More questions.

[Lawbound]

In a traditional loan agreement its my understanding the lender looks out for themselves as well the client.
Does the same hold true when dealing with a broker, or are they just trying to secure a loan?
Next question. If a property is selling for 55 and is need of rehab, can those rehab materials be financed along with the loan?

[DionEvalueMortgage]

I am glad you posted this question. I was looking to comment on something that I have been seeing quite alot of lately but first I will answer your questions.

Brokers can be broken into good and bad as any salesman or women. There are those brokers who have decent morals and ethics and those who do not and are really only interested in the money. Some of the folks associated with those rapidly growing companies like Ameri Quest or some of the internet mortgage companies and even some of the lenders like HFC (House Hold Finance). These sales folks whether they are brokers or loan officers or whatever title they hold are not looking out for the borrower. If you put your ear to the bar you can hear the horror stories of terrible rates, borrowers over extended, frauded LTV making it possible to not get out of the program for years. Example, this year I spoke with a good borrower who owed about 120,000 on his home and had an interest rate of 9.5%. Now this borrower had a middle score of 620 or better. My initial set of questions lead me down the path of seeing he was put into a program that the broker/loan officer could just maximize their profit margin on the loan. The scarry part is as I was looking at being able to calculate in a pre-payment penalty and refiance him into something in the high 5% or low 6% I did a look up on his homes value. The look up from 4 different appraisal companies barely had the guy over $100,000. How is that possible I asked? The guy is litterally upside down in his mortgage. He owes $20,000 more than what his property is worth. Well, like I said earlier some of those companies don't play by the laws (forget the rules!). And for hind-sight there are no lenders with 120% LTV programs! So no, not all brokers or loan officers are made the same and they are deffinately not just limited to mortgage broker companies the probolem arises in all aspects.

The best thing a borrower should know about who ever they are dealing with is patients. The sales person should have patients, they listen well to what the borrower wants. How long the purchase will be held, what is an affordable rate, what is an afforadable mortgage with taxes and insurance. Just because the numbers show well in what's called DTI (Debt To Income) doesn't mean it is reality. Things like putting a kid through college or paying for doctor bills etc don't really ever get calculated into that figure. A good broker/loan officer will commonly go over what they hear from the borrower and explain the loan programs to the borrower in referrence to their needs.

Most brokers that don't take that time are not interested in the borrower or their needs they are after craming them into a mortgatge that they can get paid as quickly as possible as much as possible.

The second part of your question. Yes, you can borrower money based on repairs or remodels or improvements to a builiding. These loans are called Rehab loans. They tend to function just like a Construction to Perminant loan. Whereas, the builder will need to be fully licensed and approved with the lender. The construction costs will need to be approved by the lender as well. The constuction amounts are set up on a disbursement schedule and depend on inspections by the appropriate people. Some of these programs also allow you to borrow on anticipated values. The catch is if you are doing the repairs yourself your going to have some problems depending on just how much damage is done. Once you start talking about 15% or more of appraised value in damage your going to need a liscensed proffesional or company to be present before the lender let's you borrow the money.

I hope that helps. Let me know if you have more questions. And remember as you read my posts, pretend you are listening to the Star Wars Theme song!

[Dan Auito]

Outstanding insights from the inside Dion! Thank you for letting folks know how some lenders act and how they think as well. You're like a good umbrella in a florida summer shower. :SM136:

[Luci Marcum]

In a traditional loan agreement its my understanding the lender looks out for themselves as well the client.
Does the same hold true when dealing with a broker, or are they just trying to secure a loan?
Next question. If a property is selling for 55 and is need of rehab, can those rehab materials be financed along with the loan?

I completely agree with Dion :SM005: .

Should you choose to deal with a broker, feel them out first. Ask a lot of questions and don't be afraid to ask for references. A key thing to remember is they should put you first. By this I mean, return your calls promptly and answer any and all questions you pose. If you are not comfortable with them upfront, chances are your intuition is right.

You are on the right track in posting to this site. Dan is a great guy and there are a lot of good people here :thumbup:

Good luck!

[Aldo]

A mortgage broker's primary concern is putting bread on his/her table. That is second only to insuring, to the best of his/her ability, that the borrower/lender relationship is a good match. At that point the broker becomes a piece of history. While a lender has a borrower's best interests at heart, it is for selfish reasons. They lose lots of dollars on foreclosures.

I can cite a recent example in which a local mortgage broker/friend found a lender for a borrower that I'd have rejected as a tenant in a heartbeat Well, okay. Maybe not quite that long. Unemployed and horrible credit are factors here. Bottom line is that the borrower and lender were a match.

It won't be long before the borrower's ARM adjusts, taxes/insurance go the usual direction, and utility costs strangely increase. The borrower can no longer afford the home that the mortgage broker assured him/her would be their's forever. The broker got his/her commission and has no reason to be concerned about a former customer who has been relegated to eating the bread tossed to the geese in the local park the borrower now calls 'home'.

Mortgage brokers are truly a gift to those who understand their place in this business. Without them, I may not be where I am today (wherever that is). Conversely, I truly resent those few mortage brokers who find a lender for someone who will likely have a problem down the road.

[REIaddicted]

I love the advice to follow your intuition....

While showing a house ( fsbo) that was in need of repairs... An investor asked me if I would be willing to up the price on paper ( he said to cover repairs) and when the lender gave me a check, I could could just write him a check for the difference. Total - sale = check to him. :puke:

I said NO, nada, nope, ain't gonna happen. That would be :SM100: to the lender. At that time I didn't know there was a term for this ( less than honest) activity. My gut screamed and I listened.