Mortgage Financing Options

The credit crisis aka the Wheel of MisFortune

Has the real estate market been your wheel of misfortune? Have you been made promises after promises? Have you bought into the hype of what one company or person might promise you, but at the very end, it's not even close to what they promised?

• Does a realtor promise you a high listing price, higher than anyone else did in recent months?
• Did a loan officer from a mortgage company promise you a great rate with low to no fees?

Currently we are in a credit crunch, no matter how you look at it. Credit card companies are losing hundred's of thousands of dollars. Mortgage companies and investors are losing the same. Are some of these individuals that you speak to, are they in the same boat personally, that they need to cling onto each and every client so they can make a living?

Trust...... ouch, such a powerful word, but one that is abused often. How can we trust? How can we take that risk and believe someone that we have never met before. Do we take one person's word over another?

In mortgages and real estate, it can be easy to put your trust in the hands of a realtor or a loan officer. But what I don't understand is if you get a gut feeling that something might not be right, then why do you proceed with that person?

I spoke to a client recently that was going to go with another lender. I asked her to give me some details about her rate and costs. She really didn't know. When I asked about her rate, she said that the loan officer said, "about/around 7%".  And she said that she wasn't 100% comfortable in some of his answers. My question to the general public, why would you even go through with this then?  Even if your back is up against the wall, that you are in desperation, why?  Do you know that this will usually backfire and put you in a worse situation?

The same goes for in real estate. Why listen to a realtor that says they can guarantee a higher price than most? We all like to think that we have a crystal ball. But what about truth and honesty? Realtors have access to what homes have sold in recent months. This is how they determine a possible price for your home. A very good realtor is going to point out to you the market conditions in your area. They will show you homes just as yours and what they sold for. You can't always use a current home on the market, because it might be over-priced. Sure, condition of the property makes a word of difference also.

 

My whole point in regards to both examples?  Pay attention to such words and phrases as "I guarantee", "I promise", "no problem", "110% satisfaction guaranteed", etc, etc.  I have been doing mortgages for over 15 years and I can't make everyone happy. I even had one gentleman report me to the BBB because he was unhappy. He was unhappy because he thought I was getting over on him, when in reality, I was being 110% honest. And luckily I saved my proof of what I went over with him, with his signatures on it. I fought the complaint and one.

You want my honest opinion?  Those in real estate and mortgages that give you a lot of information upfront, before you even ask for it, are the ones that you should be paying close attention to first.

I just had a client last week tell me that I was the 6th lender that she had spoken to. After 15 minutes of speaking to her, she said that I moved into the number 1 spot. I said, may I ask why? She said, "because I answered most of her questions before she even had a chance to ask them."  Meaning I basically gave her all of the information upfront for her to make an educated decision. I didn't hold anything back nor did I have anything to hide. Or was I afraid to compete with other lender's fees and rates. A solid real estate professional or mortgage professional understands this.  Just keep in mind what I have talked about, because you might come across this, thinking that you will be fine.

The average sales person doesn't like a client that is educated and fully armed with answers. The true professional actually loves it, because it makes his or her job much easier. And because they know that you know all that you need to know, to not only make a solid decision, but because this is how they operate and can sleep at night.

 

Consumers need to be aware of these Red Flags !!!!!

 

Author of this blog : Jeff Belonger

e-mail : jbelonger@ihmci.com

Yield Spread Premiums -- FHA & Conventional Mortgages -- Why the uproar?

Politicians are wanting to step in and squash the yield spread premium (YSP) that is paid to brokers by offering higher rates. I am not here to debate politics and what is right and wrong, but to give the true understanding what YSP is used for and how it can help the borrower when purchasing or refinancing a home.

Yield Spread Premium known as YSP is defined by wikipedia as the cash rebate paid to a mortgage broker based on selling an interest rate above the wholesale par rate that the borrower qualifies for.

It becomes a balancing act when a loan officer has to defend the reasoning behind how they make money, when the consumer can assume that the loan officer makes more money if they see the YSP on the good faith estimate or on the HUD settlement sheet. It becomes worse when that consumer now shops for his or her mortgage by trying to compare YSP's. This method in my opinion is ludicrous and just plain retarded.  By disclosing the YSP just confuses the mortgage process.

Question : Would you select a doctor or a criminal lawyer by what they charge?  How does the disclosure of the loan officer's profits affect the price that the consumer would pay for that loan?  Very simple, by knowing the profit, the consumer is able to negotiate better.

What's been the hottest topic of lately? That it's unfair that the broker has to disclose the YSP. What gets me is that you just don't see it on the bankers side. Which could lead you to believe that mortgage bankers are cheaper. A lot of the hype is that many brokers don't disclose YSP on their inital good faith estimate, even though they have to by law. And then it's later seen on the closing settlement statement. This is where the client becomes angry and figures that the loan officer is trying to get over on them. What would solve the problem?  Just allow the broker not to disclose the YSP.  But congress wants to eliminate the YSP on the brokers side.  This could make it more expensive  for the borrower.

Let's take a peak, comparing 2 different lenders, not making a difference if it's a banker or a broker. Example : LENDER A :  If their rate was 5.75% and they were charging 1 pt with $500 in fees. The YSP was 1 pt on the back. LENDER B : Their rate is 5.625% and were charging 1 pt with $500 in fees.  But the YSP was 1 1/2 pts on the back.  Who has the better deal?  LENDER B has the best deal for the client. So what if they made more money.  Unless we put an exact fee per loan to be made there is no transparency.  I truly feel that if you get the loan officer to reduce their fees tremendously, that it would seriously affect your service that you would receive.

Conclusion : Katie Marchione said in a comment in another post, "When you buy a $50 shirt at Macy's, don't you think that there is profit built into that price?  You are paying for a product or for a service and the providers deserve to get paid for it."

I admit, that there are loan officers that take advantage of the consumer. But there are many borrowers out there that don't have the money for all of the closing costs. And the lender can use the YSP to also pay for certain fees. And if the yield spread premium is taken away from the broker, borrowers will end up paying for more in closing costs because the lender needs to make a profit.

 

Mortgages & Real Estate -- Consumers need to be aware of these Red Flags !!!!!

How many of you at one time or another bought a house or refinanced your mortgage and ran into one problem or another. May it have been the realtor who was not able to give you the correct answer or the loan officer who strung you along and then changed things last minute. I have never said that I am perfect or that I know it all, but it does come down to honesty, integrity, knowledge, and very good service. 

What about you first time homebuyers that have never experienced buying a home or refinancing for the first time. I truly believe that there are some key phrases that can sometimes be cause for concern, known as Red Flags. And just because you have done this before, doesn't mean that it won't happen to you. If you hear some of what is mentioned below more than once, especially in a short time period, this could be your warning.

The General / Basic Red Flags from both the loan officer or the realtor :

• As you shopped for a realtor or a loan officer, this person was always getting back to you. Now you have signed a listing agreement, a buyers agreement, or the loan application and they don't get back to you right away.  If you are leaving a few messages per day, both e-mail or by cell, and this continues for close to 48 hours, there is no excuse. This is a huge Red Flag if this takes place a few days prior to settlement / closing, especially the day of closing, if they can't be reached at all.
• Key words or phrases used often when first speaking to you ; "I promise", "I guarantee", "no problem, I'll fix it", "I am the best", "I am the cheapest", and "I have the lowest fees". I am sure there are more.
• Delayed phone calls. I promise to call later or tomorrow. But you don't hear back from them and now you have to track them down. Yes, again, things happen. But if this seems to be a reoccurring issue, then you might have problems.
• Deadlines - If there are certain dates on the contract or with the lender, get everything in as soon as possible. If that is ordering inspections in a timely manner or getting documents to the lender, don't wait.

Red Flags from loan officers or lenders :

• You are shopping for lenders and the loan officer never offers you a Good Faith Estimate. Rut row.
• They don't offer you the rate or the payment?  This might sound silly, but I had 3 clients just in one month, that this happened to them. Yes, can I judge and say that they should have asked?  But maybe the loan officer talked circles around that client, and then they just forgot. Sometimes just hearing, "you are qualified" or "you are approved", gets you excited, hence why you might forget to ask the important questions.
• You find a loan officer because their rates were very good. But since you have so much on your mind, they never go over the rate lock-in features of that program. If they don't cover this prior to application, and especially during application, this could be trouble. Or they get you to sign a rate lock form, but they convince you to float. Question, did that rate even ever exist then?
• You might qualify for a FHA or VA loan, but tell you that you don't want those kinds of loans, because conventional is better for you.  This has happened to at least 5 people that I know of. The main reason was because the lender wasn't FHA or VA approved.
• If your lender/loan officer changes rates or fees during the process or at settlement, don't just give in. Avoid excuses such as; "your credit score dropped", "you have less income", "your credit isn't as good", etc, etc. What I am about to say is the average. These things are usually found out in the first week when processing a loan, not last minute.
• Changing stories / shifting blame.  This one can be used in conjunction with the other red flags mentioned above.
• When comparing good faith estimates, don't just compare the bottom line, "total costs to borrower". Some loan officers low ball certain 3rd party fees to make their good faith look cheaper. Or they escrow less taxes on paper that is mandatory in each state.
• You are at closing and the loan officer says, "don't worry about those docs, we can correct that later". NO !!! Once you sign, it's over.
• Update (04/03/08)  -  If you have a credit score of 679 or less and less than 20% down and you know you should be going FHA, but the lender says that going the conventional way is better.... major red flag. It's been proven that going FHA in this scenario is cheaper monthly.

Red Flags from realtors or real estate offices :

• When an agent only shows their listings. If you want to see homes and they keep showing those only listed by their company or that they are selling themselves.
• One complaint - When a realtor has a full time job that is not real estate related. I heard a story that the buyers had to wait until their realtor got up to show them the house. This was at 1 pm.

 
Red Flags from consumers :

• This is actually to the consumer reading this. Never hesitate to tell your loan officer or realtor everything. Even if they don't ask you and you think it's pertinent to the transaction. Don't take that chance in not telling them. We are all here to help you and not pass judgment. The true professional acts in this manner.
• Be loyal and just don't hop to every realtor showing houses. Build a rapport  with that person. That's if  you feel comfortable with that person.

Overall, don't keep falling for the same excuses over and over. Or, for multiple excuses during the process. Yes, things happen, but 9 out of 10 times, not that many on one transaction. These types of excuses are usually to delay you in finding out the truth, until it's too late. If anything above happens for 2 or more days in a row, don't wait, contact their manager or boss. If you don't feel like you are getting anywhere at anytime, seek a professional in the particular field or possibly seek legal advice. It's one thing to give someone the benefit of the doubt, it's another to be lied to or misled intentionally. Never hesitate to ask questions.

Author of this blog : Jeff Belonger

e-mail : jbelonger@ihmci.com

Market Concerns -- Robbing Peter to pay Paul???

Fears in the market.... ?? Are you hiding because of such fears in today's market place? I think many of us were scared 6 months to a year ago. The media was talking about how bad it was out there. We had the so-called mortgage meltdown.  But was it really that bad? I think it all comes down to how sure of yourself, that you feel comfortable in buying, when it comes to purchasing a new home. May you be a first time hombuyer, someone moving up, or an investor.  I have said this many of times, but you need to speak to a mortgage professional and a real estate professional, those that are looking out for your best interests. If these people don't take the time in understanding your needs and wants,  actually help you make a plan, and walk you through that plan, then seek someone else.


Rich Sweum wrote this post the other day titled, At What Cost another 50 basis point Rate Cut? I truly believe that we can't keep cutting the Fed Rates. There will be some people that will disagree with this. Rich received an e-mail from a realtor talking about the economy, that it could hurt her commissions, and that we need to help and make it work now. (you can read this in Rich's comments) Basically, robbing Peter now to pay Paul later. Better yet, robbing from our own selves now, and pay us back later..... if that theory truly would work, life would be a bed of roses. It's a huge gamble and not a gamble that I am willing to take now. Why?  Too many unknowns still out there, that if we keep digging deeper, how long will it take us to dig out of this mess. The biggest concern that could set us back, foreclosures.   Another fear, jobless claims. Just today,  the jobless figures came out and the stock market responded negatively at first, but is positive now. This will continue for the next several months. The investors are just not sure and pull money from here and dump it there. Basically a sea saw effect.

Summary : I gave a brief description in regards to the difference between the mortgage interest rates and the Fed rate. This is what I stated.... "When the Fed rates adjust, it basically increases or decreases the amount of money circulating within the economy. The Fed is acting as the throttle and the break for economic growth and inflationary control. If the Fed can keep interest rates low, there will be more money in the economy. This type of control allows banks to either lend more money when rates are low because credit is cheaper or lend less money because the cost of credit is high."  In my honest opinion, this can act as a band aide for now. The media and Wall Street are trying to curb fears in the market place now, because of fear of a recession, another post in itself. We need to allow the market to work itself out. There are still plenty of people out there that can buy and want to by. But because of the media sometimes, they get scared. Hence why speaking to a mortgage professional that is knowledgeable not only with mortgage products, with the market, but understands your goals and understands how to help you plan, is the key in being successful.

Overall, rates are low and home values are low. People, rates were even low the last 2 months. A very good mortgage planner can help you curb your fears if you lay it all on the table. Giving you more insight than sometimes found on the internet or even from someone local that just wants your business. Don't forget, the lowest rate offered on paper when shopping doesn't always exist. And you won't always get good service from someone that just offers that piece of paper without properly explaining it.                      

Mortgage Interest Rates - Up or Down?

Okay, so what have you heard on the street in the last several days? I am sure many of you have heard that interest_rates were lowered. Now, I don't want to confuse you, because I want to keep this very simple and educate you from my past experiences in the mortgage industry.I want to make one bold statement before we move forward. We all get our money from the same place. Meaning, if your loan officer works for a bank, a correspondent lender, or as a broker, we all deal with the same money at the same price. I need to make this statement because I see to many lenders or loan officers advertise that they have the best rates, no matter if the market was up or down. So many people confuse best rates with great service. Meaning, there is a higher god per se that sets the pricing on Wall Street, no matter if you are Countrywide, Wells Fargo, Bank of America, or x,y,z mortgage company (mom & pop shop), it's all the same.


Confused yet?  I hope not, because that should have been easy to understand. Too many consumers focus on the best of something, easily forgetting the importance of what they are trying to accomplish, their goals, and that buying or refinancing a home is and can be emotional. And the sad part is that many of the loan officers out there know this. Sometimes willing to tell you what you want to hear and backing you into a corner, until it's too late. That you are now desperate to refinance, needing that money or lower rate. Or that you fell in love with that home and that you must have it now, at any expense. And that you will worry about the consequences of your actions later. How do I know all of this?  I deal with it weekly. I could give you real and live examples that aren't staged.  Just be careful not to shop yourself out of the market !!!



But I want to get back to the discussion at hand. Mortgage rates, rates, and interest rates....  the percentage that is charged for you to borrow on the open market per se to obtain financing for a particular property.

When rates adjust, it basically increases or decreases the amount of money circulating within the economy. The Fed is acting as the throttle and the break for economic growth and inflationary control. If the Fed can keep interest rates low, there will be more money in the economy. This type of control allows banks to either lend more money when rates are low because credit is cheaper or lend less money because the cost of credit is high.

A MUST READ.... DON'T STOP NOW !!!

 

Conclusion : Rates were lowered a week before the Fed's regularly scheduled meetings because of the foreign market's decline of more than 9%, which influences the U.S. market. There was fear and speculation that the US market would open up, down over 500 points the next morning. This did happen and at one point, rebounded. The market was correcting itself for several reasons. My concerns aren't why it happened, just because the news reported that the interest rate dropped, but because lenders are now advertising it all over the place. My fear is that they will use this news to get you into the door. Do you know what happened the day after this great news?  Rates went right back to where they were the day before and in some cases, higher. I locked 7 clients into yesterdays rate, because I know better and because I have been through these quirky markets before. I know many lenders didn't lock their clients in and might now be playing roulette with your rates. Some will honor your rate locks, others won't. And if you were quoted great rates just the other day, check again. If they tell you that nothing has changed, they are lying to you. The market doesn't lie, so check it out yourself.

Overall, will rates come back down again when the Fed meet next week? Maybe, maybe not. It wasn't the chance that I was willing to take and I even told this to my clients that were shopping. Many companies are still promising lower rates, not to lose that consumer as a client. And because they can bascially state 1 to 5 excuses why your rate moved when you finally make your decision. It's just the facts of life. My advice, go with someone that can explain all of this to you. Go with someone that will call you or e-mail you when the good changes happen and when the bad changes happen. Why?  Because the news of rates changing for the worse won't hit the general public until next week. The market corrects itself when it wants, but many loan officers don't share the negative news in fear of the consumer running away. If you didn't lock in 24 hours after the news, you might not see anything positive for 2 to 3 weeks, and this is just an educated guess backed by 15 years of experience in the mortgage business. It's called, lenders hedging high to recoup previous losses. They adjust and readjust at a blink of an eye, keeping some of the profit that was lost in the last quarter.

 

 

And a little FYI.....  if you are putting less than 30% down and your credit score is less than 680, your best mortgage option might be a FHA mortgage. Don't let anyone else tell you differently. 

 

      

The Pay Option Arm : Get the LOWEST PAYMENT!!! But beware.... read on.

Buy a house for $400,000 and pay $1,341 a month.  WOW...... This is a win win situation. But wait, did you know the name of this type of mortgage program?  It's called The Pay Option Arm : But when advertised, lenders state...."Get the lowest payment!!"   Please read on to get a better idea of this type of program.

Many of us know that advertisements are to get you interested, to call that particular company. Making it sound like the next best thing to gold. Remember the Gold Rush? It sounded great. But many people lost their lives in search of the ultimate dream of getting rich. In regards to this program, the ultimate goal of the consumer?  Getting the lowest mortgage payment possible. Please read : Rate vs Payment

Lately, there have been a string of advertisements talking about these ultra low payments. Quicken Home Loans just came out with one called the Secure Advantage. DiTech, who is owned by GMAC mortgage, has a commercial telling you to call on the same type of mortgage mentioned above, with the same payment. These are all the same types of loans that can be found with any lender. The question is, are they leading you down the right path for you, the consumer? Are these types of mortgage programs making holes in your financing and within your house? Who actually benefits from these programs? Does the lender sway you to take this type of program because they are making more money from them.  

 

Now, don't get me wrong. This is can be a good program, but it's not for everyone. You need to understand all of the ins and outs of this program. With rates being so low, you can get better security with a fixed rate. This program is for those that will take the difference in the low payment and apply it towards other investment opportunities.

Financial opportunities :

-- stocks and bonds that give a much higher return.

-- taking the difference and buying investment properties

But this generally won't happen because the average consumer needs that lower payment so they can afford that larger house. Basically living beyond their means.

 

Just be careful. I say this because I am dealing with a client in Florida now that is trying to get out of this loan. She told me that she was pressured into this loan and the end result was that the lower payment did look interesting. In which this case was her deciding factor. Sure, she was given each disclosure to be looked over. But don't you as the consumer come to us, the mortgage professional, because we should be looking out for your best interest? The answer should be YES. But this is not always the case. Greed can be a powerful thing. In this women's case? She is now seeing her payment go up and her mortgage principal also go up. Here is another good read : Purchase Price vs Payment.    what's missing??????

Mortgage Financing.... it could be a ride you wished that you never took!!!

Have you been told that you were getting a great deal before? Did the loan officer use such phrases as "I promise" and "don't worry". Did you feel like they were giving you a very good deal because they seemed very nice? Was the rug pulled out from under you and you felt like you were going downhill quickly?

The reality of it all is that some things can be guaranteed on paper and still not be a good deal and in several cases, never happen. In this business we use the term, "sometimes it's not worth the paper that it is written on". You should always get a Good Faith Estimate   from your lender.  I will list a few solutions at the end, but be careful that you don't shop yourself right out of the market. Some loan officer's can make your head spin with different ideas. These are just the bare facts.

Just recently I had a client that was referred to me by their best friend. We'll call this client Mr. Refi, because he was looking to refinance his home to pull cash-out. He called his friend the day before settlement. This friend told him to call me and after talking to him, I realized that he was being taken for a ride.

So, how do you think he felt after I described to him on what kind of mortgage that they were giving him? They made him feel like his credit wasn't worthy, so they offered him 9.010% on a 15 year mortgage. He also had about $6,400 in extra fees with this lender. The overall picture, he was a very solid borrower.

Mr. Refi is also self-employed, in which he owns his own company. I realized that they were giving him a higher rate because they were lazy, never asking him for his business tax returns. After speaking to him, I realized that he could go Full Doc or what we call, a Full Documentation Loan. They were taking him as a Stated Income, which usually results in a higher rate. But in the case of Mr. Refi, who had good credit of 646 and whose loan to value was 73%, was still given a much higher rate. Even a rate on this shouldn't be more than a 1/2 percent on a full doc loan.

The big picture is that my rate was 6.75%, 2.25% lower than their offer. My costs were also $6,400 less than what they were charging him. This might have sounded like an easy sale for me, but it wasn't. Mr. Refi's back was up against the wall and he needed his cash-out very quickly. The other lender knew this. Mr. Refi finally decided to use my services, even after I told him it would take me 12 business days to complete this transaction. Mr. Refi then told the lender that he was going with someone else, myself. Later that day, they called him up and dropped their rate to 7.125%. He still said no. But then the next day they called him up and told him 6.9% and even said that I couldn't deliver on my so-called promise. Mr. Refi calls me up, ready to back out now. I was a little angry, because they knew he needed the money quickly and told him that they had his check waiting for him. I pointed 2 things out to him :

• Why go back to a company that was originally going to give you a much higher rate prior to this?  FYI.... if you ever negotiate with a lender after day one, it's usually because they don't want to lose your business and that they were charging you to much to begin with.
• 2nd...even if they did match my rate, they were still charging him $6,400 in more fees.

Overall, Mr. Refi was desperate and sometimes desperate people do desperate things. This loan officer even told Mr. Refi that he could refinance again in 6 months. WOW....   my question to him was, what would be the difference in 6 months to get a lower rate?  And just the fact that it would cost money again to refinance. He didn't have an answer because he never asked the loan officer this. He just took his answer at face value and never questioned this. Why? Probably because he was focusing on the money that he was going to receive from the refinance. And if he went with the first lender, it would have cost him about an extra $20,000 just in 5 years.

Conclusion :          SOLUTION to these problems and issues.....

• If you had done a mortgage prior to this and felt like you were treated fairly, go back to that same person that helped you once before. Why take a risk.  FYI.... we all get the money from the same place after it's all said and done.
• Ask those that you trust for a referral on who to call. Don't just ask a friend or family member just because. Not all of them have been treated fairly or know what to look for. Sometimes pick out those that are successful or good when it comes to shopping. But not one that is always trying to get the best deal, it can backfire on you.
• If searching the internet, get multiple estimates and just don't take the best one. Maybe take the one in the middle. I always say nothing is free. And if someone is a lot better than everyone else, I have always said that if it looks to good to be true, then it's not. Now, this is not always the case.
• If the loan officer takes the time to explain everything in detail, that person is probably giving you the better deal and being upfront with you. You want someone that can be reached often by phone and e-mail and also gets back to you in a timely manner. If they are not easy to reach, especially when time of closing, this is sometimes not a good sign. FYI... remember, if they were easy to contact before you accepted their offer and now they aren't once you said yes, this could be a sign.
• Just don't shop for rate, there is so much more behind this. It goes back to my theory about shopping yourself right out of the market. Read this : Mortgage Shopping -- Rate vs Payment......
• Take the advice of your realtor and or financial planner at times. Just remember to ask questions and not just assume.

Disclosure :  Remember, these are just my opinions and thoughts. This is from dealing with the general public and that I have been writing mortgages for 14 1/2 years now.

When is the best time to put no money down on a mortgage........

How do we judge those that put no money down? Do the sellers want to see more down? Do realtors get nervous when a buyer puts no money down? So, do we judge  this buyer based on the fact that they are putting no money down?

So, when is the best time to put no money down on your purchase of a new home? Does this make you a bad borrower if you have no money down?

In all reality, there are so many ways to finance your new home. The first thing your loan officer should be doing is asking your goals. Asking you such questions as:

• How long do you plan on living in your house. (now, you can't tell the future, but some people know if they are going to live there for life or move in 2 to 3 years)
• How much do you want your payment to be..... and don't say free.
• How much money do you have to work with? This is the most interesting question of all. I'll be exploring your options based on this question and why.

Okay, so you tell me that you have $50,000 to work with. Common sense would say to put down at least $30,000. Using $25,000 for your down payment and $5,000 for your closing costs. 

If you bought a house for $250,000 and mortgaged it for $225,000 at 6.5% for 30 years, your payment would be $1,422 a month just for PI. (principal & interest)

If you bought the same house and put no money down, financing the full amount of $250,000, at 6.75% for 30 years, your P & I payment would be $1,621 a month.

For arguments sake, that is a difference of $200 a month. And keep in mind, this is based on no points and if you have a good credit score of 660 or above. And now you tell yourself that you would be saving $2,400 a year. WOW.  But is it wow....?

          What to do with the extra money?

A good loan officer is going to have the knowledge and experience in regards to what types of programs are out there. They will ask about your goals as mentioned above, and essentially act as a financial planner in a certain sense. Not telling you were to place your money, but to give you options. Again,what can we do with this extra money?

• Talk to a financial planner. *** If you have a rate under 7%, you should be able to invest your money in medium to high risk stocks, that would give you a better return. You will also be writing more interest off because of the larger loan amount.
• By putting no money down, you could now take $25,000 to buy an investment property. Now you have rental income and another tax write off. And also building more equity.
• Money left over? You now have EMERGENCY money. You hear so many foreclosure stories (by Robert Ashby). Reasons why this might happen? Too many too list. But how about loss of job? Major medical bills? Now you have money to fall back on.

Conclusion : So many of us listen to our parents from the past. Meaning that it was told to you to pay off your house as soon as possible. Remember, back in the 70's and 80's rates ranged from 12% to 18%. Let your house work for you. Don't work for your house. Instead of putting a larger down payment, you can always put extra down on principal if you want to pay it down. But you have the flexibility of doing this, without having your money tied up in the house. If you ever needed this money back, the only way to get this money out is to refinance (cash-out), a home equity loan, or to sell the house.

Another major note : If in question about a buyer if they bring you a pre-qual that says no money down, don't hesitate to ask the loan officer several questions. If they are good enough, they should be able to set your mind at ease. And if they are able to supply a pre-approval letter, this is the best thing possible. Basically it should be in the form of a commitment letter. This means that an underwriter as already looked at the file and approved the loan.

Lastly, I mentioned financial planners. Sit down with your financial planner and or accountant for investing purposes and tax purposes. But a very good and creative loan officer should be able to guide you in the right direction.

 

UPDATE & a FYI : For those money geeks (Brian Brady, Bill A., and Robert Ashby) and those into stats, this is not to the penny. Meaning, I didn't talk about the PMI options and as Donna Harris mentioned....how long until you recoup your money and a few other things. This was just a generalization about those who believe buyers with no money are bad buyers or not positive buyers.

And Brian Brady has 2 different twists that fit into what I am trying to describe in this post : SHAKE YOUR ASS-ets baby!