Loan Officers, Underwriters, and Mortgage Brokers – Who’s Who?

Buying a home in the Cape Coral or Fort Myers area soon?

The world of real estate has many different types of professionals.  If you are a buyer looking to purchase a piece of property with financing, an area that can get a little confusing involves the professionals within the mortgage lending landscape.

According the National Association of Realtors, over 80% of buyers require some level of financing to be able to buy a home.  Ironically, while ensuring you are qualified for a loan to buy a house is the recommended first step in the home buying process, many buyers start by contacting a real estate agent.  When the need for pre-qualification comes up, buyers will usually do one of two things:  Go to their bank or use the Realtor’s recommendation.

Either option can lead to exceptional results and an outstanding buying process, however, buyers often do not realize that there are different providers in the mortgage space and who they choose can impact the loans offered and how much they pay for their home in the long run.  To help you understand your options, we have outlined several key players you may come in contact with or hear about throughout the process.

Loan Officers

Per the Bureau of Labor Statistics, Loan Officers evaluate, authorize, or recommend approval of loan applications for people and businesses.  Most Loan Officers are employed by commercial banks, credit unions, and related financial institutions.  This means that while they may have access to different types of loans available through their lending institution, they can only fit you to a loan offered by their employer.

To qualify for loan, a Loan Officer may need you to have an existing account with their bank or lending intuition and to meet stringent requirements that match their employer’s tolerance of risk.  Since the 2008 mortgage crisis in the United States, some banks have exited the mortgage business while others have adopted conservative loan requirements.

When deciding on a Loan Officer, you need to research the reputation of their employer, after all they will likely service your mortgage long-term.  You also need make sure you can communicate and get along well with your Loan Officer.    If you don’t hit it off, try visiting another branch of the same lending institution, they will have access to the same loan programs.

Loan Officers will typically take your application and gather all necessary documentation related to your loan.  This package is then submitted to other departments such as processing and then underwriting where approval decisions are made.  Loan Officers are paid either hourly or a salary by their employer and may receive bonuses for number of loans applications or dollar amount of the loans.

Mortgage Brokers

Think of a Mortgage Broker as an independent consultant.  They may work with a mortgage brokerage company or their own a mortgage brokerage.  They are not lenders and in the majority of cases they will not service your mortgage loan.  Instead, they have relationships with a diverse collection of lenders and will find a loan to meet your needs.  The source of funding may include banks, wholesale mortgage lenders, equity funds, and even private lenders.

Mortgage Brokers will assess your loan needs then “shop the market” for the best loan available.  There are strict regulations in place to help ensure that your broker provides the best loan for your needs rather than a loan that pays them the most.

Depending on the size of the team, a mortgage broker may have in-house loan processors or may outsource this function.  Ultimately, a mortgage broker who wants to be successful will ensure clients have the best loan experience possible, regardless of how their back-office functions are arranged.

A well-established mortgage broker has great relationships with their lenders and the underwriting teams and has a high rate of closing loans in a reasonable amount of time.  They are paid by the lender typically as a flat fee or percentage of the mortgage amount.  Newer industry regulations prevent mortgage brokers from being paid or bonused based on the interest rate of a loan.

Mortgage Underwriters

A Mortgage Underwriter may work for a bank, lending company, or private fund.  They are the decision makers who review all the documentation submitted for a loan and decide if all requirements have been met and if the loan applicant is qualified for the loan.

They represent the lender and are responsible for analyzing the loan package and determining if the lender will take on the risk associated with approving a loan.  They examine criteria such as the applicant’s credit rating and history, the applicant’s perceived capacity for repaying the loan, and the value of home being purchased in terms of loan collateral.

When a loan is delayed or “falls through” many people think this is done by their Loan Officer or Mortgage Broker.  Certainly, failure to properly match applicants with loan requirements or to submit critical documentation can impact the viability of a loan.  However, the ultimate decision on approving or declining a loan falls with the Mortgage Underwriter.  While most properly submitted loans are approved, sometime changes in underwriting requirements can “kill” a loan and stop a real estate transaction.

Mortgage Underwriters are employed by banks and lending institutions and go through extensive training to evaluate loan applications.  While they must be mindful of risk, Mortgage Underwriters do not aim to decline loans.  On the contrary, their paycheck and job security depend on approving as many healthy loans as possible.

Know Who Guards the Money!

When it comes time to buy a home or refinance your current home, be mindful of the service providers available to you.  In some instances, the Loan Officer at your bank may have the best rates and terms for you.  In other situations, your best bet may be to consult with a Mortgage Broker with access to dozens (maybe hundreds) of lenders who may offer better rates and terms.

Whomever you choose, be certain to submit all necessary documentation carefully so that the Mortgage Underwriter can clearly see that you meet all requirements and easily approve your home loan.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: Title Insurance Explained Visually.

Title Insurance Explained Visually

 

What is title insurance and why should any buyer purchasing a home in the Fort Myers or Cape Coral areas get it when purchasing a home (single family, townhouse, condo, apartment, or whatever format your home purchase takes)? Doesn’t the attorney or settlement company handling the closing see to it that you have a clear title?

Title insurance prevents the property owner from suffering financial loss if, at any time during his ownership of the property, someone comes along who can show that they have full, or partial, ownership of the property instead.

A careful title search is done at the time property changes hands. On rare occasions mistakes are made anyway. Property can change hands in a number of ways including by deed, by will and by court action. Typically, these proceedings are recorded in different places. Searching the history of ownership to be sure nothing has fallen through the cracks is a tedious job that requires alertness, intelligence, and skill.

It is very likely that the value of your property will go up over the years. As time passes, these elements are likely to result in your home equity’s being your largest asset. Just how devastating would it be if you eventually discovered that someone else owned what you’d always thought was your home?

Do yourself a favor. When you buy a home, buy title insurance.  And watch the video to understand the essentials.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: 5 Room Makeover Ideas.

What Is An Escrow Account? Do I Need One?

 

Shopping lenders for your Cape Coral or Fort Myers new home purchase? Have you come across the term “Escrow Account” and wondered what it means or if you even need one?

As we show you in this video, an escrow account is an account, established by your lender, to set aside a portion of your monthly mortgage payment to cover annual charges for homeowner’s insurance mortgage insurance (if applicable), and property taxes.

Escrow accounts are a good idea because they assure money will always be available for these payments.

If you use an escrow account to pay property tax or homeowner’s insurance make sure you are not penalized for late payments since it is the lender’s responsibility to make those payments.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Should I Know Before Investing In Real Estate?

What Should I Know Before Investing In Real Estate?

Are you thinking of investing in real estate in the Fort Myers or Cape Coral areas?

While you can’t control everything, it helps to know what you are getting yourself into and actively prepare yourself to execute a sound investment.  If you are new to real estate investing, here are ten nuggets of wisdom that can help you prepare for success.

10 Things to Know Before You Invest In Real Estate

  1. Understand Your Risk Tolerance – As the famous Greek adage says “First Know Thyself”. If the idea of losing money gives you a migraine, then you need to direct yourself to lower risk investments. Outline how much money, time, and effort you can realistically and willingly dedicate to investing, then respect your own thresholds.
  2. Pick Partners Carefully – The number one destroyer of marriages, family relationships, friendships, and partnerships is money. Make sure you have a clear agreement on acceptable risk and losses with people involved in your investment.  Choose people you can stand to work with even in stressful times and that you can trust implicitly in prosperous times.
  3. Assemble A Team – Even if you are venturing out as a solopreneur, you really cannot do it all on your own. Before you get started, build a solid team including a Lender, Contractor or Handy Man, Tax Professional, Attorney and a Realtor.  If possible, find a mentor who has experience in the type of investing you want to do.
  4. Write Out A Plan – Avoid making it up as you go along. Decide what type of investment you want, how the numbers work, and who will be on your team.  Map out the investment like a project and carefully track time and expenses.  Always be realistic about the amount of time and funds you can sink into an investment.  Finally, be sure to have an exit plan.
  5. Taxes Make A Difference – An investment can seem profitable until tax seasons comes around and you are paying thousands in capital gains and other tax obligations. Keep in touch with the tax professional on your team and make sure you know the tax outcome of every potential investment you consider.
  6. Always Run The Numbers – Buying a home to live in is usually an emotional purchase. Investing in real estate is a decision based on numbers.  Carefully examine expenses, investment capital, tax burden, and even the cost of failure associated with the property before fronting your money. If the numbers don’t work, walk away.
  7. Keep A Tight Schedule – Time really is money in most real estate investments. In many types of investing, such as flipping a home, the longer you hold a property, the higher your expenses.  Conversely, in some cases holding properties long-term allow is better.  In addition, there are deadlines for inspections, payments to lenders, etc. that need to be carefully managed.
  8. Find Your People – Many cities have a Real Estate Investors Association. This is a great place to meet mentors, take workshops, meet qualified service providers, and even build partnerships.  Use Google to find associations in your area or try finding a group on Meet-Up.  These groups are also a great way to get plugged into local trends.
  9. Be Aware That Markets Have Cycles – Tune in to the local real estate market where you intend to invest. Many people made lots of money investing between 2003 and 2005.  By 2007, there was no more easy money and many “late-to-game” investors lost their money, their good credit, and in some cases even their own homes. Pay attention to the market.
  10. Know When to Fold – Just as our own homes can become money pits, so can a real estate investment. When a loss is becoming overwhelming, sometimes the right answer is to walk away. The same applies when you are making a lot of money.  Avoid getting complacent, taking on too much risk, or failing to enjoy the wealth you are accumulating because you are working too hard.

Real Estate is considered one of the most reliable paths to building wealth.  If you decide to venture into this diverse and exciting world, be sure to follow these 10 guidelines.  Remember, make a plan, not a bet!

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Is The Debt-To-Income Ratio (DTI)?

What Is The Debt-To-Income Ratio (DTI)?

 

Starting the home buying process in the Fort Myers or Cape Coral areas? One term you may hear your lender use is “DTI” or Debt-To-Income Ratio.

Measuring your existing debts against your existing income is one part of a lender’s required assessment of your ability to repay a loan.

Like the video says:  debts are existing financial commitments like a car payment for example, whereas a grocery bill is not.

To calculate your debt-to-income ratio add up your monthly debt payments and divide them by your GROSS monthly income. (Gross income is generally the amount of money you earn BEFORE taxes and other deductions.)

The Federally-established debt-to-income target is a maximum of 43% for Qualified Mortgages.

If your ratio is higher there may be other loans available  – however, there may also be additional questions to establish your ability to repay, and the rates may be different than those available for Qualified Mortgages.

Studies suggest that a high debt-to-income ratio puts a homeowner at greater risk of challenges making monthly payments. So consider your situation and risks carefully before exceeding that suggested ratio.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: Should I Sell My Home?

What Is A Mortgage?

 

Are you looking for a mortgage to buy a home in the Fort Myers or Cape Coral area?

The original phrase “mort gage” translates as “death pledge”! But as this video explains, a mortgage is a loan obtained to purchase real estate.

The “mortgage” itself is a lien – a legal claim on the home or property that secures the promise to pay the debt.

All mortgages have two features in common: principal and interest.

The principal is the amount you are borrowing which is “secured” by the lender’s claim on the property.

The interest, usually stated as the percentage rate is the additional amount paid for borrowing. Mortgage interest is ‘compounded’ – interest on interest, over time.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Is A Counter Offer?

How Large A Down Payment Do I Need?

 

In the process of looking for a home in the Fort Myers or Cape Coral areas and wondering how large a down payment you may need?

There are mortgage options now available that only require a down payment of 5% or less of the purchase price. You’ll see some pictures in this video to help you remember later – the larger the down payment, the less you have to borrow and the more equity you’ll have.

Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan.

When considering the size of your down payment consider that you’ll also need money for closing costs moving expenses, and – possibly – repairs and decorating.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Is Loan To Value (LTV) And How Does It Affect The Size Of My Loan?

How Does Purchasing A Home Compare With Renting?

 

Struggling whether to purchase or rent your next home in the Fort Myers or Cape Coral area?

Like the guy in the video says, the two don’t really compare at all.

The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity take advantage of tax benefits and protect yourself against rent increases. Also, you may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity increasing YOUR net worth. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities like insurance, real estate taxes, and upkeep which can be substantial.

But given the freedom, stability, and security of owning your own home they maybe worth it.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: How Does The Interest Rate Factor In Securing A Mortgage Loan?

Are There Special Mortgages For First-Time Homebuyers?

 

Thinking about buying a home for the first time in the Fort Myers or Cape Coral areas?

Yes. Like the video shows, lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.

Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or who have experienced income irregularities.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: What Steps Need To Be Taken To Secure A Loan?

How Can The FHA Assist Me In Buying A Home?

 

Buying a home soon in the Cape Coral or Fort Myers area? An FHA loan maybe worth exploring.

Remember these points from the video:

The FHA works to make homeownership a possibility for more Americans.

With the FHA, you don’t need perfect credit or a high-paying job to qualify for a loan. The FHA also makes loans more accessible by requiring smaller down payments than conventional loans.

In fact, an FHA down payment could be as little as a few months rent. And your monthly payments may not be much more than rent.

At Title Junction we care about helping you stay informed throughout your real estate transaction. Have questions? Give us a call at 239.415.6574.

In case you missed it, check out our last Title Junction post: How Can I Keep Track Of All The Homes I See.