Brad: Hey folks, it is Brad and Mike Anderson with Reliance Mortgage again with Mike’s Mortgage Minute. And we have been talking a lot about all the craziness out there and all these different types of loans. So why don’t you give us a rundown of kind of these government loans and what is happening out there in the market and all these types that can be very overwhelming from time to time.
Mike: Well getting a loan is like buying a car. There is that many choices out there. In the government specter alone, which are government insured loans, there are 4 different types of loan, there is FHA, VA, USVA which is agricultural property in small towns and there is reverse mortgages, all of them have different criterias as far as interest rate is concerned, down payment is concerned, ratios are concerned meaning that the debt to income ratio, and there is a reason why you would want to buy a particular house using those programs, the government programs and all of them are certified by FHA, by VA or some branch of government. Then there is what you call a standard Fanny Freddy loan which in the same text is a generally $417,000 loan amount. That is not the purchase price, that is the loan amount so if you buy a $500,000 house, put down $70,000, yeah $82,000 whatever the number is, you can get a conforming loan, those rates are very competitive. Then you get into what they a jumbo loan, jumbo being referred to a loan of anything over $417,000 to $1 million. Those are different categories; generally they want to look more laying down. Although you got to buy an $800,000 home, for sitting down all day long. And most lawyers will tell you it is 20-25% down. And you have to have a 740 credit score and all this stuff is just not true. That is what they have to offer. But it is kind of like going car shopping, I am not going to buy a car at the first dealership I go to, you know, well that is not true, I have done that before. But it would have to be a hell of a deal, I would have to be pretty confident but it is like shopping for a car, you really ought to shop more zones even if you are pretty confident that your bank can do a loan for you at a competitive rate of interest, there may be a different program you want, like maybe not put as much money down, maybe your credit score is a little lower than they want and they turn your loan down, maybe they don’t have enough down payment and they don’t have that program, I mean there is not a sold out, as we are trying to get somebody a loan and there are so many different types of loans that you know, it is like buying a car, you know there are lots of choices of cars and there is also lots of choices, there is 60 month standard, 30 year product that everybody calls on the phone and says, “I am not going down withal 30 year note, do you have 10 year arm notes.” No I don’t like arm notes, they are too hard to explain or why should I tell them about the benefit of a 15 year note, they want a 30 year note. That is what they ordered so I am going to give it to him. Yeah, so there is a lot of thing going into mortgage planning so I am just saying that different lenders, even our lenders, the ones we make calls for, lender A may want a 720 credit score to get the best rates, lender B may want a 680 credit to get the better rate, lender C maybe want a 740 credit score, lender A may want 25% down, lender B may want 10%, lender C wants 25% down. So really it doesn’t make any difference what our lenders want, it is what you can do as a consumer. In other words if you call me on the phone and say look I am buying $1 million house and can’t put 30% down, that is what the bank wants. I go what can you put down, well I can put down 15%, it is our job to go find you a loan for 15% down. Our job is not to tell you no you can’t go out and buy because you don’t fit in this box. You know so it is just searching. And you know we were talking earlier about interest rates. There are a lot of loans where you are better off to pay a lower interest rate, I mean a higher interest rate because your payments are lower because EMI may be rolled into it or you may get an 80-10-10 and avoid more interest all together. So interest rates are not the end all, it is really the whole bottom line is what paid is. And if you are better off paying a 4.5% rate of say a $1,000/month in principle interest, as verse $1,100/month for a 4% rate with mortgage insurance, you better off to pay a higher interest rate for a lower payment.
Brad: Yeah, because that mortgage interest does nothing for you right? Yeah it just money out…
Mike: Throwing money out the door, that is exactly what it is like
Brad: That is another Mike’s Mortgage Minute here with Mike Anderson, Reliance Mortgage.