San Diego Housing Bubble News and Analysis

Hi HLS,

So a question here. If the equity is less than 80%, does that require an impound escrow account for taxes and insurance with most loans?

Thanks

I assume you mean with less than 20% equity and a loan amount above 80%.....

Some lenders charge an extra .25% at origination if you don't want an impound account. I don't.

Up to 90%, I have options with better rates and no extra charge to waive an impound account.

Above 90.01%, I think that impound account may be mandatory per mortgage insurance requirements... HLS

Just go FHA, because there is no PMI required.

Remember mortgage brokers are only out for the commission, and they are not not any kind of advisor. Most don't have any kind of degree, let alone a degree in finance or accounting. Beware the mortgage broker!

Look at all the people that listened to their mortgage brokers over the last five years.

J,

I'm not sure what the source of your information is, but it is WRONG. Please correct me if you have FACTS that are different.

On an FHA loan PMI IS REQUIRED for 5 years, regardless of a down payment. Even with 50% down, FHA loans have PMI, for 5 years.

Just to make sure that you understand, EVERY 30 year FHA loan has PMI for 5 years.

(If you get a 15 YR FHA loan with up to 10% down the PMI is less. If you get a 15 YR FHA loan with at least 10% down there is no PMI)

EVERY FHA loan comes with an upfront 1.75% fee.
On a $400K loan that is $7000.00. This fee doesn't exist on "conventional" financing. (FNMA & Freddie)
FHA rates are not better than conv. A waste of money, but the price to pay for help from the govt.

You are partially correct that MOST mortgage brokers are out for the commission and MOST are not any kind of advisor.
In every industry/profession there are incompetent, dishonest people, many have degrees.
Many employees are lazy & useless too

The problem is the profit that most mortgage people want to make.

The fact is that a good mortgage consultant can save people a lot of money in various ways.
Yes they make money by doing it.

Do you REALLY think that you are going to get a loan anywhere that the originator is going to lose money on ?

Banks make profits on loans and you often deal with a clueless bank employee who is told what to say and only offers the bank RETAIL products. They mislead people by telling them that they have no fees, which is misleading. They charge a higher rate which leads to a higher payment for the life of the loan, costing the borrower a small fortune in the long run.

Mortgage brokers have access to money at wholesale rates, not retail. If their markup is reasonable, you can get a better loan from a broker.

Believing that FHA is the best loan is wrong. For most people, FHA is the WORST loan possible.

If you have a crappy credit score and only 3% down, then FHA might be your only option.
In my opinion if you only have 3% down you shouldn't be buying a house.

FHA is a govt program which supposedly helps people. Over the years it has allowed many people to buy a house, but for the uneducated consumer they may have had better options.

Yes, I am in the business. I'm a mortgage consultant who educates people of their options and has a very reasonable fee to do it.

Anyone that you have given your opinion to is now misinformed, spreading more ignorance and myth rather than facts. BEWARE OF IGNORANT PEOPLE...
HLS

HLS: Well stated! And right on the money..................as usual.

J.: You are the kind of guy who thinks he knows everything and winds up getting fucked over for thousands of extra dollars in fees, points, PMI, etc.

I'm not in the mortgage business (like HLS) but I have friends who are and your source (or sources) for mortgage information are grossly misinformed.

Well, I am technically right. There is not PMI on FHA loans; there is FHA mortgage insurance. Which is cheaper than PMI for people that only have 3% down payments. Yes, with 10% or 15% equity PMI is cheaper than FHA insurance. But the fact is that most mortgage brokers do not know or choose to not tell their "victims" of the best loan in many cases. Plus not many have 10% to buy a house with that do not come to this blog. Many here actually have 20%(Crazy housing bubble people ;) ).

I personally think a 3% down payment is an awful idea, but it is better than a 0% down payment.

And where did 50% come from?

Oh, and the minimum is 1.25% not 1.75%: http://www.hud.gov/offices/adm/hudclips/...

Oh, my original post was to counter the propaganda presented by a mortgage broker. I believe that if most people get a few different stories most will look for the facts, and not just listen to the guy looking for his commission. Too bad so many only got their mortgage broker's propaganda over the last 5 years.

J
My understanding of the FHA program is that all fees are preset. Not much to wiggle on. I think for anyone in a subprime category this should have been the product of choice. At this point in time I would argue that for anyone with money down and good credit, conventional loans are a better bargain. With certain exceptions. If you fall into a category such as teachers of police who have some special incentive program combined with FHA

So if someone uses a mortgage broker, the mortgage broker will protect them from extra fees, points, PMI, etc? Isn't it the usual course that mortgage brokers get the highest commission on loans that make the most money for the lender?

Mortgage brokers may be well-informed, but their commission comes from the lender, so they are incentivized to put the borrower in the loan that is best for the lender, not the borrower. Does HLS disclose how much he makes on a particular loan? Last I heard, mortgage brokers were fighting like crazy to keep from disclosing this type of information.

BREEZE, Unfortunately, like most people, you don't understand loan pricing.

Since you asked,YES, I ALWAYS clearly disclose my TOTAL compensation UP FRONT. This is NOT what most mortgage people do. The industry deserves to be bashed, I do it on a regular basis.

Most mortgage originators don't care about the borrower. This is no different than any other job/position caring about who they can sell something to so they can get a commission. Welcome to the world.

Mortgage industry groups ARE fighting against having to disclose what I already willingly disclose.

I work for the borrower, not the lender. By choice, I have absolutely no incentive to put someone into a crappy loan. Don't confuse ME with anybody else.. The world is full of scumbags.

The "usual" course is that MOST people in any business will charge as much as they can get away with.
Attorneys, doctors, mechanics, plumbers, electricians, grocers, drug companies, truck drivers, gas stations, restaurants, military contractors, mortgage brokers, etc. etc. are all in business, and most overcharge whenever they can, to make a larger profit.. Also, many salaried employees are way overpaid for what they do.

To me, it's all about personal accountability and a fiduciary responsibility. As MY choice, the rates that I quote are the lowest wholesale rates that I can offer. I don't get a single penny from a lender for offering the true wholesale rate. I also don't get a penny from an escrow company, title company or appraiser. No Christmas gifts or backdoor deals either.

I CHOOSE to be upfront and to tell people how much my services will cost for their loan, and I don't tack on any additional dirt bag fees.
I offer the lowest rate that I possibly can at that moment. Rates can change at any time. I have no control over rates going up or down, and the borrower decides when to lock. I will always try to get them an adjustment if I can.

Most mortgage people charge a fee up front AND over quote in rate so they can get a commission from the lender. Many people DO get screwed by mtg brokers.
I point out to a borrower if I will be getting anything from the lender; With refi loans I GUARANTEE what the total 3rd party closing costs will be. NO surprises at closing.

I can also offer even lower interest rates and disclose what the additional cost (that goes TO THE LENDER) will be
OR
the option to take a higher rate and have the commission from the lender credited towards my fee.

I explain the pros and cons of both. The best rate possible pays NO commission, not a penny... Commissions ONLY come from overcharging people in rate. Most people shop by rate and get screwed. It's not only foolish, it's stupid. Rates change very often similar to stocks, (but not as volatile)

I can usually lock a loan 24 hours a day, 7 days a week. I have access to credit scores that most others don't have. This alone can make a difference of thousands of dollars over the life of a loan.

There's a whole bunch of misinformation about the mortgage business and I will be the first to admit that there are still plenty of crooks & idiots that get plenty of business from clueless borrowers by lying and fooling them about rates and fees. The most foolish thing is that many people get loans from their friends, neighbors and relatives who are usually screwing them beyond belief. Easy business that they don't have to earn.

That only addresses rate. In addition to offering wholesale rates, I provide service and education to anybody who wants it, and I'm not expensive. I'm usually available 7 days a week, and attend the loan signings of most of my borrowers. While most mortgages are originated by a salesperson and then passed off to a processor, I deal with a borrower personally all the way through to signing.

Whatever your experience with anybody in the mortgage business has ever been, you don't know ME. I can't be the only one, but I don't know anyone else that is as transparent as I am.

I don't hide anything and will answer any questions with the truth. I figure out ways to save people money whenever I can.

I'll put my integrity, ethics and interest of the borrower up to anybody you choose. For those that shop by rate alone and want no cost loans and think that they know what they are doing, they are usually being foolish about the largest financial transaction of their life.

I don't care if people shop, but the problem is they don't understand how to shop. I'm not expensive, and even if someone charges less than me, they probably don't offer what I can and do.

I provide a valuable service and peace of mind for those that are intelligent enough to recognize it. Most people get fooled. I know what goes on but very few consumers do. ...HLS

Breeze: It looks like HLS answered your questions (but I'm sure you're still skeptical). :)

*Look at it from this perspective: HLS has served as the broker for more than a handful of people who have posted on this site that they would recommend using him to anyone looking for a mortgage.

*Several of these posters were long-time, regular posters who are very savvy and who understand how to do their homework before plunging into business transactions.

*To my knowledge, NO ONE has EVER posted anything negative about a transaction that they had with HLS. To me, this is a very positive indicator that Sheldon is not one of the shady characters that tend to gravitate to the mortgage industry.

*If I needed a mortgage, I would use HLS in a skinny minute.

*If you need a mortgage, why don't you compare his prices and services with others and then decide if he's on the up and up? Once you have acquired more information rather than generalities about "ALL" mortgage brokers. You will probably become one of his customers and save yourself a lot of money.