Several reasons: (1) Our advantage is our size. We are a small lender and that smaller size allows us to price our loans for less. Small company = small fees. (2) The advancement in technology we use to originate mortgages allows us to keep a small and efficient staff which allows us to process loans more quickly than the larger institutions. Therefore we can get your loan closed and funded in a shorter time span. Faster closings equate faster profits. Afterall, as the saying goes: “Time is Money”. Therefore speed = profits. So we price our loans for less because we anticipate fast closings and fast fundings for our clients. (3) We also focus only on two states which keeps our overhead low since we have to carry fewer bonds. (4) We have agreements in place to deliver quality loans with a ”low fall out percentage.” “Fall out” means “locked loans not funding”. Fall out costs money and increases interest rates and closing costs. Therefore when a loan is locked and does not fund it increases costs to the lender/loan servicer because it costs money to lock that loan. We manage this cost by working diligently with our customers/clients to ensure their loan is going to be originated and not “fall out”. This in turn increases the profitability per funded loan and allows us to deliver lower interest rates and closing costs. Larger institutions have larger staff and layers of management which add layers of costs to loans (regardless if they are banks, credit unions, mortgage companies, or mortgage brokers). Another challenge larger entities deal with is “pull through”. Pull through is simply the amount of loans processed in relation to the amount of loans that actually close. This process is very expensive due to loans “falling out” which increases the costs per closed loan and increases interest rates. In essence, the larger the size of the institution the larger their fees.
What are your interest rates and closing costs?
Our interest rates and closing costs are based on each individual’s unique combination of: credit scores, collateral, loan to value, and debt ratios. Once we verify these details we can tailor make the loan to the clients specific needs regarding interest rates and fees. In addition we also like to give our clients 2 or 3 different loan options to consider when making their loan. (Depending on the size of their loan the options can be: Classic loan, Low Cost Loan, No Cost Loan, and Discount Point Loan). This way the client has choices and is not locked into “a one size fits all” category. We have found by providing loan options our clients feel more “empowered” and in control when choosing and making their loan.
What states do you do business in?
We currently originate in our two favorite states: Arizona and Colorado.
Why don’t you originate in other states?
Specifically because we can offer better rates and closing costs by focusing on just those two states. It gives us a pricing advantage. We once held licenses in two other additional states but this watered down our competitive advantage in pricing, customer service, and fall out. We found by staying small and focusing on these two niche states that it continues to provide us with a pricing advantage over our competitors. In addition, we have agreements in place with our wholesale conduits to provide loans in these states with a low “fall out” rate. This low fall out rate means we can deliver “more quality loans” with fewer loans falling out which helps mitigate losses and reduces overhead costs.
Why are your rates and costs so much lower than the other quotes? (please refer to the answer provided in question #1 and #4)
Why am I supposed to get a 3 page good faith estimate and truth in lending statement in lieu of a one page closing costs worksheet?
The three page good faith estimate and truth in lending statements are “legally binding” loan documents. That means they must be adhered to based on the figures they contain. The three page good faith estimate was originally designed to bring more clarity to the total closing costs a borrower would incur at settlement and remove bad practices where “bait and switch” tactics would occur. (Please refer to Question #7 for more details) This was when a lender would provide an artificially low initial closing cost estimate (the bait) and then would change it and charge considerably higher fees at closing (the switch) when the consumer would have no other choice but to accept the loan provided. In 2010 the new 3 page form went into law and was mandated to use when a full loan application is taken. The form is designed to adhere to keeping the closing costs the same and eliminating this practice. However, I have seen recently where some lenders and very large banks are doing things with these forms that still result in a form of bait and switch. One of those things is they do not put dates on the form. If there are no dates on page 1 of the good faith estimate this may make the form invalid. Even if it is from a very large “reputable bank”. The lender/bank can still change the fees on you. One way to ensure everything is correct is to match page 3 (of a four page 1003 application) or page 4 (if your 1003 loan application is a 4-5 pages long) to page 2 of the good faith estimate. Page 3 or 4 of your loan application provides a “summary” of the “estimated prepaid items” and “estimated closing costs”. When you add these figures together and then compare them to the bottom of page 2 on your Good Faith Estimate (where it totals the A + B boxes) the figures should match and if they do your loan is valid. If they don’t something is wrong. The truth in lending statement documents the APR, of the loan and is also an important disclosure.
Why do different lenders offer to provide me with one of the following: “closing cost worksheet”, “closing cost estimate”, a “closing estimate”, or simply a “worksheet” which is just a single page document stating what the closing costs are? Why won’t they provide me with the official three page good faith estimate?
There are a couple reasons for this: (1) They did not take a full application from you so legally they do not have to provide you with one (2) They do not want you to see what all of the actual true costs of the loan will be until you have committed to them (3) They simply want to give you an “idea” of what your closing costs “might be” knowing full well you intend to shop the loan. Therefore they do not put down all of the fees or reduce the fees knowing full well your actual closing costs will be much more than what is shown. (If you receive one of these forms AFTER you have provided a full application and your credit has been pulled, request them to send the 3 page form and TIL. If they still have not provided it cross them off your list and apply elsewhere.) The lenders never fill out all of the actual fees on this form for fear another lender will do the same. Lenders realize that many prospective borrowers always shop for the lowest fees, so that is what they give them…but what borrowers don’t realize is that this form is worthless, not legally binding, and does more harm than good when shopping for a loan. It essentially harkens back to the days of the “bait and switch”. The only way to fully know what you are getting is to fill out an application with several lenders and have them send you your full loan approval with the three page good faith estimate, truth in lending statement, and additional applicable loan disclosures. This way you have accurate data. This is the ONLY way to shop for a loan. *** We will provide the short form in the event a prospective borrower requests it and does not wish to submit a full loan application. We prefer to not use this form (for the aforementioned reasons) but will if the borrower requests it.
Why are dates on the three page good faith estimate important? What happens if I am provided with one that does not have any dates filled in?
The dates are important because it tells you the date the loan was priced out in terms of interest rate and fees as well as for how long the fees are good for until you lock your loan. If you receive a form from any lender with no dates on it then the form may be invalid. Many institutions have resorted to NOT filling in the dates on these forms. I suspect this practice will change in the future but for now those forms may be invalid without being dated.
What happens when the appraisal comes in low?
Several things can occur: (1) The loan stays the same because the loan to value was not affected enough to change the terms of the loan. (2) The loan to value was affected and in order to keep the original terms (interest rate and fee structure of the loan) the loan amount must be reduced. (3) the interest rate can be changed provided the borrower agrees to the updated terms and the closing costs stay the same (4) the closing costs and interest rate can be changed provided the borrower agrees to the changes (5) the loan is canceled due to the low appraisal since there is no benefit to the borrower.
What is the loan process?
The loan process starts when we take down your personal information and generate a loan application. Upon completion and the pricing of your loan we send you a copy for your review. When you agree to the terms of the loan we then request you to sign and date your application and applicable disclosures, and provide documents for income, insurance, assets, and etc. Upon receipt of these items we lock your loan, request the title report, and order an appraisal. The processing of your loan (depending on how quick you are) can be processed in as little as two weeks and up to four weeks. Again the speed of the closing depends on how quick you are to document your information.
When can I lock my loan?
Your loan can be locked as soon as we receive your entire signed and dated application with all disclosures back via email or fax.
What is a “Hard Money Loan” or an “Investor Loan”?
A “hard money loan” or an “investor loan” is simply a loan made by a private individual who lends their own money or money from a pool of investors to a private individual or home owner. The collateral is usually a home or some form of real estate. The loan is just like a regular mortgage but the interest rate and closing costs are higher since the money is being lent by a private party. The loans are usually serviced by a title company (instead of a bank) where they hold the mortgage and process the payments much like a bank would. Most hard money/investor loans are made to private individuals or businesses who are in need of money but a bank won’t lend to them. Sometimes the borrowers of these loans can get bank financing but choose to forgo the arduous process to simply get the money quickly so they can develop and pursue their project. In other cases there are those homeowners who for one reason or another can’t get financing through conventional means and choose to get a hard money/investor loan so they can refinance or buy another home.
Who is FNMA , FHLMC, and FHA?
FNMA stands Federal National Mortgage Association and FHLMC stands for Federal Home Loan Mortgage Corporation and FHA stands for Federal Housing Administration
How does your company earn a profit?
We earn a profit through the origination fee charged to make your loan and/or through a lender based credit disclosed on your 3 page GFE. You will be given the option and choice of how you wish our compensation is to be derived.
Other lenders we applied with (such as our bank) say you can’t offer as the pricing you have provided? How is that possible?
Please refer to the answers contained in questions 1 and 4.
Who will service my mortgage?
As of January 2011 (after your loan is originated) your loan will be serviced by one of the following: Wells Fargo, JP Morgan Chase, Bank of America, or Provident Funding. The lenders are determined by who buys the pool your loan happens to be in. (We will update this list in the future as things change)
Can the terms of my loan change once I close?
No, once you make a loan the terms can’t change regardless of who the loan servicer is. Your interest rate remains the same provided you have a fixed rate mortgage. If you have an ARM loan then the interest rate can change after the initial fixed period expires. Therefore if you have a 5 Year ARM, your interest rate remains fixed for the first 5 years and then will change after that period has expired. The terms of your loan are contained in your “Note” and “ARM Rider” which is an addendum to the note. The only thing you may see a change in (regarding your monthly payment) is if you have an escrow account for your taxes and insurance. If your property taxes and homeowners insurance increase or decrease this will be reflected in your payment.
Do I have to have an escrow account?
No you do not have to have an escrow account. You have the option (to have one or not to have one) but your loan pricing is better when you elect to have an escrow account.
What is the APR? Is it my interest rate? Why is it higher than my actual interest rate also known as the “Note Rate”?
The APR is not your interest rate. It is the cost of your credit over the life of the loan and is found on your TIL (Truth In Lending Statement). The APR is calculated using the current interest rate you are approved for and includes closing costs as well as some prepaid items all added together. This total is calculated as your APR. The APR is always higher than your actual “Note Rate” on a fixed rate mortgage and can sometimes be lower on an ARM loan. Your monthly mortgage payments are based and calculated on your Note Rate which is shown on page 1 of your 1003 loan application not your APR.
