Builder / Lender Relationships

Builder / Lender Relationships

Have you noticed all of the new construction homes being built lately? Or what about all of the apartment complexes that are being converted to condominiums? It would be hard to have not seen them. There is new construction and conversions everywhere! That’s not a bad thing. The new homes being built these days are beautiful. And most people that are considering the purchase of a home at least think about these new construction homes. But before you go diving into the purchase, here’s something to think about.

As you go to the site, whether it’s a condo conversion or new construction homes, you will mostly likely see something about their ‘preferred lender’ bonus. Usually they’ll call it a ‘Buyer Bonus’ and they’ll give the buyer $5000 or something. That’s great, right? Sure it is. It can go towards closing costs and you can bring less cash into closing.

But, don’t just do it without talking to another mortgage broker too. These ‘preferred lenders’ are typically banks that work with the builders and they have special relationships with each other. That alone isn’t a bad thing. But you might not get the best interest rate or loan structure by going with them. (see previous post - "Choosing the Right Mortgage Broker")

The big question becomes is it worth the $5000 savings to have a higher interest rate that will make you pay possibly $10-15,000 over the life of the loan? Perhaps. It depends on the buyer. It’s just something that should be checked out. Don’t limit yourself to only that preferred lender. It’s always a good idea to talk to someone else too that might be able to save you much more than that $5000.

Don’t stay away from them, but just know your options.

To search listings, view current market information, and many other resources - visit www.soderlundhomes.com.

Good luck!
Aaron

Choosing the Right Mortgage Broker

Choosing the right mortgage broker can be a huge advantage to you in the purchase of your new home. There are a couple different types that you need to know when going into this process of home-buying.

The first is a bank, or a ‘lender.’ When you go into the back, ie: Washington Mutual or Wells Fargo, etc, you can get a loan from them. And sometimes, they have a great deal and it’s a great way to go. You may often get special rates and promotions that they are advertising and it can be quite beneficial. As a buyer, you will still have to pay approximately 1% of the loan amount to the lender as their ‘fee’ – this is called a ‘point’.

Here is the disadvantage to using your local bank as your lender. Every lender has certain parameters that their borrower has to fit into. Sometimes that’s a credit score, other times it employment history, and it could be any number of requirements. You have to fit into their little ‘box’ and then they give you the rates they can. But when you fall outside of their parameters, guess what happens – your interest rate goes up because you become more of a liability than their ideal borrower. They’ll probably still lend you money, but you might pay more for it.

The other option is to use a mortgage broker. These are people that don’t work for a specific bank. They have the ability to get loans for you from 100 different banks. They can still go to WaMu or Wells Fargo, but they can also go to the people that you didn’t even know existed – like Decision One, etc. You’ll most likely still pay your mortgage broker that 1%, but your options are much stronger.

Here’s where this type comes in handy. They might be able to find you a much better interest rate than you could get at your local bank. And if you don’t fit into the ‘box’ that the banks usually like to see, they can go to a different bank and get money from them and still get you that better interest rate.

Obviously, its much more complicated than that when you dig into it, but if you’re thinking about buying a home or re-financing your existing loan, consider talking to a mortgage broker and see if they can get you a better rate than your local bank. If they can’t, it’s better to have tried than not.

If I can be of any help to you or someone you know in purchasing or selling a home, please let me know. I will be happy to help out however I can.

To search listings, view current market information, and many other resources - visit www.soderlundhomes.com.

Good luck!
Aaron

The Re-Finance Dance

The Re-Finance Dance

I just re-financed my house…

Better interest rates, lower payments… but is that really an advantage? If you do it correctly, it can be a huge advantage. If done incorrectly, it can set you back a lot.

I thought long and hard about the decision to refinance my home. It sounds really great to have the lower payments and to not have to bring any money in for closing costs. But what are the hidden costs of refinancing? As long as you know all of the details and costs, you can make an educated decision and it can greatly benefit you.

1. The “Closing Costs” are paid out of the current equity you have in your home. So yes, you don’t need to bring in cash to closing, but you just lost that much equity in your home.

Example: Our closing costs came to almost $8,000.00. That includes paying the mortgage broker, the escrow company, prepaid taxes, etc. That is not money that I had in my pocket to spend, so I was OK with it because I had more equity than that.

2. Remember all of those mortgage payments you’ve been making for the past however-long? If you’re anywhere near the first half of your mortgage, most of your payments each month have gone to the lender, not as principle (your actual loan amount) but towards interest (that’s how they make their money). When you re-finance, you start that loan process all over again, and you’re back to square-one and paying almost all interest again.

Example: After two years of making my payments, I had paid nearly $44,000.00 in monthly payments. About $10,000 of that was actually applied to my loan amount. So if I start with a brand new loan, that $34,000 goes to the lender, and I start over with a new loan, making my first payments almost entirely towards interest again.

Adding the $34,000 and the $8,000, I end up paying $42,000 to re-finance my house.

But here’s the good news…

In my situation, I am now saving just over $100.00 on each monthly payment. Where is the best place to put that $100.00? That will depend on each person. If you need that extra $100 to live on, then you know what you have to do. But if you just want to get ahead financially and save A LOT of money in the long run, here’s how it worked for me (and will work for you, but as your mortgage amount may be different, so will the numbers.):

Lower your payment by refinancing, but continue to pay the same mortgage payment amount you were paying BEFORE you refinanced. This will chip away, slowly but surely, at the principle amount faster than the bank would hope for. Each month, the interest you owe is based on the principle amount you have remaining. So the faster your principle amount lowers, the less interest you end up paying.

Example: In my situation, as we know, it ultimately cost me $42,000 to refinance, but by applying that $100 to my principle amount each month. But after accounting for my lost $42K, I will still save about $60,000 over the life of my loan, cutting my 30-year mortgage to about 26 or 27 years. Now if I can find a way to add another $100 each month, I will save over $125,000 and making it a 22-year loan.

So it seems a little anti-climatic right now to have gone through the re-financing process and not really be ‘saving’ anything each month, but when I pay my loan off 5 years early (or more), I’m taking my wife on a LONG vacation!

Just make sure you have a good mortgage broker that gives you ALL of the information you need to make the best decision possible for your situation.

If I can be of any help answering questions about real estate or if you want the name of the mortgage broker that is saving me almost $100,000, just send me an email and I’ll get back to you as soon as I can.

To search listings, view current market information, and many other resources - visit www.soderlundhomes.com.

Good luck!
Aaron

Why are there so many real estate agents

Why are there so many real estate agents?

Great question! Doesn’t it seem like every third person you meet is a real estate agent or is married to one? Maybe I’m just more sensitive to it than others because I am one. In the past three years especially, there has been a HUGE influx of people into the real estate agent world. Why? People are trying to capitalize on the ‘booming’ market and think it’s an easy way to get a lot of money.

I’m not going to tell you that I’ve been an agent for 10 years when I haven’t. I’m one of those agents that have come in the last three years. Guilty. However… I’m not out there to make a quick buck on a job that is ‘easy money’. A lot of these agents that have come in have left just as quickly as they arrived. Did you know that 2 of every 3 agents in the Seattle area don’t make it past their first license renewal (approximately 2 years). It’s more work than they imagine and it’s not easy to make a lot of money. Sure, a new agent might get lucky and sell a million-dollar house and make a good commission on it, but that’s not a sustained business. People get in, don’t learn the market they’re in, and expect to sell houses and make a lot of money. They’re the ones that don’t make it.

If you’re purchasing or selling a home, you want to make sure that you’re getting someone that is going to work hard for you. Not someone that is out there for a quick buck and that is planning on getting it from you. Yes, if you’re selling your home, you will pay them a commission. It will probably be a 3% commission. But if you have a good agent that is working hard for you to get your home sold, he/she will be worth every penny of it. There is so much that goes into either side of a transaction that the buyer/seller do not see right away.

And don’t be scared by the ‘new’ agents. They’re not necessarily bad… they often will work even harder for you because they might have more time and eagerness for your business. There will be some bad agents, just make sure you don’t hire one of them! Make sure you ask them questions and ask them what their plan is to either find you a home and/or sell your home.

If I can be of any help, please email me and I’ll get back to you as soon as I can.

To search listings, view current market information, and many other resources - visit www.soderlundhomes.com.

Good luck!
Aaron