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                                          Don’t Get a Mortgage from a Company that has “Bank” in its name

When buying or refinancing a home, most people don’t even know the first place to start the process. While some may know someone that knows someone, the majority turn to a bank that they have dealt with in the past or an advertisement they see on television for their first call. Others will turn to the internet and take a shot in the dark to see if they hit the target. Unfortunately for these people, after everything is said and “closed”, they realistically didn’t ever have a chance to really see the target. With all of the marketing gimmicks that you see (No closing costs, no money down, $5000 incentive if you pick this lender….. Blah, Blah, Blah!!!!!!), it is very difficult to understand what is the best path and the most sound financial decision when buying a home.

 Before the crash in 2009, everybody played the rate game with lenders, and whoever gave the borrower the best rate won. What most people didn’t realize was that the higher the rate, the more money the bank would make. This was called a yield spread premium. The higher the rate, the higher the yield in the bank’s pocket. Well, that is not the case anymore. The best rate is not always the best decision. Since the controversial “Dodd Frank Act”, the rules have changed drastically, and what most do not realize, this is what changed the game for consumers in a very positive way. Instead of the bank getting paid more when they charge a higher rate, now the homebuyer gets the paycheck the bank used to get to put towards their own closing costs. Yield Spread premium is now called a “Lender Credit”. This means that you can now decide on the rate that best fits your financial situation. For example, at 4% interest on a 30 year conventional mortgage the lender will pay 1% of the loan amount towards your closing costs. If the rate is moved to 4.25%, then the lender will pay back 1.25% of the loan amount. At 4.5% they may credit you 1.5% and so on. Based on a $100,000 loan the credits to you would be $1000, $1250 and $1500 respectively.

How does this help you?   

For someone that may have little money to put down at closing, taking a higher rate would enable them now to have the lender pay for some of the closing costs. On higher loan amounts, all of the closing costs can be paid by the lender. This enables many people that couldn’t buy a home before the crash to have many more options to be able to buy now because they do not have to bring as much money to the table.         

NOW HERE IS THE KICKER!!!!!

All of the gimmicks that I mentioned above (No closing costs, no money down, $5000 incentive if you pick this lender….. Blah, Blah, Blah!!!!!!), well those are all based on the Lender Credit. As a broker, I am required by law to disclose the amount of lender credit for each rate, but the banks are not.

What does this mean?

This means that the bank can hide the money from you and put it in their pocket. This is how they advertise no closing costs or special incentives to use them.  They are just raising your rate to cover everything without you having a say in what you want to do. If they are not offering incentives or showing a lender credit on your loan estimate, then, well they are just raking you over the coals. If you use a broker, that money is always yours, end of story.

The law has again allowed banks to be dishonest with your money. By using a broker, you will always know where every penny of your money is used.

Daniel Cason Lonestar Mortgage Solutions Texasmortgagedc.com

Is a Bigger Down Payment Always Better?

In the homebuying process, if you find yourself in the enviable position of having more cash than needed for a minimum down payment, it may be difficult to know just how much you should put down. A larger down payment can bring plenty of benefits, but is it always best to contribute the biggest down payment possible?  First, remember that every loan program has its own down payment requirements. FHA loans for example require a minimum of 3.5% while jumbo loans will require at least 10%. To get a conventional loan without PMI you’ll need 20%. USDA and VA, by contrast, do not requi...

September 25th, 2019 | Purchasing a Home, Preapproval, Mortgage Advice, Is a Bigger Down Payment Always Better?

What is the CHOICERenovation Mortgage?

Freddie Mac has announced the creation of a new home renovation loan program called the CHOICERenovation Mortgage.  This product is replacing Freddie Mac’s previous Renovation Mortgage and is very similar to Fannie Mae’s HomeStyle Renovation and the FHA’s 203k loan. It offers many benefits to borrowers looking to make updates to their properties. How Does It Work? The CHOICERenovation Mortgage breaks from its predecessor by eliminating the need for Interim Construction Finance and allows borrowers to take out one loan at closing to pay for both the home purchase an...

August 28th, 2019 | Home Renovation Loans, What is the CHOICERenovation Mortgage?

What’s More Important: Lower Home Prices or Mortgage Rates?

When buying a home, there are several factors that affect how much mortgage you can afford. Two of the most important are the property prices and current mortgage interest rates. Is it better to search for the absolute lowest rate or is it more helpful to choose a less-expensive home? Here’s how the two factors are related and how to make the right choice. Mortgage Rate/Home Price Relationship Since higher mortgage rates make homebuying more expensive for buyers, you might think that home prices would tend to fall during high rate climates in order to compensate for those costs. Un...

July 31st, 2019 | Purchasing a Home, Interest Rates, What’s More Important: Lower Home Prices or Mortgage Rates?

Happy 4th of July

We want to wish you a Happy Fourth of July! It is because of clients like you who believe in this great country and the dream of homeownership that we have reason to celebrate. "We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness." Declaration of Independence - July 4, 1776

July 3rd, 2019 | Mortgages, Happy 4th of July

Benefits to Mortgage Debt

In order to buy a house, most Americans take on a mortgage loan. While debt is usually to be avoided if possible, when it comes to a mortgage there may actually be some financial benefits for borrowers. Liquidity If you dump all your extra funds into paying off your mortgage, you may be in a tight spot if you face a financial emergency. Family deaths, divorce and health traumas are just a few things that can quickly rack up enormous debts. If you do not have a sizable emergency save up and you have been sinking all disposable cash into your home, you may end up selling your home to pay f...

June 5th, 2019 | Debt, Credit, Mortgage, Benefits to Mortgage Debt

What is Mortgage Amortization?

If you have a fixed-rate home mortgage, you pay the exact same amount each month. But did you know that the amount of principal you pay toward the balance of your loan changes from month to month? This is called amortization and it is a method of distributing the interest and principal over the course of a loan so that it is completely paid off by the end of the loan term. Understanding how it works could help save you plenty of interest on your mortgage. How does it work? When you agree to buy a house at a certain price, in reality, you will end up paying way more than that price to you...

May 8th, 2019 | Credit, Interest Rates, What is Mortgage Amortization?

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