A Menu of Mortgages. Learn about the mortgage choices available. by Natalie Danielson.

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A Menu of Mortgages Learn about the mortgage choices available. by Natalie Danielson www.clockhours.

1 A Menu of Mortgages Learn about the mortgage choices available. by Natalie Danielson Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

2 A Menu of Mortgages This class is an introduction to different types of loan programs available to the consumer. There is an almost endless variety of mortgage products available to home buyers but they need to be matched to their individual needs and wants. Course Objectives As a result of taking this class the agent shall be able to: Help prospective buyers wade through the hype when it comes to loans and lenders. Identify different types of mortgage products available. Know some of the advantages and disadvantages to the various products Understand the different costs and fees associated with mortgages loans. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

3 A Menu of Mortgages Section 1 1/2 hour Learn differences between lenders. Pre-requisites to obtaining financing including down payments Section 2 2 hours Section 3 1/2 hour List the different loan products available Contrast the variations Understand the costs involved to obtain loans Know about disclosures Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

Choosing the Chef The most important decision a prospective borrower makes is the choice of a Loan Officer and the Lender. The loan officer has the choice of products.

4 Choosing the Chef The most important decision a prospective borrower makes is the choice of a Loan Officer and the Lender. The loan officer has the choice of products. The loan officer also has to evaluate the needs and wants of the buyer and match those with the products. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

5 Variety of Restaurants The Lenders vary depending on the source of money, location, and structure. Commercial Banks Credit Unions Mortgage Bankers Mortgage Brokers Private Funding Sources Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

6 Menu Restrictions Consumer Financial Protection Bureau lending rules affect lenders and borrowers starting in Jan 2014 The Ability to Repay Lenders are required to ensure that the borrower is financially able to make payments. Using a 43% debt to income ratio. A Qualified Mortgage Lenders must limit points and fees to no more than 3% of the loan and eliminate risky loans Lenders must also be clear about where money goes, communicate better about payments and interest rate changes, and intervene when there are missed payments. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2041,

7 Appetizers The loan products available will depend on the qualification and down payment from the borrower. The property financed may affect the choice of loan product. Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

8 Salads A home Equity Loan is often a second mortgage that is in addition to the primary mortgage. It is a lien on the property that is used for one purchase or even as a line of credit. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

9 Main Course Each loan product comes with a variety of ingredients. The bottom line is to get a loan that will help the buyer get into the property. The ingredients will affect how the loan is paid including the terms. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

10 Only the Freshest Ingredients These are the most common loan products available today. Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

11 Not Available Today Bait and Switch Sometimes the lender can sell a borrower on a type of loan that they cannot qualify for then switch the program when the borrower has no time to change lenders. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

12 Prix Fixe (fixed price) These are your basic amortized mortgage loans. They include: 30 year fixed 15 year fixed Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

13 A Little Bit of Both There are several loan packages in the market that may include more than one loan loans loans Many of those loans got borrowers in trouble Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

14 All You Can Eat Buffet These adjustable rate mortgages change and can be designed to meet borrower needs. Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

15 The Pasta Plate There are loans where the borrower pays only the interest and does not pay off the principal. At the end of the term, the borrower still owes the principal amount. Direction, Inc., 2005 revised 2007, 2009, 2010, 2012, 2014,

16 Day Old Bread Sub Prime loans are designed for those borrowers that do not have the best credit rating. They have higher rates and less desirable terms due to the risk of the lender. They contributed to the fall of the real estate market Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

17 Dessert Oh so Sweet.. The Reverse Mortgages are for those that have had their full meal and are ready for dessert. They are designed to increase the mortgage over the term. The cost for these mortgages can be high and some banks have eliminated them. Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

18 Read the list of Ingredients Carefully Some lenders did not disclose the true loan terms including the prepayment penalties and the loan fees. This will all change with the new good faith estimate a few years ago and the CFPB changes that affect all lenders and disclosure. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

19 Prepayment Penalties Prepayment penalties can trap borrowers into remaining in loans for long periods of time. Typically prepayment penalties are 2-3 years. They assure the lender that the loan will stay put for that time. Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

20 Fresh or Frozen? Fraud occurs when a loan officer creates a loan package with a real estate agent and an appraiser that does not reflect the true terms to the bank. A common fraudulent transaction involves stripping equity from a home with fraudulent sales price The property is written up with an inflated sales. Appraiser is often inflating value to deceive lender. House is then not the collateral for the loan! Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

21 The Check Please Approving a loan with payments higher than the borrower can afford to pay. Sometimes lenders fudge on the borrowers income. Sometimes they quote payments that are interest-only to borrower until they see the HUD. Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

22 Borrowers rights The borrower has rights when they apply and close on mortgage loans. Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

23 Disclosures to Borrowers Good Faith Estimate Truth in Lending Disclosure Statement Rate lock disclosure form Disclosure that moneys held for appraisal and credit will be in trust account. Disclosure that you have the right to transfer certain reports to another lender such as appraisal. ARM disclosure Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

24 Rights of borrowers Right to know if lender is licensed and bonded Right to stop doing business with lender Right to know costs, rate, type of loan and loan amount within THREE days of application date Right to have a lender that is not misleading or deceiving Right to file a complaint Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

25 Choosing a lender It is important when choosing a lender to look for the following: The lender is licensed and bonded The lender provides a good faith estimate within 3 days and it is close to the actual rates and fees on the HUD statement. The lender explains the terms of the loan. The lender returns calls Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

26 Regulation of Lenders Mortgage brokers are under the Department of Financial Institutions in Washington State. Washington State has passed the Mortgage Broker Practices Act. Department of Financial Institutions Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

27 Resources Don t borrow Trouble Hotline Community Home Ownership Center (206) Mortgage Default Counseling Services Fremont Public Association (206) The Urban League of Seattle (206) Legal assistance King County Neighborhood Legal Clinics (206) Department of Financial Institutions (800) U.S. Housing and Urban Development (800) Consumer Finance Protection Bureau WAHomeowners.com Copyright@Professional Direction, Inc revised 2007, 2009, 2010, 2012, 2014,

Beware of Loser Loans

Beware of Loser Loans It is important to understand some of the traps of predatory lenders. by Natalie Danielson email: clockhours@gmail.com www.clockhours.com A Washington State Approved Real Estate School