Washington State Mortgages, Made Clear. Buying or Refinancing? Let's find the right loan together.
Many home owners have two mortgages on their properties. A first mortgage and a second mortgage that may either be fixed or a home equity line of credit. Do you know what your effective rate is? Basically, this is if you factor in what your paying on both mortgages, and then figured out what your interest rate is on your payment.
Here’s how to determine what your “blended rate” is:
My husband teases at me when I talk about the Bubble Bloggers…not because they’re funny (they can be), it’s simply the phonetics. Our local bubble bloggers are a very serious and determined group of individuals. In a nut shell, they believe that Seattle’s home values will plummet or burst like a popped bubble and when this happens, it will reek havoc for current home owners. Many of them feel it is much better to rent than to own a home for financial purposes. The Seattle Bubble is probably the most well known local blogs on this topic.
Recently, an article I posted on Rain City Guide, The Great Rent vs. Own Debate, was featured (or should I say, "flogged") on the Seattle Bubble and Priced Out Forever (these blogs share writers). Eleua, one of the "bubble bloggers" asked me if they could do this and I must tell you, I was a bit nervous about how this would all shake down. For starters, where ever there are numbers and stats, there is opportunity for debate. Numbers can be twisted and recalculated to prove anyone’s theory. I must say they were very fair and kind in their "flogging" of my post.
Here are some points they make on why it’s better to rent than to own a home (I’m not going to debate these points in this post):
I wrote The Great Rent vs. Own Debate over an exchange of comments on one of Rain City Guide’s post where I stated something along the lines of "owning a home is an automatic savings plan for some borrowers". I still believe this to be true based on what I’ve seen in my past seven years as a Mortgage Consultant.
Many people are not putting away money into savings accounts, retirement, planning for college…you name it. When you make a mortgage payment (assuming it’s not interest only), you are applying a small portion of that mortgage payment towards reducing the principle balance. For Americans who do not put 10% of their gross income (or anything) into an investment vehicle (no…not a new car!), this is their only source of savings. They are at least putting some money away where they do not have immediate access to it (unless they treat their home equity like an ATM).
I will be the first to admit that a big reason why I have bought homes is emotional. I have "a need" to own a home. I grew up renting and moving around quite a bit as a kid. I feel grounded and I have control over the home…it’s mine! With that said, owning a home has proven to be the best investment for me. I would not have realized the appreciation and profits from renting that I have as a home owner over the past 18 years.
Home ownership is not for everyone. Especially people who are careless with their credit and spending. You need to be responsible, plan for repairs and improvements and make your mortgage payments on time. Buy a home because you want to live in it and you want to be your own "home sweet home".
Every so often I'll receive an email from someone who asks me about becoming a Loan Officer. Last night, just after hearing the news about Greenpoint, I had a lady contact me wanting to take the plunge into lending. "What? Now? Have you been watching the news? It's tough out there, Missy!" Okay…okay…I didn't say that to her…but I was thinking it! After getting over the shock of someone innocent and new wanting to enter into this field, I read her questions which I thought were pretty interesting (by the way, she's very persistent). I thought I would share some of them with you:
What exactly does a Loan Officer do? In a nutshell…meet with either people who are considering buying a home or refinancing their existing mortgage. A professional will explain the mortgage process, answer any questions and help the client understand what all their options are. (This could be a post on it's own!). May days are often spent completing loan applications (interviewing borrowers), learning and searching for specific loan programs and educating Real Estate Agents and borrowers on different products and guidelines as well as talking to various wholesale reps to learn about their products and reviewing files with my processor and underwriter. Every blue moon, I'm able to sneak out and make a "sales call" on a real estate office, it's rare these days.
What sort of skills do I need? If you enjoy helping people, are patient and aren't afraid of crunching numbers…you have some basic skills. You should also be computer savvy and able to constantly learn. You cannot be afraid of tons of paperwork, paper cuts and have an attention for details.
Are there any classes I can take? Check out local community colleges for classes they may offer. Contact the local lending associations, for Seattle some would be the Washington Association of Mortgage Brokers, or the Seattle Mortgage Bankers Association. Jillayne Schlicke is CEO of an excellent school called CE Forward. Many of her courses are approved with DFI and feature approved clock hours. There are also advanced programs to receive designations such as Certified Mortgage Planning Specialist.
Mortgage Originator Magazine may also be a good read for someone considering entering this business.
What is the income for someone entering the business? It can range from $0 to "the sky is the limit". In fact, you could even lose money being a Loan Officer. According to the U.S. Bureau of Labor and Statistics, the average LO made $59,350 in 2005. Something to keep in mind is that there are hundreds of thousands of LOs factored into that average. And it can cost quite a few bucks just to be a LO with marketing, leads, etc. I would recommend having a back up source of income and 6 months of living expenses in the bank before starting any career that may be 100% commission.
Jillayne Schlicke, Co-Executive Director of Ethical Lending, also suggest "if someone wants the easy route and wants a base salary and on the job training included, then they should try to hook up with a bank or credit union. If the person does not have a sales mind, then they are better off starting out as a processor because the training is INVALUABLE. The competition for these jobs would probably be higher unless the candidate is bilingual. They won't have to pass the LO test if they start out here."
Jillayne's suggestion of starting at a bank or credit union is great because these institutions may also provide leads to a new loan officer. A bank or credit union may also provide you with more strict working hours, unlike a broker where you could be "on call" depending on how you structure your business. Last, banks and credit unions will not have as many programs to learn as a Mortgage Broker where you're learning many different lenders and all of those lender's programs and guidelines.
Bottom line: I would never recommend that someone get into the mortgage business with dreams of striking it rich. You may be setting yourself up for disappointment and money should not be what motivates you when you're helping someone with the largest investment of their lifetimes…their homes.
EDITORS NOTE 2/4/2009: I have updated Jillayne's contact information on this post thanks to another person who is interested in becoming a mortgage originator.
Note: I was contacted by the fine folks at DFI with corrected information to this post regarding continuing education. My corrections are either striked out or bold.
This week has been a bit crazy with mid-winter break…our three kids all have different break schedules so our family is home instead of vacationing somewhere. This has provided me with a great opportunity to attend classes and seminars, which typically take a bit of coordinating with getting the kids to schools (they go to three different schools due to their ages).
Anyhow, on Monday, I went to a seminar by Dustin Luther. Dustin is the creator of Rain City Guide, a blog that I contribute to that has been a force in the Seattle Blogosphere for years. This was actually my first time meeting Dustin! And, the seminar was great. I learned about Web 2.0–how the consumer is directing the web instead of the web attracting the consumer. It was fascinating. He is truly genuine.
Yesterday, I took my first clock hour course to retain my State of Washington Loan Originator License. It kind of feels strange to take a course before passing an exam that is not yet available (hence the cart and horse photo…I was going for the cart before the horse…but it was taking too much time to find the right photo). I am assuming I’ll pass the exam once it’s available (or I will be adding a post with a photo of egg on my face).
The course is required for all Licensed Loan Originators during their first year of being licensed and is on ethics. This one was taught by NAMB. I wish it would have been an exam on ethics, instead this was a class or open discussion. I typically do not attend "lender functions". When I took the CMPS exam, I really enjoyed networking with the professionals who cared so much to fly from all over the nation to take the three day exam (25% did not pass the first test). I was very proud to be a Loan Originator (or what ever title you wish to call me) in the company of those fellow lenders.
At today’s class, I was fortunate to sit with two other fellows who I feel also have very high standards and ethics. And I do believe overall, the room was filled with the same caliber of people who truly care about serving their client’s best interest before there own. I mean, they are there spending their time BEFORE taking the exam. (You must pass the exam to retain your license…you can re-take the exam for $125 a pop). the cost for the exam will be determined by the exam provider and is anticipated to be around $50 -$60. DFI also recommends that BEFORE a loan originator spends their time and money on continuing education classes, they check DFI’s website to make sure the professional organization or individual course are approved for loan originators or mortgage brokers continuing education.
What was interesting to me is that when you survey a room full of people, ethics can become a bit blurry. I left the four hour class with my certificate…I have one more class and an exam to go before all of the criteria is met to REALLY be a Licensed Loan Originator.
Lately, I have received more inquires about bridge loans. Bridge loans are used when someone wants to make an offer on their next home non-contingent on the sale of their current residence BUT they need the equity from their property for part of the down payment on their new home.
Bridge loans can be a great tool in a hot market where sellers are in the position to be extra picky, when multiple offers are a possibility or perhaps the seller is simply not in a position to accept an offer contingent on your property selling. A buyer wants to put forth the best offer if they really want the property for their next home. With a bridge loan, there are no monthly mortgage payments and the interest that accrues is paid off at the closing of the buyer’s listed home.
Mortgage and some real estate companies offer bridge loans, as does our mortgage company. The guidelines and terms may vary from company to company so if you are considering a bridge loan, please make sure your Mortgage Planner clearly explains the terms to you. The terms that I am discussing in this post are those of Mortgage Master (with that said, our company may make exceptions as well).
Bridge loans lend a portion of the equity of the property that is listed with a real estate agent. For example, if you have a home listed for $400,000 with a $200,000 mortgage balance, we would lend up to $120,000 (400,000 x 80% less the mortgage of 200,000). The $120,000 would be used for down payment on the next home. Different lenders have different ways of factoring how much they will lend for a bridge loan.
With a bridge loan, a deed of trust would be recorded against the current residence listed for sale. The $120,000 bridge loan plus interest would be paid off once the property is sold along with the current mortgage in the amount of $200,000.
A home buyer considering a bridge loan should discuss this with their Mortgage Planner and Real Estate Agent. The buyer will need to be approved factoring in mortgage payments for their current residence, the new home AND the bridge loan (interest only payments, even though no payments are due).
A possible down side to a bridge loan is if the home buyer’s property that is listed does not sale right away or if they have a sale that fails for what ever reason. It is quite possible a buyer could be stuck with 2 mortgage payments. There is usually a gap of one month before the payment on the new home is due. However, it also takes time for closing to take place once an offer is made on the buyer’s former property.
Bridge loans are intended to be short term financing (6 months). If you are considering a bridge loan, you may want to discuss market conditions with your real estate agent and make sure that your listing is “priced to sell” so you’re not in a position to become strapped with two mortgage payments for too long.
If you are interested in buying or refinancing a home located anywhere in Washington state, please contact me! Click here for a no-hassle mortgage quote.
