Jana Lee's Millbrae Real Estate Blog

You may this similar question after years of trying to save and putting in “:sweat equity” into your first home. This was written by my loan officer and is very interesting.

The other day, while perusing through SF Gate for the daily fix of current events, I came across this compelling article. It describes the perspective of a young couple eager to start a family in there first home. Come to find that their achievements, their equity, pretty much their nest egg; had been swallowed up by the real estate “Black Hole.” “Where’d all my equity go?” It’s a question that comes up often in this financial climate.

The vast amount of Americans in this situation is staggering. The consequence of what the article explains “strategic defaults” would cause further spiraling into the abyss. I am in no way endorsing the actions portrayed as “strategic defaults.” My intrigue with the opinions of the article is due to the fact that it is completely relevant to so many people. It hits home. From friends and colleagues, to internet blogs and clients, it’s a situation that comes up far too often.  

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/03/08/MNAO1C7TT1.DTL

Source: www.sfgate.com

Thoughts? Comments? Feelings?

Best regards,

Jeff Tung Jr.
Senior Mortgage Specialist

Tel: (650) 465-9762
Fax: (650) 239-4022

http://www.trulia.com/profile/jefftungjr/

Here is another answer to the question about lowering your interest rate when there is a co-borrower.  There are factors to consider and below is an article by my loan officer, Jeff Tung, Jr.  He best summarizes as follows:

The answer to your question can go one of two ways…either yes, it can or no it won’t. This is obvious, however understanding why is the more complicated part. Having a co-borrower on your loan can benefit you in the same proportion that it can hurt you. David mentions very important pieces to the puzzle, so-to-speak. There are some factors that will directly affect your RATE and there are some factors that will directly affect how you QUALIFY for the loan.

Credit rating is important. The FICO score which is the “numeric value” of your credit rating. Having someone on your loan that has a high FICO/credit score may help for both lowering your rate and helping to qualify. A lot of lenders give pricing adjustments to the interest rate based on your FICO score when “pricing” your loan scenario. Meaning that there is a price improvement (decrease in rate) if a borrower has a FICO score of over “X”. Conversely, if the borrower has a FICO score of less than “X” the price adjustment affects the rate negatively (increase in rate). This directly affects your rate!

Regarding qualifying; sometimes the more important issue pertaining to co-borrowers and credit. The score as explained above IS important to the loan scenario and interest rate pricing. But having a co-borrower presents another issue that must be considered.

What is the debt that is being brought to the scenario with adding the co-borrower?

The co-borrower can have a really high FICO score, but what if they have a lot of debt? Lenders will also greatly take into consideration the overall debt-to-income ratio (DTI). This is another factor that may or may not hurt your scenario.

Income (DTI) ratio is as important if not more important than FICO score lowering the rate. It can sometimes be the difference between qualifying. Consider the DTI to be the ratio of total monthly income divided by total monthly liabilities (credit debt). Lender’s require all parties included on the loan to NOT exceed a maximum debt-to-income ratio of “Y”. By bringing another person (co-borrower) on the loan, you increase the chance of raising the DTI. Again conversely, you can lower the DTI by bringing on a co-borrower who has income but little to no debt; lowering the overall debt-to-income ratio.

Loan amount will also directly affect your rate and payment. The Conforming loan amounts usually have the best rates. The more you borrow, the higher the rate is!

Here is a very detailed answer to a question posted on Trulia that my loan officer Jeff Tung, Jr., answered.  The buyer was asking  should he want to get pre-approved becaused that will establish a working relationship from that point and questioned fees.  This may enlighten some of you about how & what goes on in the mind of a loan agent and how to pick the right loan agent to work for you. Jeff Tung, Jr’s responded:

I can attest to the fact that certain companies charge a “minimum” fee to originate your loan, as I’ve experienced the same explanation from other lenders during my search for an investment property. That is the policy for some companies and who am I to argue?

Well, in that case I was the consumer…ie: you. And the consumer has a right to understand what the fees are, where they are come from and why you are charged. With that said I do agree with most of the responses saying that “trust” is everything. Trust is everything! However we all still have a bottom line. As a professional in the industry I have first hand experience with borrowers working with multiple lenders at a time; It is there prerogative.

Some fees are up to negotiation. Some are fixed. It’s your loan officer’s job to teach you about these fees and bring you to an understanding of them; while helping you in making a comfortable decision. Understanding the fees are one thing, but making a comfortable decision is where the trust and transparency of your business relationship is key. Many if not all loan officers work for you for FREE until we close the transaction.

The bigger picture, “time is money.” Processors and underwriters spend hours examining documents and preparing loan packages. Some how they must get paid, and as mentioned before we don’t get paid until the transaction is complete.

My suggestion is, interview your Loan Officers and Real Estate Agents first. Talk to them about what you are wanting to do. Feel them out. In my mind the relationship between the agent and their principal goes way farther than just business.

Service: is your loan officer available to answer your questions, even when it comes down to price!? Are they able to communicate with you during non-business hours to explain something that may be of concern to you? Are they flexible in meeting and coordinating with you and other third parties? More importantly, would use their assistance again? Would you refer your friends and family to them?

All I’m saying is, business is not just business in the Real Estate game. There are far too many of us for that. It is a working relationship that can be life long. Ultimately, you are the one who makes the decision. Base what you pay on the service you are provided, and you will have piece of mind.