Are You a Lender or a Banker or a Broker?

“So are you a broker or a lender?” “Or a banker or a lender?” “Or a broker/banker?” Yes, yes, and yes!

We get this question all the time, but I think it comes from a good place. Naturally, everybody shopping for a home loan wants to get the best rates and terms and some confusion swirls around how the type of mortgage originator one uses has a bearing on the outcome. So when they work with me, who is really behind the curtain?

[Too lazy to read the rest? Watch the video below instead.]

Banker / Broker / Lender

In the post-downturn lending industry, there are really only three primary channels for obtaining a residential home loan; mortgage banker, mortgage broker and mortgage lender. It’s important to know that no matter which you choose there is ALWAYS a “middleman” and that person is called the mortgage loan originator or “MLO.” Now don’t confuse an MLO with a single individual — it could well be a call center with a series of “clerks” that work to get your loan from start to finish. Regardless, there are some distinct characteristics of each channel:

  • Lender: This is usually a single-entity banking institution that will fund your mortgage with their own money (most of the time…). Maybe you have a checking or savings account with this bank already. A lender will have its own specific set of guidelines for a jumbo loan and it may have its own “overlays” for conforming and government loans, like FHA and VA. Overlays are defining characteristics — let’s say a minimum FICO score, for example — that are technically not a guideline of the government-sponsored entities (Fannie Mae and Freddie Mac), but that are adhered to by this individual institution on top of the standard guidelines. So, if you’re going to be a customer of a direct lender, you have to meet their guidelines. If you don’t you won’t qualify with them.
  • Broker: A broker can be seen as the opposite of a lender. A broker has none of its own money to lend, but instead works with many lenders to offer a variety of options to its clients. A broker just may have more flexibility to get some scenarios approved, though when they are in the process of doing so, they turn the control and authority of the file over to the lender.
  • Banker: An independent mortgage banker fits between the lender and the broker and can often offer the services of both. Instead of lending its own money, an “inde” will have warehouse “lines of credit” from lenders and will have authority to fund loans with that money. Thus, an independent mortgage bank has a combination of in-house control over your application and the ability to match a specific profile to a specific lender. Many indes can also broker loans when brokered options prove to be the best fit. Guaranteed Rate is one of the nation’s largest independent mortgage banks, for example.

Who Has the Best Rates?

Great question! But you won’t find the answer here. And you won’t find the answer anywhere but in your own research. As mentioned above, there are many complex factors that go into a consumer’s rate and the entity type alone does not exclusively determine the outcome. Can a broker beat a lender? Yes. Can the opposite be true too? Absolutely. It’s very important to note that many originators advertise exclusively based on rate, but for consumers it’s practically impossible to shop exclusively on rate — there are often too many variables for the scenario, let alone the fact that rates can change every day.

What a Roundabout!

Not really. The purpose of this blog is not to get you to resign to the fact there’s no one option better than another. In fact, by understanding the differences, it may help you get best positioned to optimize your research. For 10+ years, I have worked for an independent and the reason I really enjoy doing so is because we can say “Yes!” to more clients. We have a great variety of choices when it comes to programs, rates and terms and this power, when understood and effectively communicated gives, I feel, our customers the edge in today’s market.

I’m happy to discuss the mortgage industry and what we can do for you today. Get in touch any time and I look forward to being of service!  And of course, you can always begin the pre-approval process, free of cost or obligation, by clicking HERE.

So much better than a, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Finding Harmony in Unison

Ever since the woebegone days of Greenpoint Mortgage’s 400+ page rate sheet (and those who remember are laughing right now…) we in the mortgage lending industry have become accustomed to recognizing that not every borrower and not every scenario will fit exactly in the credit box. That’s just been a reality of the post-Dodd-Frank era. Lending solutions rarely “check all the boxes” and I hear myself reminding clients, not infrequently, to “not let the perfect be the enemy of the good.”

So you can imagine that when we start talking about jumbo loans and lower down payments AND add in the element of a credit blemish or two, things can get really imperfect. How can we achieve just that perfect level of harmony for the buyer? How can we create a mortgage masterpiece for the 10% down payment borrower who may not have a 720+ FICO score? The answer is the Unison program, which was formerly known as FirstREX.

Let’s cover some basics first. Unison is not a loan. It is down payment “enhancement” that typically matches a buyer’s investment. So in the classic example, the borrower will get an 80% mortgage from us, they will bring in a 10% down payment, and Unison will then match their 10% down payment for a total of 20% down. Unison’s investment comes with no monthly payments and does not need to be repaid for 30 years. When you end the Unison agreement, by purchase, refinance or buyout, you agree to pay them their initial investment plus a percentage of the value change. It’s a shift of the paradigm — instead of servicing debt each month, you are partnering with them long-term and with the understanding that sharing a fraction of tomorrow’s value is much better than not owning at all today. And to serve as a stark reminder, “today” means coming up with the full 20% down payment and bringing the credit profile to the stellar levels it would otherwise take to get a competitive loan alternative.

Now of course, the push back on the Unison program has always been, “No way! I don’t want someone else sharing in MY appreciation.” OK, fine. I hear you. But first, let’s accept that YOU don’t have any chance of appreciation if you can’t buy, and YOU are not in a position to buy without Unison’s help. And secondly, recall that I mentioned that Unison was formerly known as REX. I used to drop this line on potential REX candidates: “I understand you do not want FirstREX partnering in your purchase and potentially getting a share of your appreciation, but what if we called FirstREX ‘Uncle Rex’ instead? How would you feel then?” I didn’t usually need to wait for the answer. I could see the expressions on their faces change. It was evident that if a family member could cut them the very same bargain, most would accept. So why the resistance when we supplant a company that has the capital and wherewithal and has diligently structured such a mutually beneficial agreement? Again, it may take a more visionary mind to come to peace with how this program works. True, it’s not DaVinci’s mortgage. It’s very much the product of a new approach to an increasingly high barrier of entry to home ownership in many desirable areas.

So if you find yourself looking to buy a home with a jumbo mortgage and less than 20% down. If you find that your FICO score is 680, 700 or under 720. If you find that desirable homes in your area continue to fall just out of the reach of your buying power, it may be time to find the harmony in Unison. Call me if I can help today.

Cracking the code, 

 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Time Is of the Essence

There it is in black and white.  Section 29 of the California Association of Realtors’ residential purchase agreement.  “Time is of the essence.”  And in real estate transactions, which are inherently complex, this simply means that every day matters.  To be competitive as a buyer you need time on your side because very likely the seller of the home in which you’re interested knows that the longer things take to get to the closing table, the greater likelihood something might go wrong with the financing you need in order to acquire the home.

“Like what?,” you ask.

Perhaps the borrower/buyer will file his tax return and it will change the qualifying income.  Or gosh, maybe the buyers will inadvertently miss a credit card payment, or their autopay will malfunction and they’ll learn that they’re late on a revolving debt.  Or as we’ve recently seen, the darn government could shut down.  You get the picture.  Things happen.  And more things can happen if you give them more time.

[Too lazy to read the rest?  Watch the video instead.]

What can a buyer do about this short of a mad and stressful rush in their loan process?  There are two key actions that prove to be universally helpful across all buyers, all price points and all markets:

1)  Get your loan underwritten in advance.  Every serious real estate agent will require that you have a valid pre-approval before you begin looking at homes.  But what if you could not only get a pre-approval but also have the certainty that your loan application has been through a complete underwrite?  That way, all you’d need to complete and provide to your lender once having your offer accepted is a fully-ratified purchase contract and a satisfactory appraisal.  Wouldn’t it be great, in advance and free of time constraints of the contract, to not only gain the confidence of a rock-solid approval but also eliminate the time it typically takes to underwrite a file once your offer is accepted?  In fact, we do this all the time.  An “advance underwrite,” a “pre-underwrite” or a “TBD underwrite” is an extension of our pre-approval process for those who have the time and inclination.  Once we have the underwrite complete, it is sometimes possible for the buyer to offer with an exceptionally fast close of escrow (again, without requiring a rush) and even offer without a financing contingency.

2)  Get organized!  All borrowers owe it to themselves to take the homebuying process seriously.  After all, there is a lot at stake.  Simply, get your financial house in order before searching for a house to buy.  Get all of your income, asset and credit documentation in one place.  We’ll typically require two years of tax returns and W-2 forms, 30 days’ worth of paystubs and often a year-end paystub for the last two years.  For bank statements, we’ll want two months — all pages even if blank.  Other items we request?  Driver’s license and/or valid US identification.  Also, letters of explanation for any unique characteristics of your application.  Remember, I may know your story because we’ll talk about it together, but an underwriter will not have the benefit of those conversations.  The more you’re able to concisely convey any specifics of your credit profile, the better you’ll help your cause.

Every year, some home buyers will fall out of contract both because they cannot take the pressure or they cannot meet the deadlines that were spelled out when they got their offers accepted.  Time is of the essence.  And there are two really good ways, above, that help you adhere to, and succeed in, that reality.

Time stand still, 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283