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It will
be my earnest attempt to provide accurate mortgage information that
is suited to normal circumstances which will provide the majority
of persons the best choices in todays complex market place.
Ok let's get real, I'd like to teach you Texas Hold-em, but if it's
mortgage rate information we are discussings, let's
look at how some of Florida's banks
and brokers
determine a rate. The formula is simple...it's just this:
Three C's equal Rate and LTV
(Loan to value)
Collateral
- Assets pledged by a borrower to secure a loan or other credit, and
subject to seizure in the event of default.
Capacity (Employment) - A borrower's ability to repay a debt
Credit - The borrowing capacity of an individual
or company.
Simply put, If the property or collateral is worth the price...and
you haven't more than 2 or 3 skeletons in the closet...you should
be approved for an excellent mortgage product. If one of the "C's"
is questionable you are approvable but there may be conditions and
or adjustments (such as little interest rate bumps). If two "C's"
are in question, you might get a mortgage but there will be a price
to pay...(It will be up to you to determine if the "price"
is worth the time and effort).
Later we will discuss common
questions and how to elicit integrity (or lack there of) but for
now lets focus on what our local boys do to set up a mortgage. They
either load the front or the back of the wagon. How's that again??
Yes the "load" is either in the front in fee's or the back
in rate.
You normally will see a front loaded loan. There will be normal charges
such as a couple hundred for Underwriting, possibly a few hundred
Broker Fee, some Insurance & Title fee's, a couple hundred for
Closing (at a title company) and a few nickle dime fee's for Overnights.
THE FEE'S TO WATCH CLOSELY ARE: ORIGINATION, DISCOUNT, AND OR BROKER
FEE'S..those are pure profit (not that they should be at zero, but
anything over about 1% of the loan amount would begin to get my attention
and should be addressed).
Back end rates are a little trickier...Brokers are required
to disclose them (as YSP and the disclosed amount is not added to
the fee's so it's almost as if it's not there).
Banks do not have to disclose YSP (Yield Spread Premium) so it's earned
by them but you won't see that WINDSHIELD COMING...and you definately
don't want to be the perverbial bug smashed by it.
How you avoid this is to check the rates on the day you lock
your loan. If the rate lock agreement shows that the lender's
YSP is 102.750 then that indicates he's earning a commission of $2750
on every 100,000 borrowed. That's serious...a one million dollar loan
that earns a bank or broker $27,500 commission is to healthy a price
to pay.
Again know your rates and make certain you have a clear understanding
before proceeding. (THIS IS A CRITICAL POINT IN A MORTGAGE TRANSACTION).
Jim Moore is a trusted Florida
mortgage expert who wrote A
Wholesale Guide to Florida Mortgage. If you wish to contact Jim
call
1-305-609-4144, or email: jim.moore@comcast.net.
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