Mortgage Basics

What are the advantages of using a mortgage professional who is a broker and a banker?

As a mortgage broker, I can go out to any lender across the country and get you a loan. As a mortgage banker, we have our own money to lend and we sell it directly to Wall Street. So, I would be your best place to go to. It's based on a lot of variables. I would break everything down for you, income, assets, credit, and really know who you are to better fit your needs and know exactly which bank will provide us with the best rate and the best service.

What is the difference between a mortgage banker and a mortgage broker?

As a mortgage banker, at Putnam capital, we can actually fund the loan in our own name and we sell that loan off to Wall Street. This allows us to close the loan very quickly and gives us a lot of control. As a mortgage broker, we are actually acting as the middleman between you and the actual lending institution we are going to be going to. As a mortgage broker, we can go to hundreds of different banks out there to get you the best deal.

What are the benefits of using a mortgage broker?

The benefits of using a mortgage broker compared to walking into a local bank are as follows: the biggest benefit is that as a mortgage broker, most of us have a lot more experience than a regular loan officer that works for a bank. Also, we're able to go to any lending institution that's out there. With a bank, a local bank, they're going to be very limited on their product selection. With me, I've set myself up to finance anything attached to real estate, whether it's commercial lending, private money, construction lending, out-of-state lending, loans in Mexico, etc. etc. A mortgage broker is definitely your best route to be well diversified and to really educate you on the mortgage process.

How does my broker get paid?

The broker can get paid one of two ways. Either by the lending institution that we go to, or by charging origination or discount points. And it really depends on the deal, the client and how we structure that. For me personally, I don't like to have my clients pay points so i'll just make my money through the bank.

Do banks provide better mortgage rates directly to consumers or to brokers?

No, banks do not provide better mortgage rates. This is because as a mortgage broker we are able to go out to a hundred different lending institutions to get you the best deal and mortgage rate. The only reason you'd be able to get a better deal with a local bank is if you have a significant amount of money with that particular bank.

What is private mortgage insurance PMI and do I need it?

PMI is not as prevalent as it was maybe 5-7 years ago. In simplest terms, if you don't put at least 20% down on it for a downpayment, you have to pay mortgage insurance and the reason is all of the lending institutions over the years have done studies that show if somebody doesn't put at least 20% down, they're more than likely to be possibly foreclosed on. Therefore, mortgage insurance comes into effect. But nowadays, instead of mortgage insurance, if you don't put 20% down, you can do what is called an 80-15-5, an 80-10-10 or an 80-20, and that allows you to still get that first mortgage at 80%, but you can also get a 10% second mortgage, a 15% second mortgage, and if you do one of these terms I just mentioned to you; that will alleviate mortgage insurance.

What is a "second mortgage"?

A second mortgage is buying the first mortgage. If you go to buy a home for $500,000 with a first mortgage at $400,000, and you get a second mortgage at $50,000, it's just buying the first mortgage.

Does the bank require mortgage insurance?

The bank will only require mortgage insurance if you don't put at least 20% down for a down payment. If you are only putting 5, 10 or 15% down, then yes, they will require mortgage insurance. However, to alleviate mortgage insurance nowadays, they have programmes out there that are called 8/15/5s, 8/10/10s or even 8/20s and that will alleviate mortgage insurance.