All of us at Texas Mortgage Finance would like to wish you and your family a safe and Happy Halloween. Thank you for being such a valued partner or client. All the Best, Texas Mortgage Finance.
Oct 31, 2018 |
Mortgage lenders love to see borrowers with consistent, steady incomes. But not all borrowers have jobs that send a paycheck every two weeks. Of course there are plenty of self-employed entrepreneurs, but there are also people who are depend on tips for i
Oct 10, 2018 | Purchasing a Home Conventional Loans
In order to achieve the dream of homeownership, many buyers look for creative financing to aid them in their quest. One such option is a piggyback mortgage, which actually involves taking out two separate loans to make homeownership more affordable. These
Sep 12, 2018 | First-time Homebuyers Conventional Loans Preapproval Purchasing a Home
When you are in the market for a mortgage, one of the many decisions you’ll have to make is whether to apply for a fixed-rate loan or an adjustable rate mortgage (ARM). Both can be beneficial, depending on your situation. Learning the difference bet
Aug 15, 2018 | Purchasing a Home Fixed Rate Mortgages Adjustable Rate Mortgages Refinancing a Home
If you are buying a home or refinancing, you have probably heard about “mortgage points.” This form of pre-paid interest can save you thousands of dollars over the course of your loan but in many circumstances is not worth the upfront cost. Ho
Jul 18, 2018 | Purchasing a Home Interest Rates
Buying a home in Texas, whether for the first time or the last, is an exciting event. Yet before you even take a look at a single home for sale, it is a smart idea to have your mortgage financing lined up. While it is possible to get a home loan directly
Jun 20, 2018 | mortgage brokers
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