Your Questions About Mortgage Loan Process

Lizzie asks…

Can I get a loan to rehab or fix an ugly house?

My husband and I, are looking into buying our first house but we are still young and don’t know much about it. But what we were thinking of doing was to get an ugly house that has potential and get it fixed my way. And what I want to know is if I will be able to get a loan along with the mortgage loan. Can some one please explain how rehabbing a house can be. I mean the loan process or if I have to fix it out of pocket. Thank you!

John answers:

No, you will not be able to get another loan.

When you get a second loan the total loans (mortgage and this) can only total 80% of the house value.

Paul asks…

Whats the difference between the “Rate” and the “APR” on a loan?

I thought they were the same thing but I heard a Radio ad about a mortgage loan that advertised a 5.5% rate and a 5.95% APR??????
What gives?

John answers:

APR, annual percentage rate, is a formula created by HUD to, at least in theory, make shopping for mortgages easier, because it includes some of the closing costs you pay, amortized over the term of the loan.

It is easily manipulated in a quote, by fixing the date of the closing to the last of the month. And your loan amount matters as well, since many of the APR-related costs are fixed, so the APR spread will be higher on a $100K loan than a $400K loan.

It’s also utterly meaningless on any ARM, because it’s calculated assuming that the rate only changes once, to whatever it would adjust to at today’s rates.

It’s pretty much illegal to advertise an interest rate without disclosing a corresponding APR. So that’s why you heard it.

And your payments are calculated off the note rate of interest, in your case 5.5%.

Just another example of our government trying to simplify things for the average consumer, and making it impossibly complex in the process.

Charles asks…

How does the process work when a HOA forecloses on your home and your current with your mortgage?

I still have a balance on my mortgage loan

John answers:

Your HOA is trying to foreclose on you? They can put a lien on your property if you’re not paying your dues, but they can’t foreclose because they don’t own your mortgage. Only the lender can foreclose.

George asks…

How do I remove my wife from home ownership to get a reverse mortgage, she is not 62 to qualify..I am.?

She is willing to do this in order for us to get a reverse mortgage loan. Will we have to go through a lawyer or can this be done at little or no expense? If I die first she will sell the house and then pay off the loan. Also we plan to make a will leaving her the house, so she will be the owner and will be able to sell , pay the loan and move in with her sister. My question is how to legally remove her from the title in order to start the loan process, without costing us.

John answers:

You don’t indicate what state you are in, but it should be possible to quit claim your wife off the property, do your reverse mortgage, and then quit claim her back on. Not to mention the fact that in many states she would have dower rights even after the quit claim process. This sort of situation takes place all the time and so there should be a well-worn path to follow.

Also, the bank never “owns” a home when there is a reverse mortgage. It’s just a lien on the property like any other type of mortgage. If the person with the reverse mortgage passes away then the heirs have the right to refinance out of the reverse mortgage – or if the home goes on the market for sale the proceeds will be used to pay off the reverse mortgage and anything left over goes to the heirs.

Richard asks…

Is there a list of charges that loan officers have to go by or can they charge what ever they want?

When looking for a new mortgage loan is there any department that over looks what is legal or not to charge someone to find them a loan? If so where do you find it and if not how do you protect yourself from being taken advantage of when you are not up to speed-on how the loan industry works? Thanks to anyone that can tell the truth about this because stepping on some ones money is not easy to do for some people.

John answers:

For a typical loan a loan officer cannot make any more than 5% of the loan amount on a conventional loan. For commercial loans and private equity (through private investors offering the money for someone with horrible credit or someone with impossible to prove income) the fees can sometimes be much higher.

Typically a loan officer is paid a commission, so theyre getting a percentage of whatever you see being charged. That 5% can be in the form of up front fees, and termed different things such as “broker fee”, “origination fee”, “processing fee”, “application fee” or something similar. However, there are also fees a bank pays a loan officer in the form of whats called Yield Spread Premium, or YSP. This fee is based on the interest rate you receive (the higher the rate, generally the more YSP given to the loan officer).

While some loan officers are definitely sharks who will rip you off, most that Ive come across in the form of acquaintances and coworkers are fair in both rate and up front fees. As a safe average, the total a loan officer makes on a loan amount over $150,000 is about 3%. If it’s a good, experienced loan officer, you might catch a break if your loan is very easy to process and you’re cooperative in helping get the loan closed quickly, however you might pay more if the loan officer has to spend drastic amounts of time on your file.

Be sure to ask for a Good Faith Estimate (by law they’re supposed to have it to you within 3 days of application) and compare the fees on there w/the fees that end up on your closing sheet. If you’re happy w/the GFE, and the fees are drastically different when it comes time to close, walk away and find another bank. If the fees on the GFE seem a little high, get another quote, however dont tell the new lender you already have a GFE…….some banks/loan officers will cut the rate .125 or charge a few hundred less just to lowball the competition, but this doesnt reflect their true intentions and you’ll also end up with a ton more frustration with places like this, as they normally don’t have knowledgeable loan officers who know what they’re doing.

Your best bet if youre in the Northeast US would be to call me! ; ) If not, I also have associates all over the country that I can guarantee will give you a great deal.

Check out my site at www.johnsrate.com and feel free to contact me with any questions, or to look at an offer and tell you if you’re getting a fair deal.

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