Is Now The Time To Use A Mortgage Broker?
By JD Esajian on January 24, 2014
The most successful investors give themselves as many outlets to do business with as possible. Whether this means finding new ways to get leads or working with different people, it is important not to put all of your eggs in one basket. Some of the highlights in the real estate world, in the first month of the New Year, are the changes being made to mortgage guidelines and underwriting caused by the Dodd-Frank Act. You may have used the same lender for years, but with these changes, you may need to branch out and explore options with different mortgage brokers.
The Dodd-Frank Act includes new guidelines regarding a borrower’s ability to repay their loan and increased lender scrutiny for what is a considered a qualified mortgage. There is now a 3% cap on the closing fees a borrower can be charged as well as changes in acceptable debt-to-income ratios. The new level is down to 43% from as high as 50% with some lenders. Lenders can still write loans with debt ratios over 43%, but they will have a tough time being sold on the secondary market. Here is where using a mortgage broker may be beneficial.
If you have used a local or national bank for your loans, you know that they are very good at some things and not so good at others. If there is any variation from guidelines, the loan may not be approved and the closing could be in jeopardy. A mortgage broker may have outlets for loans that are slightly outside the norm in regards to credit score, number of properties and even higher debt-to-income ratios. Loyalty is a great asset in business, but it is important to be loyal to the right people. Your local bank may work well for traditional deals, but if you need something outside the box done you should have a mortgage broker you can contact.
Many lenders that mortgage brokers work with will create their own portfolio programs that do not need to follow big lender guidelines. These are not mom and pop lenders that can’t be trusted. Some of these lenders sponsor college football games or are names you may have heard of but didn’t associate with mortgage lending. You don’t necessarily have to use a broker, but you should be giving yourself all of the options possible. Even if it is for just one deal a year, you will appreciate giving yourself that option.
Ask your broker to keep you in the loop if there are any changes in guidelines or what investor programs they have available. Even if you can put down 5% less on a deal, it may free up some money of another area of your business. The worst case is to get an estimate or a program quote and compare that to your regular lender. In this changing mortgage landscape, you don’t want to leave deals on the table because you or a buyer couldn’t find funding. Give yourself as many options as you can. With the current mortgage changes, that may require using a mortgage broker.