Over the last few years, lower
interest rates have helped propel sales of new and existing homes to record
levels. Financing costs and a strong job market have helped
stretch the purchasing power and home ownership has risen to new heights
- fully two-thirds of all American families now live in a home they own.
Find an Upfront Mortgage Broker
Jack M. Guttentag, emeritus
professor of finance at the Wharton School of the University of Pennsylvania
coined the term, Upfront Mortgage Broker. Professor
Guttentag states that "An Upfront Mortgage Broker" (UMB) is
one who has elected to do business in an upfront and fully transparent way."
To quote from his Web site, the major differences between a UMB and a conventional
mortgage broker (MB) are:
UMBs disclose their fees
to customers in advance and in writing, and disclose the wholesale prices
(rates and points) passed through from lenders. Customers of UMBs
pay the broker's fee plus wholesale loan prices.
In contrast, conventional
mortgage brokers (MBs) add a markup to the wholesale prices, and quote
the resulting retail prices to customers. Most MBs reveal their
markup only in required disclosures after an application has been submitted.
Professor Guttentag states
that if you don't find a UMB in your state, you can convert a conventional
broker into a UMB for your deal. He says just to copy the
Commitment of an Upfront Mortgage Broker, and ask the brokers you approach
if they are willing to do business with you in this way.
According
to the Upfront
Mortgage Brokers Association (UMBA) Web site, the following mortgage
brokers have offices in the Portland area and are members of UMBA:
You can learn more about mortgages by visiting
Professor Guttentag
Web site.
Mortgage Broker or Lender?
Mortgage
brokers, middlemen who shop for homes buyers among banks and lenders, now
do the majority of mortgage loans according to
Wholesale
Access, a mortgage research company. Because brokers can choose
from programs from many banks, they may be able to offer a variety of deals
that are not available at your own bank. Examples of deals include:
first-time buyer programs, low- or no-down-payment loans for certain occupations
(police and firefighters), and low-cost mortgages for energy-efficient homes.
Most of a broker's compensation
comes from fees paid by the lender. The lenders that mortgage brokers
deal with quote a "wholesale" price to the broker, leaving it to the broker
to derive the "retail" price offered the consumer by adding a markup. For
example, the wholesale price on a particular program might be 7% and zero
(0) points, to which the broker adds a markup of one (1) point, resulting
in an offer to the customer of 7% and one (1) point (Each point is equal
to one percent of the loan amount). But if the broker adds a two (2) point
markup, the customer would pay 7% and two (2) points.
Associated
Mortgage Group Licensed in both Oregon and Washington.
Telephone: (503) 221-0064 Fax: (503) 221-0396.
Mr. David Jolivette is the contact.
Mortgage
Trust 4386 SW Macadam Avenue, River Forum Two, Suite 401,
Portland, OR, 97239. Mr. Kevin Gienty is the contact.
Kevin's telephone is (503) 282-5626 and his e-mail address is
kevin@mortgage-trust.com.
Kevin is a cyclist, hiker, and all-around outdoor guy.
Mortgage World Telephone: (503) 292-4900.
Mr. Tim Bolen is the contact.
Northwest
Mortgage Group 1600 NW Cornell Road, Suite 190,
Beaverton, Oregon 97006. Telephone: (503) 439-9191 or
toll free (877) 439-9191. Fax: (503) 439-9292. Contact is Ms.
Nancy Kinzer, Senior Loan Officer,
nkinzer@nwmortgagegroup.com.
JPMorgan Chase
& Co. Their office is located in the Pearl District at
422 NW 13th Avenue, Portland, OR, 97209. Telephone: (503)
804-8850.
Flagstar
Bank A Michigan-based full service bank. In Oregon
they offer home mortgage services. Telephone: (866)
733-3700 or (503) 223-2162.
Washington Mutual One of the largest home mortgage lenders
in the Pacific Northwest with numerous offices in the Portland area.
A public company, they are a full service bank offering checking,
investment banking, online banking, etc. After suffering
large losses from their home mortgage business, they closed all
of their free-standing Home Loan Centers and moved a mortgage specialist
into each of their branches. Pearl District: Diana Bird, WaMu
Pearl Financial Center, 1239 NW Couch Street, Portland, OR 97209,
telephone 503-295-7866. Uptown Branch: Dagny Hooke,
WaMu Uptown Branch, 2364 W Burnside Street, Suite E1, Portland,
OR 97210, telephone 503-238-3367.
Wells Fargo
BankkkMs.
Cherie Stanley at 503-670-1920 - Cherie is located at 5100 SW
Macadam Avenue, Suite 550, Portland, OR 97239.
Mr. Clayton
Scott at (503) 497-5060 - Clayton is located at 200 "A"
Avenue, Suite 200, Lake Oswego, OR 97034.
Mortgage Sources
Bankrate
Online mortgage services allow you can click through to lenders
whose deals you find appealing.
Costcoco If you are a Costco member, the mega warehouse
company offers a full range of financial services to include mortgages.
They partner with
LendingTree
for home loans. Telephone: 800-237-3806.
HSH Associates Online mortgage services so you can click through
to lenders whose deals you find appealing.
According to the
Oregon Division of Finance
and Corporate Services Web site (Oregon Revised Statute 59.840 to 59.996),
the below rules govern the licensing of mortgage bankers and brokers in
Oregon:
Beginning on Jan. 1, 1994,
the State of Oregon required licensing for mortgage bankers and mortgage
brokers. The licensing law required that each licensee maintain a surety
bond or irrevocable letter of credit of at least $25,000 and use an
in-state clients' trust account if the licensee accepts clients' funds
prior to the close of escrow. Each licensee is also required to employ
an experienced person who has at least three years experience in mortgage
lending. The law provides for the licensing of the company, not the
individual loan originators.
Since Jan. 1, 2002, licensees
have been required to notify DFCS of the names of loan originators working
for the licensee that originate Oregon residential mortgage loans. All
loan originators also must complete 20 hours continuing education every
2 years.
As of Mar. 31, 2003, there
were 1,225 licensees with 982 additional branch locations and 7,760
loan originators.
Oregon Regulations on Fraudulent
Mortgage Marketing
On March 11, 2008, Governor
Ted Kulongoski signed into law Senate Bill 1064, which expands enforcement
over loan originators by allowing the Department of Consumer and Business
Services (DCBS) to ban or suspend loan originators from engaging in dishonest
or fraudulent practices. DCBS will maintain a registry of loan originators
and list complaints made against them as well as actions taken. The bill
also requires lenders to file an annual report with DCBS detailing their
lending activity.
Stricter and clearer rules
to enforce the 1993 Oregon Mortgage Lenders Law took effect on May 7, 2008
according to the state Division of Finance and Corporate Securities.
The new rules will, among other benefits, make it easier for the state to
penalize “bait-and-switch” tactics, in which companies lure customers with
fictitious loan terms and coax them into accepting inferior loans. Other
rules:
The new rules require
mortgage lenders to prominently display the complete terms of loan fees
and interest rates.
Mortgage companies no
longer may advertise a teaser rate in large print and bury the true
loan terms in tiny print at the bottom, or in a rapid-fire voice on
a radio ad.
If it’s a subprime loan
that resets after two years to a higher interest rate, that must be
explained and advertised in the same style and size of lettering.
If the loan allows “negative
amortization,” in which the borrower may – and often does – add to the
loan principal each month, that must be clearly stated.
Advertisers no longer
may pretend to be the customer’s existing lender, or make false statements
that a customer has pre-qualified for a loan.
Penalties remain unchanged at $5,000 per violation. As
before, regulators also may strip the licenses of the 1,500 mortgage lenders
licensed by the state to operate in Oregon. The new rules, as with
other state banking regulations, do not apply to national banks that are
federally licensed. Those banks include Washington Mutual, Wells Fargo and
other major home lenders.
Your Credit
Check Your Credit
Credit scores and reports are now used to determine the rates you pay
on loans and credit cards, your insurance premiums, whether you get
a job or an apartment. Lenders have long used credit scores and
reports to determine whether to lend you money and how much interest
to charge you. Some utility companies are linking credit scores to the
size of the deposit you must pay to have your power turned on.
Consumer Reports,
in their July 2005 issue, noted that, "Scores from the three credit
bureaus can vary by 50 points or more because of errors or out-of-date
information. That gap could result in a $100-per-month swing on a $150,000,
30-year fixed-rate mortgage."
Free Credit Reports
Credit scores are based on credit reports, which will be free to all
consumers by September 1, 2005. Reports from the western states
are available as of July 2005. As of early July 2005, the government-mandated
Web site set up to provide the reports is difficult to use and doesn’t
include credit scores. The official government sponsored Web site
address for the free credit reports is
annualcreditreport.com.
You can request a report by mail, download a form, or call 1-877-322-8228.
Scammers and marketers are exploiting the federal law (2003 Fair and
Accurate Credit Transaction Act) by creating Web sites with similar
names (over 200 Web site have domain names similar to that of the government
sponsored site) so be careful. You can visit the Federal Trade
Commission Web site at
www.ftc.gov - it has a link to the free-report site.
Review your FICO scores
and credit reports several months before applying for a loan.
Consumer Reports recommends that you buy your reports and scores at
www.myfico.com and
order the $44.85 FICO Deluxe package. If you have a spouse, you should
order separate credit reports. Even if you've been married for
a long time and share a credit history. Here are the three
major credit reporting companies:
Factors That Lenders
Weigh when Examining a Buyer's Credit Report Lending institutions
- in conjunction with Fannie Mae and the Federal Home Loan Mortgage
Corporation - have based loan decisions on credit scores that are provided
by the credit bureaus. Factors:
Level of delinquency (30, 60, 90 day late).
Derogatory public record (lawsuits or legal judgment)
or collections files.
Proportion of balances to credit limits.
Length of time accounts have been established.
Too many inquiries from creditors in the last
12 months.
This can mean that even
if you have perfect credit, are never late with payments, but have all
your credit cards at their maximum and you keep moving them to get lower
rates and not closing them, your scores could be the same as the person
with minimal credit and a few small collections in the past.
Acceptable Debt Load
Every loan program has different acceptable debt ratios. Your
top ratio will be your new house payment against your annual gross household
income; your bottom ratio would be your house payment and all other
debts (consumer debt, child support, and union dues but not utilities
and insurance payments) against your annual gross household income.
Active Credit Accounts
Too many credit cards may cause your credit score to be lower than expected.
If you have several credit cards open with little or no balance, this
would give you an opportunity to go out and incur further consumer debt.
Secure Cards Can Improve
Credit Record If you have having a hard time establishing
credit, you can put your own money on deposit - say, $350 - and obtain
a secured card. You need to use this card and pay it off monthly
to have some activity on it. Don't take it to the limit quickly,
it might negatively impact your credit score by being a new account
already at the maximum credit limit.
Hints on Getting The Right Home and Mortgage
Estimate
How Much You Can Afford Start by estimating how much
you can afford to borrow - especially first time buyers. Most
mortgage lenders say that, to be manageable, your total monthly payment
for principal, interest, mortgage insurance and property taxes should
not exceed between 28 and 36 percent of your family's gross income.
You can calculate this online at
Quicken
or Microsoft's
Home Advisor.
Consider what it would
cost if you were to take out a conventional 30-year fixed-rate loan
and what you could expect to pay on an adjustable-rate mortgage (ARM).
Rates on ARMs are initially lower than those on fixed-rate mortgages.
Preapproval
You can make yourself more attractive to sellers by getting a lender
or broker to issue you a preapproval letter for a mortgage. Preapproval
includes a check of your credit history, your earnings, and your family's
financial assets. You do NOT have to ultimately choose to finance
a purchase with the lender who preapproves you, but to a seller, a preapproval
letter puts you on nearly the same ground as a buyer offering to purchase
for cash.
Borrowing
A 30-year fixed-rate loan may offer a lot of peace of mind, but you
pay more for that security. One of the newer multiple-year ARMs
that remain fixed for 7, 10, or even 15 years before they are readjusted
may be more affordable without significantly adding to your risk that
interest rates will continue upward. On average, owners tend to
relocate with 6 years of purchasing a house, so one of these longer
ARMs may serve for as long as you remain in your home. Look for
an ARM offering an interest rate at least one-half percentage point
below what lenders ask for a conventional 30-year fixed-rate mortgage.
Risky Mortgages
In the July 2005 issue of
Consumer Reports,
the publication warned that many loans mortgage brokers and lenders
are pushing increase the odds of foreclosure by allowing borrowers to
accept more risk than they can manage, especially if home prices level
off or if interest rates increase. That’s because some loans, such as
interest-only mortgages, keep monthly payments artificially low at first
but can skyrocket to unaffordable levels later on. They concluded,
"With today’s low interest rates, the best option for most buyers is
still a 30-year fixed loan."
Hints
Dial mortgage lenders until your fingers hurt
when checking out rates. You will be surprised at the range
of quotes (and costing costs) you'll receive. Just a quarter
point can save you $25 a month on a $150,000 30-year mortgage.
Points and fees can also vary widely between lenders.
Make certain you obtain a written disclosure of
all loan costs in advance from any mortgage broker or direct lender
with whom you do business. Be prepared to challenge any large
discrepancies between the quote and the actual fee(s) at closing.
In Oregon, you have three business days after signing the final
papers to revoked the transaction - this applies only on refinancing.
Examples of honest third-party charges to expect include appraisal
fee (about $300), credit report fee (about $15), recording fee (varies
by county), mortgage or transfer tax (in some counties), courier
fee, wire fee, title insurance fee, and escrow or attorney fee.
Names of unnecessary, undisclosed loan fees include an administration
fee, documentation fee, processing fee, preparation fee, overhead
fee, management fee, and even "miscellaneous charges" when the lender
runs out of creative names.
After you get all the quotes and start comparing,
you may find a lender or broker who you would like to do business
with but their rate was higher than your lowest quote. Call
them back and tell them that you would like to do business with
them but they need to match your low rate. They may surprise
you and readily agree. Last, when you lock a rate, agree (get it
in writing) what happens if the rate drops before you close.
Bidding
You stand a better chance
of finding sellers who are more willing to bargain if you focus on homes
that have been on the market for several weeks; they exist even
in the tightest of markets. Bidding is briskest on properties
that are newly listed.
Should You Pay Points
Points are mortgage
loan costs typically in association with an interest rate. One point is
equal to one (1) percent of the loan amount, so one point on a $200,000
loan is $2,000.
Points are often looked upon
as prepaid interest, hence the potential tax deductibility. If you
paid points last year for your new home then you may be entitled to deduct
those points from your taxable income. Note, the tax deductibility can vary
for points between purchase and refinance transactions. Points paid during
a refinance are usually only deducted over the term of the mortgage. With
a purchase, points may be tax deductible for the year paid.
If you pay points, you're paying
your lender some of the interest up-front, in a single fee, in exchange
for a lower rate. There is no correspondent trade off between points and
rates, but usually one point will get you 1/4%.
Deciding Whether or Not to Pay Points - Here are
the steps:
First calculate your monthly payments by paying
a point then do run the same routine with paying no points. Subtract
the two amounts to find the monthly savings.
Now divide the monthly savings into the point
you paid. The result is the number of months it will take to
recover the cost of the additional funds to drop your rate.
Example Let's say
you've got a loan amount of $250,000 and you're quoted 7.00% with zero
points. That's $1,653 per month in principal and interest for a thirty-year
note. Your lender can also offer a rate reduction of 1/4% for one point.
The monthly payment on a $250,000 note at 6.75% drops to $1,612, or
a difference of $40 per month. In this case, it would take just more
than 62 months, or five years, to recover that money. On the other hand,
your lender will make an additional $40 per month at the higher rate
in lieu of your up-front $2,500.
A lot of the decision rides
on how long you anticipate keeping the mortgage in question, either
by selling the property or refinancing later if rates drop. If you in
fact don't anticipate keeping the house for a long time then paying
additional points may not make much sense. But that $40 per month savings
adds up to $14,400 more than thirty years. It's really not necessary
to rely on outside experts to tell you if paying points is worthwhile
or not. Do some of the math yourself, then determine if paying points
are really in your best interest.
How The Home Mortgage Loan Process Works
In
most cases, lenders will sell your mortgage loan to
Fannie Mae and
Freddie Mac, which
repackage them as securities for sale to investors. These two private shareholder-owned
corporations (operating under a congressional charter) guarantee nearly
trillions in mortgages. The government does not guarantee the debt issued
by Fannie and Freddie. It does provide the companies with some special
privileges, including exemption from state and local taxes.
They used to have relatively strict
guidelines for the loans they purchased but these two institutions,
along with many lenders, dropped the ball in the mortgage mess
(2004-2006) and started buying NINJA (No Income, No Job and Assets) home
loans.
Congress created Fannie and
Freddie to pump money into the home-mortgage market by buying home loans
from banks and other lenders and bundling them into securities for sale
on Wall Street. In 2008, the two institutions held or guarantee about $5.3
trillion in home-mortgage debt.
Homeowners Assistance
Programs
First-Time Home Buyers
Oregon Home and Community
Services (OHCS) is Oregon’s “state housing finance agency.” The Department
periodically issues mortgage revenue bonds to fund lower than market interest
rate mortgage loans for below-median income homebuyers in Oregon.
OHCS helps low and moderate income households in Oregon buy their first
home by providing below-market rate financing and cash assistance through
our Residential Loan Program, also known as the “Oregon Bond Loan”. The
program’s below-market rate helps eligible families increase their home
purchasing power and lower their monthly house payments to be affordable.
Current eligibility (e.g.,
household income, residency, etc.) can be found at the OHCS Web site located
at http://www.oregon.gov/OHCS/.
A qualified homebuyer cannot have an annualized gross household income exceeding
the following income limits: $58,600 statewide; $67,400 in Benton; and $67,900
if the property being purchased is located in Clackamas, Columbia, Multnomah,
Washington, or Yamhill counties (effective 2/27/04). They must be a first-time
homebuyer or not have owned and occupied a primary residence during the
three-year period prior to the date the note and mortgage is signed.
This requirement is waived if they are purchasing in a targeted area.A qualified
homebuyer must be (or intend to be) an Oregon resident, and must agree to
occupy the home being purchased as their primary residence. An Applicant
may not have been discharged from a bankruptcy within the past two years
or had a real estate foreclosure within the last five years prior to closing
the program loan.
When you contact a mortgage
broker or lender, make certain you inquire about the Oregon Homeowner Assistance
Programs and make certain they are willing to participate if you are eligible.
Mortgage Links
Appraisal
Services Bruce Pulley, a Portland metro area appraiser, has
information about calculating home values as well as other advice about
home owning on his well-designed Web site.
Common Mortgage Terms From Interest.com - other useful
information about mortgages is also available on this site.
Compare
Interest Rates Find the best mortgages at the lowest interest
rates. Search for current mortgage interest rates from lenders
and brokers nationwide.
Freddie Mac
Visit this site for information about home buying. Freddie Mac
is private shareholder-owned corporations operating under a congressional
charter.
Oregon Association
of Mortgage Professionals The Oregon Association of Mortgage
Professionals (OAMP) represents the mortgage industry of more than 10,000
individuals in Oregon. They promote the mortgage industry through
programs and services such as education, government affairs representation,
networking events, and local chapters.
Professor Guttentag
Jack M. Guttentag, emeritus professor of finance at the Wharton School
of the University of Pennsylvania maintains this site and it's a goldmine
of information about mortgages.
Mortgage
brokers, middlemen who shop for homes buyers among banks and lenders, now
do the majority of mortgage loans according to
Borrowing
A 30-year fixed-rate loan may offer a lot of peace of mind, but you
pay more for that security. One of the newer multiple-year ARMs
that remain fixed for 7, 10, or even 15 years before they are readjusted
may be more affordable without significantly adding to your risk that
interest rates will continue upward. On average, owners tend to
relocate with 6 years of purchasing a house, so one of these longer
ARMs may serve for as long as you remain in your home. Look for
an ARM offering an interest rate at least one-half percentage point
below what lenders ask for a conventional 30-year fixed-rate mortgage.
In
most cases, lenders will sell your mortgage loan to
