Role of Mortgage Brokers in Purchasing a Home

If you have a decision to purchase your home or refinance your mortgage it is best to deal with a broker. A broker will have access to big banks and also have access to local brokers. Choose a good Toronto broker to find the right mortgage. A mortgage broker performs a job very similar to that of the bank loan officer. The difference between the two is that the bank officer works for the bank and offers loan, the broker is an individual who has relationship with many leading institutions and not committed to anyone. A broker acts as a link between the buyer and the lender. A broker acts within a firm or works independently. The broker may be the best option when searching for a home in or near Toronto. Using a broker may well increase the chances of successfully finding a mortgage for people who have special circumstances, such as poor credits.

Banks require you to qualify lot of conditions in order to qualify for mortgage financing. Toronto brokers works with borrowers helping them to find the best mortgage loans. A good Toronto broker will learn the needs of the borrower helping you to get the right loan deal from the lender. They will provide basic credit counseling to borrowers with the intention to correct your credit issues. He is a valuable tool in finding a home for you. In many cases they will get you a mortgage and charge you little because in many cases the bank will pay their fees. If you have bad credits then you have to pay for your mortgage brokers because they have to find private mortgage financing to accommodate your financing needs.

There are a lot of benefits in using mortgage brokers to purchase your home. A mortgage broker is aware of the entire mortgage industry including current rates and having contacts with many lenders. Each mortgage broker has his own specialty some can get only traditional mortgages some brokers can get uncommon loan like reverse mortgages. Toronto has many professional brokers ready to help the house hunters. The major benefit of working with a mortgage broker is that once he understands your particular needs he has a good idea of your financial history, he will be able to suggest which lenders might be able and interested in helping you to obtain your mortgage. Take time to research for the good Toronto mortgage broker to find a good home for you.

Successful Commercial Property Analysis

As a successful property investor, you will want to make a commercial property analysis of any real estate deal before you consider making the purchase. There are many factors which you should take into account while making your property analysis. Some of these factors which you should look at are: the location of the property, the price, taxes, local government and zoning laws, potential rental income, as well as the options you have for obtaining the property using an investment property mortgage loan.

Commercial property has many guidelines and regulations which must be followed. The last thing that you want to do is purchase investment commercial property, and then find out once you own it that you cannot lease it to the business you want, or that zoning permits you from using the property how you would like to. Whenever you are reviewing a commercial property analysis, it is vitally important to find out about the local governmental rules and regulations which will govern what you can and cannot do with the property in question. Look at what you had planned for the property and make sure everything is in agreement.

Taxes can be a big consideration when you are making a commercial property analysis. Some local areas offer tax incentives for commercial property owners and to certain businesses. If your property can meet the guidelines then you could possibly see a nice tax reduction. Also, if the area taxes commercial real estate at a high rate, you could be in for a real surprise if you did not consider taxes in your commercial property analysis.

Just as there can be tax incentives to buying commercial property in a particular area, the same can be said for financing options. Many commercial lenders have programs which fit a variety of different business and community needs. If your property qualifies you can see a nice reduction in your mortgage interest rate.

Another consideration is the rental rate of other commercial properties in the area. If many properties are sitting vacant that is a sign that you may have serious trouble renting to a business and keeping them for the long-term. This is important for your commercial investment analysis because the rent money is your income on the property.

In addition to all of the above considerations, the usual considerations still apply. You need to look at the location of the property and determine if it is in a good enough location for what it will ultimately be used for. What is the area around the property like? Will people likely come to the location if a business starts there? Who are the residents of the local area and will they benefit from your property’s use?

You will need to look at the land and buildings and determine how much work and cost is likely involved in bringing things up to code and working order. Look at the offering price and consider if it is reasonable or if it needs to be adjusted because of the things you have found while looking at the other factors for your commercial property analysis.

While performing a commercial property analysis you should take all of the above into consideration. You also might want to consider hitting the pavement and talking to people in the area of your potential property purchase. See what the people who already live and work in the area think about the property.

The Secret Life of Mortgage Brokers

You already know that mortgage brokers come in many flavors, that some of them deserve the bad reputation dished out to them lately. You”re also smart enough to know that they serve a great function: getting you mortgages that your bank cannot.

To better understand how mortgage brokers are useful to you, you should know how they operate and get paid.

Mortgage Brokers in Action

When you get a home loan from your local bank, there may be only one player involved, your local bank. Banks that originate a home loan and hold on to it are called portfolio lenders. Many banks, however, do not hold onto the loans they originate. They sell the loans for a profit. They may sell your loan to another lender, directly, or they may sell it to a wholesale buyer.

In other words, many banks behave exactly like mortgage brokers.

The process goes like this:

You go to mortgage brokers to get a loan. The first thing they do once they have your credit scores, down payment (equity) and the amount you want to borrow is find out if Fannie Mae (Freddie Mac) will buy your loan and under what circumstances.

It’s all computerized. Your broker inputs your information in the system, the system comes back with: you qualify or you don’t qualify. Actually, it comes back with numbers, percentages: how much you can borrow and what interest rate you’re going to get and how much the broker is going to make.

How Mortgage Brokers Get Paid (Usually)

The interesting part comes here. Brokers are presented with 3 income levels for themselves. Which means: if they give you the lowest interest rate you qualify for, they make a low amount, if they give you a higher one, they make more money.

Specifically, it will come like this:

Interest rate of 5.04% – the broker earns 1.25% of the loan amount.

Interest rate of 5.15% – the broker earns 1.50% of the loan amount.

Interest rate of 5.30% – the broker earns 2.25% of the loan amount.

On a $200,000 home loan, this means your broker’s company can earn $2,500 or $3,000 or $4,500. Sometimes, overhead alone does not allow your broker to quote you the lowest interest rate you qualify for. Overhead makes many brokers turn away applicants who want to borrow small amounts.

Once brokers are assured that your home loan fits Fannie Mae criteria and you’ve accepted the interest rate, they will look for a wholesale buyer who can work with your particular circumstances.

The wholesale buyer who gets your home loan turns around and sells it to another wholesale outfit or to an investor (this could be a bank, a hedge fund, a pension fund, a private person or any company that has the money). I heard mortgage brokers complain they sold a home loan for $X and the wholesale buyer sold it within a week for $6,000 or 7,000 more.

You make a lot of people a lot of money when you take out a home loan.

Some of the biggest wholesale buyers are the big banks.

You could enter into an agreement with mortgage brokers whereby you pay them directly and there’s no spread premium (they do not get paid more if you get a higher interest rate loan).

Mortgage Broker Pitfall

Sometimes, your broker has a particularly good relationship with a particular wholesale buyer (they pay better, they are easier to work with, etc.). In this case, many mortgage brokers try to get every customer they have to go through that wholesale buyer, even when there isn’t a good match.

That’s one of the occasions when your mortgage broker will ask you if you can bring extra money at the closing, if you have someone willing to co-sign. It is also when some mortgage brokers break the law.

As different mortgage brokers have different buyers for the home loans they generate, different overhead and different profit margin needs, you get different interest rates. All of them and all lenders base whatever interest rate they quote you on the same thing, the rate the FED charges banks when banks borrow money from the fed.

Not Your Mortgage Broker’s Fault

Mortgage brokers have to work within this system, unless they’re also a portfolio lender. To be a portfolio lender for all the mortgages they generate, brokers would have to have a lot of money, hundreds of millions. And, you’ve guessed it, most of them don’t have that kind of money in their wildest dreams.