Your Questions About Mortgage Loan Type

Joseph asks…

How many pages did you have to fill out?

To get a mortgage loan, how many pages did you have to fill out and sign? Seemed like an endless pile, no?

Why then should Wall Street get a free bailout based on a 3-page document?

Let’s clean house AND take those people to the woodshed! Governments are EXCELLENT at this type of activity.

And what if the loan were guaranteed ONLY if the republican party agreed to disband until all the money is paid back? Could we get by on democrats and independents and greens? Definitely!

John answers:

When I bought my home I had several papers to fill out. Had writers cramp when it was said and done! Kidding! :)

Daniel asks…

Do people have to fork $ upfront if their home is sold at a loss?

If a seller lost $5,000 in the sale, would he have to pay the money upfront at closing or can he obtain a loan or does the bank convert the mortgage loan into another type of loan?

John answers:

If a seller sells for less than what is owed on the property, and it is not part of a short sale already negotiated with the lender, her/she will have to pay off the remainder of the loan out of pocket. It is possible that the seller get the money by finding a personal loan from the bank, but the loan would have to be secured by some other asset than the real estate in question. The bank will not do it automatically. If the seller simply can’t find the needed $5000 (in this case) the sale can not occur

Sharon asks…

What kind of loan do I need if we are building a new home?

My fiance and I are looking into building a new home on land that we already own. Should I get a construction loan or a regular mortgage loan? People have been telling me many different things and I just need some answers. What would be the benefit of getting one over the other?

Thanks

John answers:

There are 2 main options when it comes to financing new construction. The first option is to let the builder finance the construction and the second is to finance the construction yourself.

1- Builder Financed New Home
Under this option, the builder will finance the purchase of the lot or land and the construction of the actual property. This option is more common when dealing with large builders and builders of “spec” homes. You will be required to get permanent financing arranged to pay off the builder and “purchase” the finished product. This type of loan is essentially treated as any other normal loan that we do. The only major difference is that you will need to do some type of “extended lock” on the interest rate. The main reason for doing the extended lock is to prevent any change in interest rate to the end loan. It would be very difficult to have your new home built and then find out in the end you no longer qualified for the house because of a change in interest rates.
Typically you will need to pay a “non-refundable upfront lock fee” to guarantee the rate through the term of the construction. Up front lock fees vary by lender and can range from .50% of the loan amount to 2.00% of the loan amount depending on the length of the extended lock. Some extended locks also carry a “float down” feature. If the interest rate market would improve, you can “re-lock” the loan for one time prior to closing for free. If the interest rate market would go against you, you are protected with the extended lock and you would get the rate that you originally locked at.

2- Self-Financed New Home
Under this option, you would finance the purchase of the lot and the construction of the home. This option is more common when you are working with a custom builder. This can really be a 2 or 3 step loan.

* Step 1 is typically to purchase the lot. Typically on a lot purchase you will need to put 10% down if you are not planning on building right away. If you are planning on building right away, you can combine Step 1 and Step 2 and go right into a construction to perm loan. Your first draw on the construction loan would go to “purchase” the lot.
* Step 2, the construction to perm portion of the loan is typically set up with one of our local bank contacts. These loans are typically set up as interest only payments and you will only pay on what you have drawn. Some banks will even offer what is called an “interest reserve” to be built into the loan so you have no “out of pocket” payments. They will handle all the draw requests and inspections to make sure the construction of the house is proceeding.
* Step 3, would be to arrange that end financing. Typically you will need to pay a “non-refundable upfront lock fee” to guarantee the rate through the term of the construction. Up front lock fees vary by lender and can range from .50% of the loan amount to 2.00% of the loan amount depending on the length of the extended lock. Some extended locks also carry a “float down” feature. If the interest rate market would improve, you can “re-lock” the loan for one time prior to closing for free. If the interest rate market would go against you, you are protected with the extended lock and you would get the rate that you originally locked at.

Laura asks…

Buying 1st home: How/what is the easiest way to learn about…?

Closing Costs?
Types of Mortgages?
Interest Rates & Credit Scores?

Is there any good websites or books that explain the process and help you understand what all the terms and loan types are?

John answers:

Wow, lots of spam and time wasters.

You honestly do not need to understand everything, just what pertains to you.

You should start with getting pre-approved from a reputable bank, none of the sharks around here. I suggest Wells Fargo, they have great customer service.

Your closing costs vary by city and state, they are the fees for filing various papers related to the sale.

Carol asks…

How could I get into the mortgage business?

I’d love to help folks like me learn about different options that are out there. I just got a loan through PHFA, which I found on my own!! My realtor knew nothing about the loan and neither did the underwriter she worked with! I’d like to know about different loan types and which would be the best for the buyer! Where would I start? I have no idea what the position is even called!!!! Could anyone please help me!!!

John answers:

Your goal is to be a loan officer. I started out in 1986 as a processer. A loan officer now must do the following to be licensed:

1. Get sponsered by a mortgage company.
2. Be fingerprinted for an FBI background check.
3. Take a national test called a S.A.F.E. Test & pass it.
4. Take a state specific test & pass.
5. Take 20 hours of continuing education this year.
6. Starting next year a credit check will be required.

I would suggest starting out in an office as a processor, since you can learn the business that way. Most companies prefer to hire loan officers who have the background already to be able to pass all the new requirements listed above since the cost for all the above is very high, they don’t want to hire people who will fail. Good luck, it’s an amazing business to be in.

Right now only 67 percent of loan officers are passing this test.

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