Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Lenny in Framingham, Mass. asks:
Q. How many mortgage companies should I consider when applying for a mortgage?
A. I have a different take on shopping than most people have. Most shop for rate, ignoring that many loan officers lie about rates. That results in you applying to the biggest liar. NOT GOOD! I believe that you should engage in the process of shopping for some intelligent, trustworthy, helpful person, a fundamentally different process. When you find the right person, everything else will work itself out.
You can start with lenders referred to you by friends, but if you aren’t happy with those, I highly recommend the Upfront Mortgage Brokers Association for people who will agree to treat you fairly. Full Disclosure: I am a director of UMBA, a non-paying volunteer job, but it’s an organization I believe in. So should you.
I think it is important to get an education at this time too. You can start out with my book, but any book is better than none.
Rob in Orange asks:
Q. Here is my current situation: The first mortgage has a balance of $286,000 and is four years old at 5.75%; payment is $1,900 per month. There is a home equity line of credit of $128,000. The interest rate is the prime rate published by the Wall Street Journal less 0.55%. Currently paying interest only. My wife and I are in our mid-sixties, no plans to move, will continue with our own business for another 10 years, God willing. My wife is receiving social security. My plan is to wait until age 70. What would be the most cost-efficient structure for our mortgage situation?
A. I would take this opportunity to refinance both loans into a fixed rate loan less than $417,000, now with interest less than 5%. A 30-year loan payment is around $2,200, still less than you are paying now. If you choose a 15-year with a payment of about $3,200, it’s $900 higher but your mortgage will be paid down to about $175,000 in 10 years. If the payment then is uncomfortable, you can refinance into a loan with a lower payment.
This same opportunity awaits others who have two loans. Rates are lower than I have seen in my 28 years in the business and people ought to take advantage of this opportunity to take mortgage risk out of their lives.
That’s it. Read prior questions and answers by clicking on the headlines below…
- Speedy mortgage payoffs could cost you
- Paying your mortgage may be the best use of your money
- A ‘good’ borrower these days is someone who…
- When insurers kill your mortgage application
- Mortgage insurance companies not giving breaks
- How price reductions work when Uncle Sam owns a foreclosure
- How long should we wait to refinance?
- Can you be too old to get a mortgage?
- Why aren’t foreclosures cheaper?
- When you can’t afford your mortgage
- How much to put down and other mortgage answers
If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question. Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it.
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What a bunch of LIARS! So that’s what I learn? That mortgage brokers are liars? No wonder we wound up in this mess that is driving the world into an economic crisis. There is very little integrity left in anyone.
Brokers were part of the problem they were not the main cause, 1+1+1=3 (Brokers + Borrower + Bank = Meltdown) Brokers did help to push people into loans by sugar coating things, but in the end all the terms were listed in the loan docs (unless it involved fraud), people need not to “trust” other people especially when it involves borrowing a large chuck of money.
People are just stupid to let themselves be “victims” by not acting like responsible adults and reading and making sure they understand what they are signing, how high their payments will go at the ceiling rate, and know that there is no guarantee that they can refi in 2-5 years (which assuming they will is a gamble)
Banks were stupid by relaxing their underwriting standards so any shmo on the street can qualify for a home.
I just tried to get my home refinanced through countywide (who has my current loan) and guess what. I can’t . Even though I have great credit and great income, apparently the the maximum loan amount to get a conforming loan in my county has been lowered!! This means my mortgage amount which used to be conforming is now “non conforming” and is going to cost me more.
I cant believe what a bunch of crooks the bankers are. What are they doing with my tax dollars anyway. Certainly not writting us tax payers loans or passing on the extremely low prime rate. In fact USAA just sent me a notice that my credit card interest rate is being raised even though I have never missed payment in 20 years!
We need to start regulating banking in this country
Cari, Join a credit union, ditch the banks!!
If you are in your 60’s and owe all that money, sell your house and get a smaller one or better yet, get a small condo or apt. Duh. Or rent it out.
Cari,
The reason why you were declined doesnt make any sense. Is your loan above $417,000? Thats the conforming limit in the entire country. If you are over that, then the rules change. Credit Unions are the same as a bank….. A jumbo loan (anything over $417,000) is and alsways has been an ALT-A loan. So regardless of how good your credit is or your income, when you got into a loan over $417,000 you are part of the loans that are defaulting like crazy. Thus banks dont want to lend on properties that are going to take more and more declines in value. Can you blame them?
5.75 and a heloc with almost a 0% interest rate???? I would say this client is in real good shape and they shouldnt do anything.
Cari, there are also a lot of factors in Credit Card Companies raising your rates. Your debt to income ratio, if you have any recently closed accounts, what your payment history is like (such as if you only may the min payment) where you live and the percentage of defaults in your area, plus a bunch of other factors I cant think of.
Best thing I can say is call your CC company and dispute it and if they dont put it back have them cancel your card at the old rate (before they raised it) I would also file a compalint with the Better business Breau.
Also go to the consumerist.com and send an email to them about your situation, at least they can post it and your CC will get lots of bad publicity, you might get info to executive email carpert bombs.
Lots of people have been helped there.
First of all the conforming loan limits have been raised to 625,500 for both Orange and LA County. If you owe more than that & have to refi then you are considered “non-conforming”. The banks and so forth have to disclose what loan you are getting so they send out preliminary disclosures which should reflect what your loan is going to be. My suggestion is that you read it so you know what you are gettnig into BEFORE signing the final documents. Ask questions, ask alot of questions if you don’t understand your loan terms. That’s how alot of poeple got into this mess in the first place!
“Liars”, what a self serving jerk…..sez he I highle recommend the “upfront mortgage brokers association”, check on the web site, it’s a joke. How do you join?….you pay the fee, and post their mission statement - wow!, I guess that makes you trustworthy eh Randy?
jaded jaded jaded - you must have a loan over $417,000. you are in the dark . its true that FNMA and Freddie Mac raised loan limits to try and help the mess we are in, but its a futal effort. Like i said before, any loan over $417,000 is an ALTA loan, yes, the same loans that the news is talking about being the mortgage meltdown problem…. if you are trying to qualify for a loan over $417K, i wouldnt really worry about the prelim dislclosures, because most likely you will be declined…….