the market to make sure we match your situation with the optimal lender.
Q. I don’t have perfect credit. Should I wait to apply?
The recession left many consumers with bruised or damaged credit. While the industry does require waiting periods after a significant derogatory credit event, there are some programs that are less restrictive. If a home purchase is on the near or distant horizon, the time to review a full comprehensive credit report and your fiscal profile with a knowledgeable mortgage professional is NOT when you’re ready to start shopping for a home, but well in advance of that time.
Even if your credit isn’t perfect now, we’re always happy to assist in reviewing your credit history and offering guidance about how to better position yourself for a home purchase at no cost or obligation to you whether a home purchase is a few months or a few years away.
Q. When should I apply for a loan?
If you’re reading this, you’ve at least thought about applying for a home loan, so the answer to that question is; now. As a mortgage professional, there’s nothing more disappointing than meeting a new client who’s just written an offer on their new dream home and we have to be the bearer of bad news and tell them the home is out of reach.
In the wake of the mortgage industries collapse, underwriting guidelines, credit requirements, and collateral (the home you plan to purchase) assessments have tightened considerably with no signs of relaxing. So getting your financial affairs in order, reviewing your credit history and gaining a thorough understanding of your buying power before you go house hunting is paramount.
In addition, most realtors won’t be very enthusiastic about spending time with buyers that don’t know what their buying power is, not to mention a seller typically won’t entertain an offer that’s not accompanied by a credit approval letter from a respected local lender. Credit approvals have a lifespan of 60 to 90 + days, so it’s never too early to get your affairs in order financially before you start shopping.
Q. What kind of documentation will I need?
When applying for a mortgage, most lenders will evaluate the “Four C’s” of your Fiscal Profile. Your Credit, Capacity, Capital and the Collateral.
Your credit report is easily pulled by your mortgage broker–with your written permission of course. And your Capacity relates to your financial ability to repay the loan in light of your household income and other debts like credit cards, student loans, and car payments.
Your Capital refers to both liquid (checking, savings, Mutual funds) and non-liquid (retirement accounts) funds you have accumulated both for use in the transaction and reserves after closing. Capital also includes investments or other assets that could be quickly sold for cash if necessary. The Collateral is the home you plan to finance with the loan. The lender will want to make sure they’re investing in a quality real estate venture. So your responsibility is to portray your financial strengths as prominently as possible for the lender, and for that you’ll need to provide the following:
- Most recent two years tax returns and W-2’s, and if you’re self employed, business tax returns as well
- Most recent paystub
- Most recent two months bank statements
- Statements from retirement or investment accounts
- Valid identification such as driver’s license or passport
Of course, loan programs vary, and there may be cause to provide other documents to better establish your creditworthiness, and your broker will advise you of any additional documents you may need.
Q. What can I expect during the loan process?
While no two lenders may be the same, Mid Oregon Lending has developed a thorough step by step process designed to make your loan transaction seamless, educational, and thorough. If you’re not 100% satisfied with our process and your result, we can’t expect you to recommend us to your family and friends. Our process is as follows:
- Initial consultation: This step involves a thorough evaluation of your mortgage needs, a review of your financial goals and a detailed conversation about the options available to you, and a review of your credit history and can be conducted in person (preferred) or over the phone.
- Loan Application: Involves filling out the necessary paperwork to apply for mortgage financing, signing necessary disclosures, and evaluating your data to uncover any possible items that need to be remedied prior to closing.
- Processing: This step involves assembling your file in a comprehensive way to present you to Underwriting in the best possible light. It includes your financial information, credit report, title information, and several other necessary items to make submission to the lender possible.
- Underwriting: The underwriter will review every aspect of your file to verify your creditworthiness to purchase or refinance your home.
- Closing: Once you’ve signed your closing documents, the lender will review them for accuracy, wire money to escrow, and release the Deed of Trust to the county where the home resides to become public record. It’s at that moment that you become a homeowner.
- Post Closing Follow-Up: Mid Oregon Lending will follow up with you to make sure your process was what we promised to deliver, and that you’re completely satisfied with your transaction. Additionally, we will forward necessary documents from the transaction to your CPA as necessary, keep you informed of important aspects of your loan during the life of the loan, and will work hard to earn your future trust and business.
Q. What can I expect to pay in closing costs?
Beyond your down payment the mortgage industry breaks down the expense of purchasing a home into two categories comprised of closing costs and pre-paid items collectively referred to as settlement costs. Closing costs are the transactional costs to obtain the home and financing. Closing costs include lender, 3rd party services (appraisal, credit reports, tax certification etc), escrow, title and recording fees. Pre-paid items are on-going ownership expenses that are comprised of taxes, insurance, interest and home owner association fees.
The actual amount of these fees will vary from one transaction to another, and many will be based on the purchase price, loan amount, and type of property you choose. If you have a specific property or transaction in mind, we are happy to provide an estimate and some suggestions on how to structure your transaction such that it fits your unique financial needs and fiscal profile.
Q. How long will it take to complete my loan?
On Average, it takes about 25 days to complete a loan transaction, but there are several variables that can extend or shorten that time frame.
Most loan transactions start with a consultation where a client’s needs are evaluated, and once the loan application is taken, there are several tasks that must be completed in order to close the loan. Appraisals must be ordered and received, title reports collected and reviewed, and once the entire package is assembled, it must be underwritten and approved by the wholesale lender.
Regardless of what kind of mortgage you’re applying for, it’s important that you give your loan officer or broker as much time possible to assist you to the best of their ability. If you’re planning on purchasing a home, speak to your lender first to make sure you’re as prepared as possible to make an offer. The more time you allow us to do our job, the better!
Of course there are times that timeframe can or must be shortened, but remember that to give you the best options possible requires careful scrutiny of every aspect of your profile, and the more time we have to evaluate your needs, the more favorable the result.
Q. What kind of mortgage should I apply for?
There are dozens of loan programs available today, and a myriad of ways to structure the transaction.
Whether it’s a multi-million dollar loan, or a modest second mortgage, your Mortgage needs to be tailored to suit your unique financial situation, and should be an important part of your long and short term financial plans. Keeping that in mind, you need to evaluate your options carefully regarding the terms, amortization, and payment structure of your loan.
Additionally, HOW you choose to structure the loan could mean thousands of dollars difference over the life of the loan. Should you pay higher closing costs and get a rock bottom rate, or take a higher rate and pay less at closing? Should you put more money down to have a monthly lower payment, or finance the maximum amount possible and maximize your tax deductibility?
These are difficult questions to answer, and they should reinforce the fact that you must be working with an experienced professional when making your mortgage plans. You need to evaluate what kind of mortgage you obtain in light of your other financial assets, your tax brackets and future earnings potential. You need to consider whether you have enough saved for retirement, or adequate funds set aside for your children’s education.
Q. Why should I use a mortgage broker?
A professional Mortgage Broker will evaluate your unique mortgage needs, and then has the ability to shop for your loan from SEVERAL different wholesale lenders that do not deal directly with the public.
The advantage to this is that a broker can shop for loan programs and rates—yes, even mortgage money goes on sale when you know where to look—to find the BEST possible solution for you. A skilled mortgage broker will have a greater degree of knowledge and should also have the skills to evaluate all aspects of your financial portfolio to make your mortgage loan an integral tool in your financial success.
Additionally, a mortgage broker who has access to multiple wholesale lender’s product lines will be able to offer prices below what most local banks can offer, and can typically gain access to loan products not available through other sources like local banks or credit unions.
Q. What is a rate "lock" and when can I lock?
A Rate Lock is effectively a guarantee from a lender that you will get to borrow money at a specified interest rate, and have a limited amount of time in which to close your loan to get that rate.
Rate Locks can be as short as a few days, out to several months with the caveat that the longer you want to lock your rate, the higher the rate will likely be. Typically, you need to have a property address, loan amount, and loan program picked out to get a specific rate, and your broker will advise you of your locking options throughout the loan process.
Since Rates are dictated by market conditions, they do change frequently, and a skilled broker should be able to identify interest rate trends and offer sound advice as to the best time to lock your rate. That’s why it’s incredibly important to work with a broker who monitors market conditions constantly and who’s experienced enough to recognize interest rate trends and spot the best time to Lock your Loan. Just a quarter of a percent in interest rate could mean thousands of dollars over the life of your loan.
Q. Should I refinance my loan?
Whether or not you should refinance your home loan depends on many factors above and beyond just what rate you currently have. How long you plan to keep the home, what interest rates you’re paying on consumer debt, how much money you need to borrow, and how you intend to structure your transaction should all play an important part of your decision making process.
Remember, your home loan needs to be an important part of your overall financial portfolio, and needs to be evaluated in light of your long and short term goals for financial freedom and wealth creation. Again, this is why it’s vitally important that you work with an experienced mortgage broker capable of evaluating your mortgage needs as just a part of your overall financial goals and needs. Interest rate should only be a small part of the decision. Tax savings, retirement plans, college expenses, investment portfolio’s, etc are all a part of whether or not you should proceed with a refinance.
Q. What is a Conventional loan?
The two largest purchasers of mortgages from the lenders with whom we will broker loans are the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
These companies purchase closed loans from lenders which provides the capital for those lenders to make more home loans, and then securitizes them and sells them to investors in the form of Mortgage Backed Securities on Wall Street. Fannie and Freddie guarantee payments of principal and interest on those loans to the end buyers of the securities. So in effect, the mortgage industry is a big circle of dollars through our economy.
A Conventional Loan is any loan that meets the qualifying criteria established by Fannie and Freddie in regards to credit worthiness, debt to income ratio, loan to value, loan amount, etcetera. Typically, conventional loans offer most competitive rates and terms for the homeowners. Of course, these loans also require the highest degree of scrutiny by the lender, because Fannie and Freddie need to issue a guarantee of repayment to the end investor.
So any loan that meets these criteria are considered Conventional or Conforming Loans because the Conform to the guidelines of Fannie and Freddie. There are several other varieties of loans insured or purchased by other entities on the secondary market like Jumbo loans, Veterans Administration Loans, Federal Housing Administration Loans (FHA loans) but Fannie and Freddie still make up the bulk of the loans granted in the United States.
Q. How are the interest rates on mortgages determined?
Interest rates on Mortgages are determined solely by the Mortgage Backed Securities Market. The MBS exchange is an actual trading center where Mortgage Backed Securities are bought and sold as commodities much like stocks and bonds on Wall Street.
There is a DIRECT correlation between market demand for MBS, and the interest rates we can offer to our customers, and those rates are predicated by market appetite for these securities in relation to market trends and demands for other investment vehicles for investors. Simply put, if traders want to incite investors to buy MBS and draw their attention and dollars away from other investments, they have to offer them higher yield, which means they pay the buyers of MBS more money for their investment. This in turn means higher interest rates for consumers.
If Demand for MBS is high then traders do not need to offer as great a yield, and interest rates to consumers will drop. A MBS is historically a “safer” investment than stocks and bonds, and oftentimes investors leery of rapid fluctuations in stocks who seek a safe long term investment will gravitate towards MBS as their payments of principal and interest on their investment are guaranteed in some MBS.
Through a complex cycle, mortgage dollars flow from the MBS markets, through large corporations like Fannie Mae and Freddie Mac who pool and guarantee the security, to wholesale lenders who offer mortgage dollars to the Mortgage Brokers and Banks around the Country. The Banks and Mortgage brokers are effectively the retail outlet where consumers can go to get a home loan.
Ironically, if you have money invested in mutual funds or some kind of whole life insurance policy, it’s a safe bet that you have dollars invested in Mortgage Backed Securities! So in effect, WE are the buyers of our own loans!