Choosing a Mortgage Broker

When you are getting ready to buy a home, one of the toughest decisions is choosing a mortgage broker to work with. This is especially true in today's rocky mortgage market where you don't know who to trust. These are confusing times, so you need to make sure that you are working with a mortgage broker you can rely on.

There are two main types of brokers to consider:
*First, there are mortgage officers associated with specific lenders, like Bank of America or WaMu or Countrywide. They will work with you to find the best deal from their company, and if you are already a customer with them, they will want to keep you as a happy customer.
*Second, there are independent mortgage brokers and they are able to run your profile with a wide variety of lenders to find you the best deal. They are not beholden to any one lender and will want to create a lasting business relationship with you.

Both type of mortgage brokers are fine, but I recommend getting a personal referral from a friend, family member or colleague. If someone has had a successful experience with a mortgage broker, there is a better chance that you will too. (I believe that referrals are the way to go for many personal decisions, from mortgage brokers to dentists to nail salons)

It is also wise to work with someone local, as they will know about special incentives and programs offered by local governments, such as first time homebuyer programs or special rates for certain professions like teachers.

Be careful using any mortgage contact you might get from the internet. While they might offer enticing introductory rates, they could be anywhere in the country and will most likely be more interested in getting you into a mortgage rather than finding the best mortgage for you. The personal connection is not there and probably cannot rely on them.

Finally, no matter who you choose to work with, make sure to get everything in writing, especially any fees associated with the transaction, and get a complete copy of the transaction paperwork. And, if you ever need a mortgage referral in the East Bay, just let me know. I work with many professional and experienced mortgage brokers. I can be reached at 510-547-5970 x57 or MSmartt@jps.net.

The Mortgage Mess

What Does It Mean To You?

I am sure most people are aware of the major changes in the mortgage markets this past week. Some are calling it a crash, and others are calling it a correction after a few years of out-of-control loan practices. But what does this mean to regular consumer or the buyer on the market right now? After checking in with several mortgage brokers and my colleagues, this is what I have to recommend.

First, the rules are changing fast. Loan guidelines are getting tighter. Much tighter. If you are pre-approved for a loan, don't assume that pre-approval is still valid. Check in with your mortgage officer to re-run the numbers. Chances are that your access to money has been restricted.

Second, if you are getting ready to hit the market, know that you better have very good credit and some serious money ready for a down payment. It looks like the days of 100% financing are over...at least for know. Some of the mortgage brokers that people are still calling them saying that they know that the market is changing, but how do they get 100% financing now. Well, the answer is: you don't get 100% financing.

Third, if you are making an offer, make sure to get a loan contingency. These have been out of favor in the East Bay real estate market for years, but you will need this now to cover yourself.

That said, this can be a very strong buyer's market right now. There is a lot of inventory and also a lot of price reductions. Sellers are getting a little worried. That means the power is shifting to the buyer when it comes to offers and negotiations. If you are ready to hit the market, let me know. I can be reached at 510-547-5970 x57 or MSmartt@jps.net

The Mortgage Mess

The New York Times Explains It All to You


If you pay even the slightest attention to the housing market and the economy, you know the market is on a rollercoaster right now because of the mortgage market shake-up. I wrote a little bit about it last week, but wanted to also present a more concise explanation of how this overly-complicated system works. And, The New York Times presents just this today.

Things are not how you might imagine them to be. It would be easy to think that you borrow money for your home loan from a lender, and you pay that lender back. But, the secondary market for mortgages really muddies the waters and makes it difficult to understand how it really works.



The Times explains reality--


"The process begins with the entity that originates the loan, either a mortgage broker or lender. The loan is assigned to a company that will service it — collecting borrowers’ payments and distributing them to investors. Sometimes the servicer is affiliated with the lender, creating potential conflicts if a loan goes bad."

"A Wall Street firm then pools thousands of loans to be sold to investors who want a steady stream of cash from loan payments. The underwriters separate them into segments based on risk."


"Securitization has made it so complicated that everyone in the process is able to say that they don’t know what’s going on. The effect is, no poor person can afford to litigate this type of matter to bring it to a resolution, and therefore they lose their home."






In other words, the rich get richer and poor get poorer. The entire article is a must read if you want to understand this situation, which affects us all, whether or not you are actively buying or selling. If you would like to discuss the mortgage mess more, feel free to contact me at MSmartt@jps.net or 510-547-5970.

*graph courtesy of the NY Times

Market Update

The Return of the Loan Contingency?

In the East Bay's go-go-market of the last few years, loan approvals happened without a second thought. And, since buyers have to be competitive in that market climate, they often dropped the loan contingency from their offers. Well, the credit market is tightening up--especially with American Home Mortgage and others like them closing their doors--and loans won't be so easy to come by.

I think this means we'll start seeing the return of the loan contingency. Buyers are going to have to cover themselves, as in the past, when it comes to getting their loans funded. Firms like AHM stopped funding new loans last week, and then closed their doors. What happened to buyers who were ready to close escrow last week, but their lender disappeared on them? I hope they had loan contingencies in place.

We'll also start to see a return to conforming loans--aka those loans that conform to federal Fannie Mae and Freddie Mac standards--and fewer and fewer jumbo loans. I also think we might start seeing more seller financing, which could be very interesting. What do you think? Comment below or drop me a line at Msmartt@jps.net.

Financing Tips

Last time on the topic of Financing Tips, I wrote about MMAP--the Monthly Mortgage Assistance Program. Today, I wanted to visit Home Equity Sharing, which Traci Hukill wrote an excellent article about in yesterday's San Francisco Chronicle Magazine.

As we are starting to see, it is becoming a "buyer's market" in many East Bay neighborhoods these days, so people interested in getting into real estate should seriously considering getting their financial ducks in a row in the next few months. One obstacle to this can be the daunting prospect of coming up with the down payment, so home equity sharing is a creative and sound solution to consider.

Home equity sharing is basically finding a private individual investor to cover the down payment in exchange for an equity percentage in the home. The particulars are up to the involved parties, who will need to agree upon the percentage of equity, the time of the agreement and more. Typically, the homeowners pay back the investor in 3-5 years and then refinance on their own.

The easiest way to do this might be to make an agreement with a friend or family member, but there are also matching services out there, such as HomeEquityShare.com, which can connect you with investors.

Of course, like with any financial deal, there could be some risks, so be sure to discuss all the angles with your financial advisor or mortgage broker.

If you would like more information on home equity sharing or would like to further discuss financing options for first-time home buyers, please let me know. I can be reached at 510-547-5970 x57 or MSmartt@jps.net

Financing Tips

GET OUT THE MMAP!

One of the biggest hurdles that the average person faces when purchasing a home is how to finance such a large amount of money. Buying something for hundreds of thousands of dollars just seems unfathomable at first to most people. And, it makes the new iPhone look cheap! So, besides standard mortgages (or those dangerous sub-prime loans), what is the home buyer to do?

Well, there are many sound, creative solutions, and one of my favorites is the MMAP program.

MMAP stands for Monthly Mortgage Assistance Program, and it can help reduce your payments from $250 to $1000 per month for up to two years. And, all it requires is a simple agreement between the buyer and the seller.

Basically, the seller agrees to set aside an agreed-upon amount of the purchase price into a trust account (via the MMAP grant program), which is then used to reduce the buyer's monthly mortgage payments anywhere from $250 to $1000 per month for up to 24 months.

Even better, it is reliable and astoundingly simple to arrange. For more information, visit the MMAP website or just ask me. I've had special training to certify me to represent buyers and sellers in the MMAP program.

Have a great weekend!