mortgage lender

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As housing affordability wanes, mortgage lenders have gotten increasingly creative to help borrowers qualify.

The latest innovative product is “Movement Boost,” a zero-down FHA loan offered by South Carolina-based Movement Mortgage.

Instead of requiring a minimum 3.5% down payment, home buyers can take out a repayable second mortgage that covers those funds and closing costs if needed.

This means a home buyer doesn’t need any cash to close in some cases, which often proves to be a roadblock.

Read on to learn more about the new loan program.

How Movement Boost Works

Movement Boost takes the standard FHA loan and supercharges it by removing the 3.5% down payment requirement.

Instead, borrowers wind up with a first and second mortgage, the latter covering the down payment and up to 1.5% in closing costs if necessary.

The first mortgage is set at 96.5% of the purchase price, with the remaining 3.5% funded via a repayable second lien.

This second lien features a mortgage rate 2% above that of the first mortgage. And the loan term is 10 years.

For example, if you purchased a $300,000 home, you’d take out a first mortgage at $289,500.

You’d typically need $10,500 to make the minimum down payment of 3.5%.

But with Movement Boost, that $10,500 could be financed via a second mortgage. Additionally, you could tack on another 1.5% ($4,500) for closing costs.

Let’s pretend the interest rate on the first mortgage is set at 6.5%. That would make the second mortgage rate 8.5%.

This would result in a monthly payment of $130.18 if the loan amount were $10,500. Or $185.98 if you took out a larger $15,000 loan to cover closing costs also.

While you’d have to make two monthly mortgage payments, the tradeoff would be $10,500 to $15,000 more dollars in your pocket.

Movement Boost Guidelines

  • Home purchase loan for first-time and repeat buyers
  • Must be a primary residence
  • Single-family homes, 2-unit properties, condos, and manufactured homes permitted
  • Minimum 620 FICO score (640 for manufactured homes)
  • Maximum DTI ratio of 50%
  • Can finance down payment and up to 1.5% in closing costs
  • Available in all states except for New York

As noted, Movement Boost is an option for a home buyer looking to take out an FHA loan who wants/needs help with the down payment and possibly closing costs too.

This means you need to be a home buyer, though both first-timers and repeat buyers are eligible.

Additionally, a minimum 620 FICO is required and the maximum DTI ratio is 50%.

In terms of allowable property types, single-family homes, condos, two-unit properties, and manufactured homes are permitted.

If it’s a manufactured home, you need a minimum FICO score of 640.

In all cases, the property must be your primary residence, the one you intend to live in full time throughout the year.

Those who wish to come in with a larger down payment can also apply gift funds from an acceptable source.

The new product is available nationwide in all states except for New York.

Who Is Movement Boost Designed For?

Simply put, Movement Boost is geared toward the home buyer who lacks a down payment. Or one who doesn’t want to lock up all their cash in a property.

It combines a low-down payment FHA loan with down payment assistance to provide zero down home loan financing.

The program is part of Movement Mortgage’s Grab The Key initiative, which focuses on helping more underserved communities tap into homeownership.

By financing the down payment instead of paying it at closing, borrowers can deploy their money elsewhere. Or continue to build up their reserves while owning a property.

The caveat is that the borrower must qualify for two mortgages instead of one. However, the loan amount on the second mortgage will be comparatively small.

And as seen in our example, may only set the borrower back $100-$200 per month. It also features a shorter payback period, which allows the homeowner to build equity faster.

As always, be sure to compare all available loan options with multiple banks, brokers, lenders, and local credit unions.

Also ask yourself if you’re ready for homeownership if you lack the minimum down payment required.

It’s generally advisable to have several months of reserves set aside so you can continue to make payments if facing some kind of hardship.

Of course, financing the down payment instead of paying it upfront may allow you to set aside those funds.

Lastly, be sure to compare the pros and cons of an FHA loan vs. conventional loan to see which is best for your situation.

One downside to an FHA loan is that the mortgage insurance remains in force for the life of the loan.

Movement Mortgage was a top-30 mortgage lender in 2022, funding about $23 billion during the year.

Read more: Rocket Mortgage Launches a 1% Down Home Loan

Source: thetruthaboutmortgage.com

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Table of Contents
show

This article will explain the Big Short and the 2008 subprime mortgage collapse in simple terms.

This post is a little longer than usual–maybe give yourself 20 minutes to sift through it. But I promise you’ll leave feeling like you can tranche (that’s a verb, right?!) the whole financial system!

Key Players

First, I want to introduce the players in the financial crisis, as they might not make sense at first blush. One of the worst parts about the financial industry is how they use deliberately obtuse language to explain relatively simple ideas. Their financial acronyms are hard to keep track of. In order to explain the Big Short, these players–and their roles–are key.

Individuals, a.k.a. regular people who take out mortgages to buy houses; for example, you and me!

Mortgage lenders, like a local bank or a mortgage lending specialty shop, who give out mortgages to individuals. Either way, they’re probably local people that the individual home-buyer would meet in person.

Big banks, such as Goldman Sachs and Morgan Stanley, who buy lots of mortgages from lenders. After this transaction, the homeowner would owe money to the big bank instead of the lender.

Collateralized debt obligations (CDOs)—deep breath!—who take mortgages from big banks and bundle them all together into a bond (see below). And just like before, this step means that the home-buyer now owes money to the CDO. Why is this done?! I’ll explain, I promise.

Ratings agencies,
whose job is to determine the risk of a CDO—is it filled with safe mortgages,
or risky mortgages?  

Investors, who buy part of a CDO and get repaid as the individual homeowners start paying back their mortgage.

Feel lost already? I’m going to be a good jungle guide and get you through this. Stick with me.

Quick definition: Bonds

A bond can be
thought of as a loan. When you buy a bond, you are loaning your money. The issuer of the bond is borrowing your money. In exchange for borrowing your money, the
issuer promises to pay you back, plus interest, in a certain amount of time.
Sometimes, the borrower cannot pay the investor back, and the bond defaults, or fails. Defaults are not
good for the investor.

The CDO—which is a bond—could hold thousands of mortgages in it. It’s a mortgage-backed bond, and therefore a type of mortgage-backed security. If you bought 1% of a CDO, you were loaning money equivalent to 1% of all the mortgage principal, with the hope of collecting 1% of the principal plus interest as the mortgages got repaid.

There’s one more key player, but I’ll wait to introduce it.
First…

The Whys, Explained

Why does an individual take out a mortgage? Because they want a home. Can you blame them?! A healthy housing market involves people buying and selling houses.

How about the lender;
why do they lend? It used to be
so they would slowly make interest money as the mortgage got repaid. But
nowadays, the lender takes a fee (from the homeowner) for creating (or originating) the mortgage, and then
immediately sells to mortgage to…

A big bank. Why do
they buy mortgages from lenders? Starting in the 1970s, Wall St. started
buying up groups of loans, tying them all together into one bond—the CDO—and
selling slices of that collection to investors. When people buy and sell those
slices, the big banks get a cut of the action—a commission.

Why would an investor
want a slice of a mortgage CDO? Because, like any other investment, the big
banks promised that the investor would make their money back plus interest once the homeowners began
repaying their mortgages.

You can almost trace the flow of money and risk from player to player.

At the end of the day, the investor needs to get repaid, and that money comes from homeowners.

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CDOs are empty buckets

Homeowners and mortgage lenders are easy to understand. But a big question mark swirls around Wall Street’s CDOs.

I like to think of the CDO as a football field full of empty buckets—one bucket per mortgage. As an investor, you don’t purchase one single bucket, or one mortgage. Instead, you purchase a thin horizontal slice across all the buckets—say, a half-inch slice right around the 1-gallon mark.

As the mortgages are repaid, it starts raining. The repayments—or rain—from Mortgage A doesn’t go solely into Bucket A, but rather is distributed across all the buckets, and all the buckets slowly get re-filled.

As long as your horizontal slice of the bucket is eventually surpassed, you get your money back plus interest. You don’t need every mortgage to be repaid. You just need enough mortgages to get to your slice.

It makes sense, then, that the tippy top of the bucket—which
gets filled up last—is the highest risk. If too many of the mortgages in the
CDO fail and aren’t repaid, then the tippy top of the bucket will never get
filled up, and those investors won’t get their money back.

These horizontal slices are called tranches, which might
sound familiar if you’ve read the book or watched the movie.

So far, there’s nothing too wrong about this practice. It’s simply moving the risk from the mortgage lender to other investors. Sure, the middle-men (banks, lenders, CDOs) are all taking a cut out of all the buy and sell transactions. But that’s no different than buying lettuce at grocery store prices vs. buying straight from the farmer. Middle-men take a cut. It happens.

But now, our final player enters the stage…

Credit Default Swaps: The
Lynchpin of the Big Short

Screw you, Wall Street nomenclature! A credit default swap sounds complicated, but it’s just insurance. Very simple, but they have a key role to explain the Big Short.

Investors thought, “Well, since I’m buying this risky tranche of a CDO, I might want to hedge my bets a bit and buy insurance in case it fails.” That’s what a credit default swap did. It’s insurance against something failing. But, there is a vital difference between a credit default swap and normal insurance.

I can’t buy an insurance policy on your house, on your car, or on your life. Only you can buy those policies. But, I could buy insurance on a CDO mortgage bond, even if I didn’t own that bond!

Not only that, but I could buy billions of dollars of insurance on a CDO that only contained millions of dollars of mortgages.

It’s like taking out a $1 million auto policy on a Honda Civic. No insurance company would allow you to do this, but it was happening all over Wall Street before 2008. This scenario essentially is “the big short” (see below)—making huge insurance bets that CDOs will fail—and many of the big banks were on the wrong side of this bet!

Credit default swaps involved the largest amounts of money in the subprime mortgage crisis. This is where the big Wall Street bets were taking place.

Quick definition: Short

A short is a bet that something will fail, get worse, or go down. When most people invest, they buy long (“I want this stock price to go up!”). A short is the opposite of that.

Certain individuals—like main characters Steve Eisman (aka Mark Baum in the movie, played by Steve Carrell) and Michael Burry (played by Christian Bale) in the 2015 Oscar-nominated film The Big Short—realized that tons of mortgages were being made to people who would never be able to pay them back.

If enough mortgages failed, then tranches of CDOs start to fail—no mortgage repayment means no rain, and no rain means the buckets stay empty. If CDOs fail, then the credit default swap insurance gets paid out. So what to do? Buy credit default swaps! That’s the quick and dirty way to explain the Big Short.

Why buy Dog Shit?

Wait a second. Why did people originally invest in these CDO bonds if they were full of “dog shit mortgages” (direct quote from the book) in the first place? Since The Big Short protagonists knew what was happening, shouldn’t the investors also have realized that the buckets would never get refilled?

For one, the prospectus—a fancy word for “owner’s manual”—of a CDO was very difficult to parse through. It was hard to understand exactly which mortgages were in the CDO. This is a skeevy big bank/CDO practice. And even if you knew which mortgages were in a CDO, it was nearly impossible to realize that many of those mortgages were made fraudulently.

The mortgage lenders were knowingly creating bad mortgages. They were giving loans to people with no hopes of repaying them. Why? Because the lenders knew they could immediately sell that mortgage—that risk—to a big bank, which would then securitize the mortgage into a CDO, and then sell that CDO to investors. Any risk that the lender took by creating a bad mortgage was quickly transferred to the investor.

So…because you can’t decipher the prospectus to tell which mortgages are in a CDO, it was easier to rely on the CDO’s rating than to evaluate each of the underlying mortgages. It’s the same reason why you don’t have to understand how engines work when you buy a car; you just look at Car & Driver or Consumer Reports for their opinions, their ratings.

The Ratings Agencies

Investors often relied on ratings to determine which bonds
to buy. The two most well-known ratings agencies from 2008 were Moody’s and
Standard & Poor’s (heard of the S&P
500?). The ratings agency’s job was to look at a CDO that a big bank created,
understand the underlying assets (in this case, the mortgages), and give the
CDO a rating to determine how safe it was. A good rating is “AAA”—so nice, it
got ‘A’ thrice.

So, were the ratings agencies doing their jobs? No! There are a few explanations for
this:

  1. Even they—the experts in charge of grading the
    bonds—didn’t understand what was going on inside a CDO. The owner’s manual
    descriptions (prospectuses) were too complicated. In fact, ratings agencies
    often relied on big banks to teach
    seminars     about how to rate CDOs, which is like a teacher learning how to
    grade tests from Timmy, who still pees his pants. Timmy just wants an A.
  2. Ratings agencies are profit-driven companies.
    When they give a rating, they charge a fee. But if the agency hands out too
    many bad grades, then their customers—the big banks—will take their requests
    elsewhere in hopes of higher grades. The ratings agencies weren’t objective, but instead were biased by
    their need for profits.
  3. Remember those fraudulent mortgages that the
    lenders were making? Unless you did some boots-on-the-ground research, it was
    tough to uncover this fact. It’s hard to blame the ratings agencies for not
    catching this.

Who’s to blame?

Everyone? Let’s play devil’s advocate…

  • Individuals: some people point the finger at homeowners, saying, “You should know better than to buy a $1 million house on a teacher’s salary.” I find this hard to swallow. These people, surrounded by the American home-ownership dream, were sold the idea that they would be fine. The mortgage lender had no incentive to sell a good mortgage, they only had an incentive to sell a mortgage. So, it’s hard for me to put too much blame on the homeowners.
  • Mortgage lenders: someone knew. I’m not saying that all the mortgage lenders were fully aware of the implications of their actions, but some people knew that fraudulent loans were being made, and chose to ignore that fact. For example, check out whistleblower Eileen Foster.
  • Big banks: Yes sir! There’s certainly blame here. Rather than get into all of the various money-grubbing, I want to call out one specific anecdote. Back in 2010, Goldman Sachs CEO Lloyd Blankfein testified in front of Congress. Here it is:
[embedded content]

To explain further, there are two things going on
here.

First, Goldman Sachs bankers were selling CDOs to investors. They wanted to make a commission on the sale.

At the same time, other bankers ALSO AT GOLDMAN SACHS were buying credit default swaps, a.k.a. betting against the same CDOs that the first Goldman Sachs bankers were selling.

This is like selling someone a racehorse with cancer, and then immediately going to the track to bet against that horse. Blankfein’s defense in this video is, “But the horse seller and the bettor weren’t the same people!” And the Congressmen responds, “But they worked for the same stable, and collected the same paychecks!”

So do the big banks deserve blame? You tell me. 

Inspecting Goldman Sachs

One reason Goldman Sachs survived 2008 is that they began buying credit default swaps (insurance) just in time before the housing market crashed. They were still on the bad side of some bets, but mostly on the good side. They were net profitable.

Unfortunately for them, the banks that owed Goldman money were going bankrupt from their own debt, and then Goldman never would have been able to collect on their insurance. Goldman would’ve had to payout on their “bad” bets, while not collecting on their “good” bets. In their own words, they were “toast.”

This is significant. Even banks in “good” positions would’ve gone bankrupt, because the people who owed the most money weren’t able to repay all their debts. Imagine a chain; Bank A owes money to Bank B, and B owes money to Bank C. If Bank A fails, then B can’t collect their debt, and B can’t pay C. Bank C made “good” bets, but aren’t able to collect on them, and then they go out of business. 

These failures would’ve rippled throughout the world. This explains why the US government felt it necessary to bail-out the banks. That federal money allowed banks in “good” positions to collect their profits and “stop the ripple” from tearing apart the world economy. While CDOs and credit default swap explain the Big Short starting, this ripple of failure is the mechanism that affected the entire world.

Betting more than you have

But if someone made a bad bet—sold bad insurance—why didn’t they have money to cover that bet? It all depends on risk. If you sell a $100 million insurance policy, and you think there’s a 1% chance of paying out that policy, what’s your exposure? It’s the potential loss multiplied by the probability = 1% times $100 million, or $1 million.

These banks sold billions of dollars of insurance under the assumption that there was a  5%, or 3%, or 1% chance of the housing market failing. So they had 20x, or 30x, or 100x less money on hand then they needed to cover these bets.

Turns out, there was a 100% chance that the market would fail…oops!

Blame, expounded

Ratings agencies—they should be unbiased. But they sold themselves off for profit. They invited the wolves—big banks—into their homes to teach them how to grade CDOs. Maybe they should read a blog to explain the Big Short to them. Of course they deserve blame. Here’s another anecdote of terrible judgment from the ratings agencies:  

Think back to my analogy of the buckets and the rain. Sometimes, a ratings agency would look at a CDO and say, “You’re never going to fill up these buckets all the way. Those final tranches—the ones that won’t get filled—they’re really risky. So we’re going to give them a bad grade.”  There were “Dog Shit” tranches, and Dog Shit gets a bad grade.

But then the CDO managers would go back to their offices and cut off the top of the buckets. And they’d do this for all their CDOs—cutting off all the bucket-top rings from all the different CDO buckets. And then they’d super-glue the bucket-top rings together to create a field full of Frankenstein buckets, officially called a CDO squared. Because the Frankenstein buckets were originally part of other CDOs, the Frankenstein buckets could only start filling up once the original buckets (which now had the tops cut off) were filled. In other words, the CDO managers decided to concentrate all their Dog Shit in one place, and super glue it together.

A reasonable person would look at the Frankenstein Dog Shit field of buckets and say, “That’s turrible, Kenny.”

BUT THE RATINGS AGENCIES GAVE CDO-SQUAREDs HIGH GRADES!!! Oh I’m sorry, was I yelling?!

“It’s diversified,” they would claim, as if Poodle shit mixed with Labrador shit is better than pure Poodle shit.

Again, you tell me. Do the ratings agencies deserve blame?!  

Does the government deserve blame?

Yes and no.

For example, part of the Housing and Community Development Act of 1992 mandated that the government mortgage finance firms (Freddie Mac and Fannie Mae) purchase a certain number of sub-prime mortgages.

On its surface, this seems like a good thing: it’s giving money to potential home-buyers who wouldn’t otherwise qualify for a mortgage. It’s providing the American Dream.

But as we’ve already covered today, it does nobody any good to provide a bad mortgage to someone who can’t repay it. That’s what caused this whole calamity. Freddie and Fannie and HUD were pumping money into the machine, helping to enable it. Good intentions, but they weren’t paying attention to the unintended outcomes.

And what about the Securities & Exchange Commission (SEC), the watchdogs of Wall Street. Do they have a role to explain the Big Short? Shouldn’t they have been aware of the Big Banks, the CDOs, the ratings agencies?

Yes, they deserve blame too. They’re supposed to do things like ensure that Big Banks have enough money on hand to cover their risky bets. This is called proper “risk management,” and it was severely lacking. The SEC also had the power to dig into the CDOs and ferret out the fraudulent mortgages that were creating them. Why didn’t they do that?

Perhaps the issue is that the SEC was/is simply too close to Wall Street, similar to the ratings agencies getting advice from the big banks. Watchdogs shouldn’t get treats from those they’re watching. Or maybe it’s that the CDOs and credit default swaps were too hard for the SEC to understand.

Either way, the SEC doesn’t have a good excuse. If you’re in bed with the people you’re regulating, then you’re doing a bad job. If you’re rubber stamping things you don’t understand, then you’re doing a bad job.

Explain the Big Short, shortly

You’re about 2500 words into my “short summary.” But the important things to remember:

  • Financial acronyms suck.
  • Money flowed from the investors down to the mortgage lenders, and the risk flowed from the mortgage lenders up to the investors. In between, the big banks and CDOs acted as middle men and intermediaries.
  • When someone feels like their actions have no risk, or no consequences, they’ll behave poorly (big banks, mortgage lenders)
    When someone is given what seems like an amazing deal, they’ll take it (individual home owners).
  • CDOs are like empty buckets. Mortgage payments are like rain, filling the buckets. Investors buy tranches, or slices, across all the buckets. If mortgages fail, then the buckets might not fill up, and the investors won’t get their money back.
  • CDOs are intentionally complex. So complex, that not even the people grading them understood what was going on (ratings agencies).
  • Buying insurance on something your do not own is a behavior with potential for abuse (big banks)
  • Buying insurance on something for more than it’s worth is a behavior with potential for abuse (big banks). This is where most of the money in the financial crisis switched hands.

And with that, I’d like to announce the opening of the Best Interest CDO. Rather than invest in mortgages, I’ll be investing in race horses. Don’t ask my why, but the current top stallion is named ‘Dog Shit.’ He’ll take Wall Street by storm.

Thank you for reading! If you enjoyed this article, join 6000+ subscribers who read my 2-minute weekly email, where I send you links to the smartest financial content I find online every week.

-Jesse

Want to learn more about The Best Interest’s back story? Read here.

If you prefer to listen, check out The Best Interest Podcast.

Source: bestinterest.blog

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An investment property is real estate purchased with the intention of earning returns through rental income or profit at resale. Just over 70 percent of single-family rental properties are owned by individual investors, according to the latest Census data. If you’re looking to take the plunge and buy an investment property, here are some initial considerations to make.

Considerations when investing in rental property

Here are a few considerations to think through before you get serious about an investment or rental property.

Location matters

Remember, it’s easier to look in on a property across town rather than one that’s two or more hours away. True, you can always hire a local property manager to keep the home in tip-top shape, but that’ll eat into the passive income you hope to gain.

It’s also important to consider the location with an investor’s eye for what’ll net you the most return. When evaluating locations, it’s often best to avoid areas with lots of vacancies and instead look to neighborhoods close to amenities such as parks and shopping, as well as transit, says Trent Ellingford, an investor and co-founder of the Real Estate Knowledge Institute.

After researching promising neighborhoods, connect with a real estate agent experienced in the local rental property market.

“Don’t use just a real estate agent,” says Kathy Fettke, CEO of Real Wealth Network, host of “The Real Wealth Show” and “Real Estate News for Investors” podcasts and author of “Retire Rich with Rentals.” “It’s best to look for an agent who specializes in real estate investments. Ideally, look for someone who owns them nearby. Oftentimes, property managers have brokers in-office to help.”

Types of rental properties

The kind of property you buy is equally important. The three main types are:

  • Single-family homes: These are one-unit properties, typically for either long-term tenants or on a short-term basis through platforms like Airbnb or VRBO. If it appreciates in value, you might be able to make additional profit down the line when you sell. With a single-family home, your cash return will be lower than if you had purchased a rental property that can house multiple tenants. Compared to a condo, you’ll also be responsible for all the maintenance.
  • Condos: Condos are generally more affordable upfront than single-family homes, and you could be spared many maintenance hassles thanks to the presence of an HOA. Keep in mind, however, some condo associations significantly restrict what you can do with the property, including renting it out, and mortgage lenders will factor in the monthly HOA fee when determining what size loan to extend to you.
  • Multifamily homes: Multifamily homes include duplexes (two units), triplexes (three units) and properties with four units or more. These allow you to rent to more tenants, generating more income, but also cost more than a single-family home or condo. You might have many more responsibilities as far as being a landlord, as well.

“Single-family homes are the most popular,” says Bruce Ailion, an attorney and Realtor with RE/MAX Town and Country in Georgia. “Some areas have a tradition of two- to four-family homes, while others do not. Multifamily properties of less than 100 units tend to be owned by individual owners or owner groups. Apartments over 100 units tend to be owned by institutions and professional real estate investors, and retail office and warehouse spaces tend to attract higher-income and more sophisticated investors.”

Consider the full financial commitment

How much money do you have on hand to make a down payment, or potentially pay for the home in full? Calculate your approximate return on investment (ROI) before you purchase a property. Estimate how much income you’ll get from the property and what your expenses will be. Subtract your expenses from your income to find your net operating income. A rental property’s expenses generally include:

  • Rental property insurance: Varies based on location; about 25 percent higher than standard homeowners insurance
  • Rental property taxes: Varies based on location; the average nationally for a single-family home was $3,785 in 2021, according to ATTOM
  • Utilities: Includes electric, gas, heating and water, some of which tenants might pay, but you’ll be on the hook for during vacant periods
  • Home maintenance and repairs: Varies; the average nationally was $3,018 for maintenance and $2,321 for “emergency spending” in 2021, according to Angi
  • Advertising costs: Includes real estate agent commission, typically 5 percent to 6 percent of the property’s purchase price; or vacation rental site service fees, typically 3 percent to 5 percent based on rent amount
  • Property management and other fees: Includes property management setup, management and maintenance fees, as well as tenant screening, eviction or other expenses; property managers typically charge between 6 percent and 10 percent of the rent for ongoing service, says Ailion
  • HOA fees (if applicable): Averages several hundred dollars
  • Rental income taxes: “Income taxes must be paid for all money made on the property,” says Ellingford. “Of course, everyone thinks of the monthly rent; however, income also includes any other money you collect, such as late fees, pet fees or even work by the tenant in lieu of rent.”

Keep in mind, while you’ll need to report all of your rental income to the IRS, you can typically deduct most or all of your expenses, along with depreciation and mortgage interest. Review IRS Publication 527 or consult with a trusted tax professional for more specifics pertaining to your rental property situation.

Understand differences between investment properties and second homes

A second or vacation home is different in many ways from an investment or rental property, and not just because of how it’s used. For one, your mortgage interest rate will likely be higher for a rental property because it’s not your primary residence, meaning the lender is taking on more risk. With mortgage rates going up, it’ll cost even more than it would have say last year.

Know the laws

Do you know what to do when your tenants won’t pay up? For example, certain states require a grace period when your tenant is behind on rent. In other words, you can’t evict a tenant until the grace period is over, but you can still charge late fees. Know the laws in your state before you rent out your property, including what constitutes a compliant lease agreement (including security deposit requirements), discriminatory practices and tenants’ right to privacy.

Determine your vacancy plan

You’re not always going to be able to rent out your property. You might have trouble finding renters, have to rip up carpet and patch drywall or provide a rent-free place for a family member to temporarily stay. There could be any number of reasons why income from your rental property might dry up. How will that impact your financial situation, and how will you cope?

Financing your rental property

A mortgage for a rental property isn’t the same as a home loan for a primary residence, or even a second or vacation home. Keep the following in mind:

  • Make a sizable down payment: You’ll typically need to put down at least 20 percent for a rental property, but if you want to look more attractive to a mortgage lender, you might want to put down more than that.
  • Be a strong borrower: You’ll also need a credit score of at least 640 and a debt-to-income (DTI) ratio of no more than 45 percent, based on Fannie Mae standards. The DTI ratio is your monthly debt payments divided by gross monthly income. (Need to improve your credit score? Learn some tips.)
  • Go outside of big banks: Big banks might not readily loan to you compared to a small bank, or offer you as desirable of loan terms. Compare options from both big and small banks, including community lenders, to find the best combination of rate, fees and customer service. It might help if you already have a relationship with the bank or lender.
  • Ask for owner financing: Owner financing means that the seller agrees to accept payments directly from you instead of requiring you to get a mortgage. This can benefit both you and the seller, but there are risks involved, so tread carefully; this arrangement isn’t for everyone.

Bottom line

A rental property could be a sound investment, particularly if the rent you collect offers you some extra income. Weigh all the aspects of purchasing a rental home, including financial implications, taxes you’ll have to pay, laws involved and how much extra time you have on your hands.

Source: thesimpledollar.com

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Today we’ll check out who the top mortgage lenders in Louisiana were based on the most recent year’s loan volume.

In 2021, more than 600 banks and lenders originated nearly $39 billion in home loans in the Pelican State, per HMDA data.

It was a good year for most lenders, but one company managed to outpace the rest of the pack quite easily.

And it was a hometown bank headquartered in the state, not a big national lender.

Read on to see who it was and to view the complete list of the largest mortgage lenders in Louisiana.

Top Mortgage Lenders in Louisiana (Overall)

Ranking Company Name 2021 Loan Volume
1. GMFS $2.7 billion
2. Rocket Mortgage $1.8 billion
3. Pennymac $1.5 billion
4. Freedom Mortgage $1.2 billion
5. UWM $1.1 billion
6. AmeriHome Mortgage $1.0 billion
7. First Horizon Bank $978 million
8. Homepoint $933 million
9. Hancock Whitney $932 million
10. Assurance Financial $890 million

Just like in 2020, GMFS Mortgage was the top mortgage lender in Louisiana with $2.7 billion funded, per HMDA data from Richey May.

The Baton Rouge-based lender was founded in 1999 and only operates in 12 states, mostly in the South.

They were trailed by overall #1 Rocket Mortgage with $1.8 billion, and SoCal-based Pennymac in third with $1.5 billion.

Fourth and fifth went to Freedom Mortgage and United Wholesale Mortgage (UWM) with $1.2 billion and $1.1 billion, respectively.

The rest of the top ten included AmeriHome Mortgage, First Horizon Bank, Homepoint, Hancock Whitney Bank, and Assurance Financial.

In total, two of the top 10 lenders are Louisiana-based, GMFS Mortgage and Assurance Financial.

Top Mortgage Lenders in Louisiana (for Home Buyers)

Ranking Company Name 2021 Loan Volume
1. GMFS $1.3 billion
2. Pennymac $980 million
3. UWM $647 million
4. AmeriHome Mortgage $626 million
5. Assurance Financial $549 million
6. Fidelity Bank $549 million
7. Homepoint $500 million
8. First Horizon Bank $484 million
9. Gulf Coast Bank $480 million
10. Movement Mortgage $439 million

If we shift our attention to home purchase transactions only, GMFS Mortgage is still the leader, though by a smaller margin.

GMFS funded $1.3 billion in home purchase loans in 2021 in Louisiana, followed by Pennymac with $980 million.

In third was UWM with $647 million, a company that operates exclusively via the mortgage broker channel.

Fourth and fifth went to AmeriHome and Assurance Financial, with $626 million and $549 million funded.

Places six through 10 went to Fidelity Bank (LA), Homepoint, First Horizon Bank, Gulf Coast Bank and Trust, and Movement Mortgage.

This brought the Louisiana-based lender total to four: GMFS, Assurance Financial, Fidelity Bank, Gulf Coast Bank and Trust.

It’s not unusual to see more homegrown banks and lenders dominate the home purchase loan list.

Generally, home buyers will work with a local company they know well to ease their nerves.

Top Refinance Lenders in Louisiana (for Existing Homeowners)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $1.4 billion
2. GMFS $1.3 billion
3. Freedom Mortgage $956 million
4. Chase $521 million
5. Pennymac $491 million
6. UWM $473 million
7. Hancock Whitney $461 million
8. First Horizon Bank $457 million
9. loanDepot $434 million
10. Homepoint $433 million

Now let’s talk refis. Existing homeowners tend to care less about working with local banks and lenders.

After all, they’re simply adjusting the rate/term of their loan, as opposed to financing a home purchase.

This might explain why Rocket Mortgage took the top spot with $1.4 billion funded, followed by GMFS with $1.3 billion in refi volume.

In third was VA loan specialist Freedom Mortgage with $1.3 billion, followed by Chase and Pennymac with about a half billion each.

Others landing in the top-10 list included UWM, Hancock Whitney Bank, First Horizon Bank, loanDepot, and Homepoint.

As you can see, only one Louisiana-based mortgage lender made this list.

Top Mortgage Lenders in Baton Rouge

Ranking Company Name 2021 Loan Volume
1. GMFS $1.1 billion
2. Assurance Financial $492 million
3. Rocket Mortgage $370 million
4. Pennymac $340 million
5. Freedom Mortgage $283 million
6. UWM $278 million
7. AmeriHome Mortgage $239 million
8. Hancock Whitney $232 million
9. Homepoint $216 million
10. Chase $189 million

Top Mortgage Lenders in New Orleans

Ranking Company Name 2021 Loan Volume
1. GMFS $799 million
2. Rocket Mortgage $636 million
3. Gulf Coast Bank $581 million
4. Hancock Whitney $571 million
5. First Horizon Bank $563 million
6. Fidelity Bank $516 million
7. Chase $469 million
8. Pennymac $443 million
9. AmeriHome Mortgage $419 million
10. UWM $379 million

Who Are the Best Louisiana Mortgage Lenders?

Biggest and best aren’t always synonymous. Just because a company does the most business doesn’t mean it’s the leader in customer service.

But sometimes both can coexist. I typically check out reviews on Zillow to see how lenders are rated by their customers.

GMFS Mortgage seems to be a big player in Louisiana and well-received, with a 4.96/5-star rating on Zillow from nearly 500 customer reviews.

Compare that to Rocket Mortgage’s 4.48/5, Pennymac’s 4.40, Freedom Mortgage’s 4.85/5, Assurance Financial’s 4.96/5, and Gulf Coast Bank’s 4.94/5.

Other local lenders listed on Zillow include the Metairie, LA branch of Movement Mortgage, rated 4.95/5, Shreveport, LA’s Draper and Kramer Mortgage (4.96/5), and Lafayette, LA’s Castille Mortgage Company (5/5).

There are many other lenders and individual mortgage brokers that operate in the state as well.

Take the time to see what’s available both nearby and nationally, and be sure to compare service, mortgage rates, and fees.

(photo: formulanone)

Source: thetruthaboutmortgage.com

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More mortgage M&A activity today.

Homepoint announced this morning that it has entered into a definitive agreement to sell the company’s wholesale origination unit to The Loan Store, Inc.

As a result, the Ann Arbor-based mortgage lender will no longer be a direct participant in the loan origination space.

However, Homepoint will continue to manage its mortgage servicing rights (MSR) portfolio, which it expects “to generate significant returns and cash flow over time.”

Prior to this move, Homepoint was the third largest wholesale mortgage lender in the country, behind just United Wholesale Mortgage and Rocket Mortgage TPO.

Homepoint Was a Top-10 Mortgage Lender

Homepoint saw explosive growth since its founding in 2015 via the acquisition of Maverick Funding.

It took them less than a decade to grow out a 2,000+ employee workforce and become a top-10 mortgage lender.

In 2021, the company originated an impressive $96 billion in home loans, landing them in ninth place overall.

However, due to difficult market conditions, namely a doubling in mortgage rates, profitability became an issue, leading to a series of layoffs nationwide.

Prior to this announcement, the company operated solely in the wholesale channel via mortgage brokers, meaning they will no longer have a place in the mortgage origination business.

In the past, they also operated a correspondent and retail division before shrinking operations.

Today, Homepoint made what they felt was the “best decision for our company to continue to deliver value to Home Point shareholders.”

But due to the sale, “its nine-year tenure as a direct participant in the originations market” will come to an end.

As noted, the company will continue to manage “its high-performing MSR portfolio.”

Homepoint is publicly-traded on the Nasdaq stock exchange under the symbol NASDAQ: HMPT.

At last glance, Homepoint was up about 21% on the news, though the stock is down about 33% over the past 12 months, and 82% over the past five years.

The Loan Store Looks to Grow Its Mortgage Footprint

Despite being founded in 2019, The Loan Store, Inc. is acquiring the third largest wholesale lender in the mortgage space.

Those other two lenders, UWM and Rocket Mortgage, happen to be the largest mortgage lenders across all origination channels.

This should allow the Tucson, Arizona-based company to grow exponentially, despite industry headwinds related to higher mortgage rates.

The Loan Store, Inc. currently operates solely via the wholesale channel, offering a variety of loan products via mortgage broker partners.

This includes conforming loans, jumbo loans, VA loans, and non-QM offerings like bank statement loans and DSCR (Debt Service Coverage Ratio) loans.

The company prides itself on “fast, simple home loans,” and has funded over $10 billion since inception.

It does not retain loan servicing for any of the mortgages it originates.

Prior to the acquisition, The Loan Store did business in about two dozen states.

Those include Alabama, Arizona, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, New Jersey, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Washington, and Wisconsin.

The merger should allow them extend their reach nationwide and potentially be licensed in all 50 states.

The company expects the sale to close in the second quarter of 2023, subject to customary closing conditions.

It’s unclear if any employees will be impacted as a result of the agreement.

Source: thetruthaboutmortgage.com

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Thanks to new data, it’s time to take a fresh look at the top mortgage lenders in California in 2022.

The Golden State is by far the biggest market for home loans, accounting for something like 16% of the overall market.

Nowhere else even comes close, including heavyweights like Florida and Texas, with about 8% market share. Or New York with about 5%.

As you might expect, the big household names make this list, and many are also on the top-10 list nationwide.

Let’s take a look at who topped the rankings, and break it down by home purchase financing and mortgage refinancing.

Top 10 Mortgage Lenders in California (Overall)

Ranking Company Name 2022 Loan Volume
1. UWM $34.9 billion
2. Wells Fargo $30.4 billion
3. First Republic Bank $27.0 billion
4. Chase $25.1 billion
5. Rocket Mortgage $24.1 billion
6. Bank of America $18.4 billion
7. U.S. Bank $13.9 billion
8. loanDepot $11.5 billion
9. Citi $9.5 billion
10. Union Bank $9.5 billion

In 2021, Rocket Mortgage, formerly known as Quicken Loans, was the top mortgage lender in California, according to HMDA data from Richey May.

But in 2022, United Wholesale Mortgage (or UWM for short) took the top spot with $34.9 billion funded.

That isn’t a huge surprise as they have also been the top mortgage lender nationally for a couple quarters now as well.

The Pontiac, Michigan-based company managed to grab a 6.5% market share in CA, despite solely working with mortgage broker partners.

They handily beat out their crosstown rivals Rocket Mortgage by about $10 billion, which dropped to the fifth spot.

In second was San Francisco-based Wells Fargo with $30.4 billion, followed by now-defunct First Republic Bank with $27 billion.

That’s also pretty impressive given the fact that UWM only works with mortgage brokers, as opposed to operating a consumer direct channel.

Coming in fourth was Chase, which incidentally acquired First Republic Bank. Talk about consolidation at the top!

They’ve been a big mortgage player for years since acquiring Washington Mutual about the housing crisis back in 2008.

Also in the top 10 were Bank of America, U.S. Bank, loanDepot, Citi, and Union Bank.

For the record, Union Bank was acquired by U.S. Bank, so even more consolidation!

Speaking of banks, seven of the 10 biggest mortgage lenders in California were depository banks, with the remainder nonbanks.

Altogether, more than $500 billion in home loans were originated in the state last year, down from around $1 trillion the year prior.

So about 40% of mortgage volume in California came from these ten companies.

Top California Mortgage Lenders (for Home Purchases)

Ranking Company Name 2022 Loan Volume
1. UWM $22.4 billion
2. Wells Fargo $19.1 billion
3. First Republic $15.5 billion
4. Chase $12.8 billion
5. Rocket Mortgage $10.9 billion
6. Bank of America $8.3 billion
7. U.S. Bank $8.2 billion
8. Citi $6.7 billion
9. loanDepot $6.5 billion
10. Guaranteed Rate $5.2 billion

Now let’s look at the top purchase mortgage lenders in the Golden State, which grabbed about 60% of the market in 2022 as refis waned.

This list is a little bit different because some lenders specialize in home purchase financing, while others cater to existing homeowners looking to refinance.

Topping this list was UWM with $22.4 billion, their second year holding this honor. They once again beat out Wells Fargo with $19.1 billion, while First Republic climbed to third with $15.5 billion.

First Republic ramped up their mortgage lending quite a bit in 2022, and that may have been what ultimately ended them.

Chase took the fourth spot with $12.8 billion, while Rocket Mortgage snagged fifth with $10.9 billion.

Also in the top 10 were Bank of America, U.S. Bank, Citi, loanDepot, and Guaranteed Rate.

The only lender in this list that wasn’t in the main list was Guaranteed Rate, replacing Union Bank.

Going forward, lenders will want to focus on this part of the market if mortgage rates remain inflated relative to recent lows.

Simply put, it’s difficult to drum up refinance business when many homeowners have fixed rates in the 2-4% range and the going rate is 6-7%.

Top California Mortgage Lenders (for Refinance Loans)

Ranking Company Name 2022 Loan Volume
1. Rocket Mortgage $12.7 billion
2. UWM $12.5 billion
3. Chase $11.3 billion
4. Wells Fargo $10.3 billion
5. First Republic Bank $9.5 billion
6. Bank of America $8.4 billion
7. U.S. Bank $5.0 billion
8. loanDepot $4.9 billion
9. Union Bank $3.9 billion
10. Homepoint $3.6 billion

Now let’s talk refis, which were all the rage in 2021, but have since fallen out of favor due to unprecedented increases in mortgage rates.

In this category, Rocket Mortgage ran away from the competition with an eye-watering $78.3 billion in loan origination volume in 2021.

But a year later, the picture was a lot different. They funded just $12.7 billion in refis, which still made them #1.

However, their crosstown rival UWM came in a very close second with $12.5 billion in refi loan volume.

Depository banks Chase and Wells Fargo snagged third and fourth with $11.3 billion and $10.3 billion, while First Republic Bank jumped up to fifth with $9.5 billion.

Again, that may be why they no longer exist – too many ultra-cheap mortgages handed out to wealthy clients.

Bank of America, U.S. Bank, loanDepot, Union Bank, and Homepoint took spots six through 10, which was quite different than a year earlier when names like Nationstar (Mr. Cooper) and Freedom Mortgage appeared.

Citibank was nowhere close when it came to refis, despite being a top home purchase lender in California. They did just $2.4 billion in refinances.

Top Mortgage Lenders in Los Angeles

Ranking Company Name 2022 Loan Volume
1. Chase $8.1 billion
2. First Republic Bank $7.5 billion
3. UWM $6.2 billion
4. Wells Fargo $4.9 billion
5. Rocket Mortgage $4.3 billion
6. Bank of America $3.9 billion
7. Citi $2.7 billion
8. City National Bank $2.6 billion
9. U.S. Bank $2.2 billion
10. Union Bank $2.2 billion

Top Mortgage Lenders in San Diego

Ranking Company Name 2022 Loan Volume
1. UWM $3.3 billion
2. Rocket Mortgage $1.6 billion
3. Wells Fargo $1.6 billion
4. Chase $1.6 billion
5. First Republic Bank $1.5 billion
6. Mission FCU $1.0 billion
7. U.S. Bank $912 million
8. Bank of America $787 million
9. Union Bank $766 million
10. San Diego County CU $736 million

Top Mortgage Lenders in San Jose

Ranking Company Name 2022 Loan Volume
1. Wells Fargo $4.3 billion
2. Bank of America $2.4 billion
3. PNC Bank $1.7 billion
4. First Republic Bank $1.5 billion
5. U.S. Bank $1.3 billion
6. Chase $1.1 billion
7. Citi $1.1 billion
8. Rocket Mortgage $981 million
9. Union Bank $726 million
10. UWM $611 million

Top Mortgage Lenders in San Francisco

Ranking Company Name 2022 Loan Volume
1. Wells Fargo $7.0 billion
2. First Republic Bank $6.4 billion
3. Bank of America $4.1 billion
4. Chase $2.8 billion
5. PNC Bank $2.5 billion
6. U.S. Bank $2.0 billion
7. Citi $1.9 billion
8. Rocket Mortgage $1.5 billion
9. Union Bank $1.4 billion
10. UWM $1.1 billion

Does Size Matter When It Comes to Getting a Mortgage?

As I always ponder with these top lender lists, does size actually matter?

Does it mean anything that your bank or lender is massive and bigger than others?

While that might be up for debate, as some could argue that a big institution might be more reliable or efficient or even cheaper, the opposite could also be said.

Ultimately, it’s nice to know who the big players are, but your personality might be better suited to a local credit union or mom-and-pop mortgage broker.

The mortgage lender you choose doesn’t have to be the biggest out there to provide exceptional service and competitive pricing.

Conversely, you might find a household name that does offer all those things mentioned above.

At the end of the day, obtaining a home loan is a big deal and it should be shopped accordingly.

That means lots of research and multiple quotes before you make your final decision.

Source: thetruthaboutmortgage.com

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The nation’s leading mortgage lender, United Wholesale Mortgage, has re-launched the 1% down payment home loan.

It comes at a time when housing affordability continues to be pressured by high asking prices and equally high mortgage rates.

While it may be seen as a boon to prospective buyers, it will surely have its critics as well.

Like other low-down payment programs, it targets those with lower incomes who would otherwise struggle to qualify for a home purchase.

It’s reminiscent of the frothy days in the early 2000s, when creative financing allowed high home prices to persist.

The Return of Conventional 1% Down

Home loans backed by Fannie Mae and Freddie Mac, known as conforming loans, typically require a 3% minimum down payment.

But the re-launch of this loan program, known as “Conventional 1% Down,” requires just a 1% down payment from the borrower.

For example, a $200,000 home purchase would require just $2,000 from the buyer.

And UWM would chip in the other 2%, $4,000 in this example, to put the loan-to-value (LTV) ratio at the minimum 97%.

This would technically make the loan a 3% down mortgage set at 97% LTV, thereby qualifying for backing by Fannie Mae or Freddie Mac.

It would also lessen the burden of coming up with a down payment, often a roadblock for home buyers.

Proponents will argue that it allows would-be buyers to get into a home sooner, instead of waiting to save for a larger down payment.

Those against it will argue that such financing is too accommodative, and that those who can’t squirrel away the minimum down payment should wait to buy a home.

This is further exacerbated by the fear of falling home prices, which could quickly land borrowers in negative equity positions.

While that may sound familiar to the previous housing run-up, one glaring difference between now and then is that borrowers are fully-underwritten today.

Back then, borrowers were often qualified via stated income and came to the closing table with very little (or no money) down.

Who Qualifies for a 1% Down Payment Mortgage?

  • Home buyers that make 50% or less of area median income
  • Borrower must put down at least 1% of purchase price
  • UWM will offer 2% of purchase price up to $4,000 max
  • Minimum FICO score of 620 required
  • Follows guidelines of Freddie Mac’s Home Possible
  • Loan will be 97% LTV backed by Freddie Mac

As noted, there are income limits on this new program. Namely, it’s an option for borrowers with income at or below 50% of the Area Median Income (AMI).

It’s also limited to home buyers (no refinances) and those purchasing an owner-occupied property qualify.

That means no investors or second home purchases, aka speculators, but condos and other 1-unit properties should qualify.

Because it follows the guidelines of Freddie Mac’s Home Possible, a minimum FICO score of 620 is likely required.

Those interested must use a mortgage broker, as UWM is a wholesale lender, meaning they don’t work directly with the public.

While the down payment hurdle will effectively be cleared, borrowers will still have to contend with much higher housing payments.

This is the result of still-high asking prices coupled with mortgage rates that have doubled in the span of a year.

The 30-year fixed is currently priced around 6.5%, up from closer to 3% to start 2022.

Is This What the Housing Market Needs Right Now?

Ironically, the Fed has been raising its own fed funds rate to curtail housing demand, but lenders have ramped up affordability options at the same time.

This has kept the housing market perhaps too competitive, thanks to an ongoing dearth of supply.

Take the ‘California Dream For All’ Home Loan that allows home buyers in the state to purchase a property without a down payment.

That program sold out in about a week due to unprecedented demand. In that case, homeowners sacrifice future appreciation for a zero down home mortgage.

This new 1% down payment option can likely be emulated by other lenders too, so it could mark a return of the offering industry-wide.

As a result, the housing market may continue to run hot despite affordability gauges signaling stress.

In the third quarter of 2022, Pontiac, Michigan-based United Wholesale Mortgage (UWM) became the nation’s largest mortgage lender, beating out cross-town rival Rocket Mortgage.

They’ve still yet to beat out Rocket an annual basis, though that could be in the works.

UWM is holding a hiring event this weekend in a bid to hire 500 new employees at a time when other lenders are closing their doors.

Source: thetruthaboutmortgage.com

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With the weather warming up, I thought it’d be prudent to check out “Spring EQ,” a lender that specializes in getting cash out of your home.

By that, I mean they offer cash out refinances and second mortgages, including both home equity loans and lines of credit (HELOCs).

They also partner with other lenders to provide secondary financing, so if you get a combo loan, you might find that they’re your lender on the second mortgage.

Aside from allowing you to tap your home equity, they also offer home purchase financing too, so they’re a full-service lender.

Let’s learn more about them to determine if they could be a good option for your first or second mortgage, or even both.

Spring EQ Fast Facts

  • Direct-to-consumer nonbank lender that offers first and second mortgages
  • Including home equity loans and home equity lines of credit
  • Founded in 2016, headquartered in Philadelphia, Pennsylvania
  • Currently licensed to do business in 39 states and D.C.
  • Also operates a wholesale lending division for its mortgage broker partners

Spring EQ is a direct-to-consumer mortgage lender based out of Philadelphia, Pennsylvania that got its start in 2016.

Originally, they sought to transform the home equity lending business model from “a long, drawn-out paperwork based process into a 21st century digital experience.”

This mirrors the efforts currently being made by mortgage lenders that focus on first mortgages, moving from a clumsy, slow process into a digital one powered by the latest technology.

While they got their start originating second mortgages, such as home equity lines and HELOCs, today they also originate home purchase loans and refinance loans.

And they refer to themselves as one of the fastest growing mortgage lenders in the country, though it’s unclear how much volume they did last year.

The company also operates a wholesale lending division for mortgage broker partners, and says it serves customers at other lenders including SoFi, Mr. Cooper, and Roundpoint.

Interestingly, Spring EQ Wholesale utilizes the FICO Score 8 model and encourages its clients to use Experian Boost, which can result in higher credit scores almost instantly and maybe lower interest rates too.

At the moment, they’re licensed to do business in 39 states and the District of Columbia.

They’re not available in Alaska, Hawaii, Idaho, the Dakotas, West Virginia, or Wyoming, but say they’re coming soon to Massachusetts, Missouri, New York and Utah.

How to Apply for a Mortgage with Spring EQ

  • To get started simply visit their website and click on “Get My Options”
  • This will allow you to see which loan programs are available
  • An expert guide (loan officer) will then get in touch to further discuss pricing and options
  • Once your loan is submitted you can manage it via the online Spring EQ Portal

As noted, Spring EQ has turned to technology to make the process of obtaining a home loan (and home equity loan) more pain-free.

They say you can get pre-qualified in just a minute, and apply online when you’re ready to move forward, using the latest tools to speed up the once-arduous process.

This includes the ability to link financial accounts, scan/upload documents, and eSign disclosures on the fly.

Once your loan is submitted, you’ll be able to manage it via the Spring EQ Portal.

It appears they move quickly, as they say many purchase loans and refinances can close in 20 days or less, while home equity customers can get their money in as few as 11 days.

All in all, the loan process should be mostly electronic and doable from any device, such as a smartphone or desktop computer.

Loan Programs Offered by Spring EQ

  • Home purchase loans
  • Refinance loans: rate and term and cash out
  • Conforming loans backed by Fannie Mae and Freddie Mac
  • Second mortgages
  • Home equity loans
  • Home equity lines of credit (HELOCs)

Spring EQ is similar to other standard mortgage lenders in that they offer home purchase loans and refinances, including rate and term and cash out offerings.

It’s unclear what specific loan programs are available other than the popular 30-year fixed, though I’d imagine a 15-year fixed, and maybe an adjustable-rate mortgage like the 5/1 ARM.

I think they only offer conforming loans backed by Fannie Mae and Freddie Mac, with government loans like FHA/USDA/VA perhaps in the works.

What sets them apart is their second mortgages, something that has become a relative rarity these days.

This includes both home equity loans and HELOCs, the latter of which are lines of credit that allow you to draw more cash over time if needed.

These second mortgages can be used concurrently with a first mortgage to extend financing, in the case of a purchase, or simply as standalone financing.

They say you can borrow up to 90% combined-loan-to-value (CLTV), which is the total of your first and second mortgage balances against the property’s value.

This is higher than what you might be able to obtain via a traditional first mortgage, which could be capped at 80% LTV if backed by Fannie Mae or Freddie Mac.

For example, if you have a $300,000 first mortgage you really like that’s fixed for 30 years at 2.5%, you might be able to borrow an additional $60,000 on a home valued at $400,000.

That way the low interest rate on your first mortgage remains untouched while allowing you to tap equity.

I believe they lend on primary residences, second homes, and investment properties, including condos/townhomes.

Additionally, they serve self-employed borrowers, though required income documents may be more extensive.

Spring EQ Mortgage Rates

One slight negative to Spring EQ is the lack of information regarding mortgage rates and lender fees.

After a visit to their website, I was unable to discover any interest rates listed, nor could I find any lender fees charged.

This doesn’t mean their pricing is good, bad, or in-between, it just means you’ll need to get in touch with a loan officer first to determine your rate.

As such, you may want to give them a call first to discuss eligibility and pricing before signing up via their website.

Obviously, loan pricing is a big part of the equation, so knowing how competitive Spring EQ is relative to other lenders is important.

That being said, they may offer proprietary loan programs that other companies may not be able to match, especially in the second mortgage department.

Spring EQ Reviews

On LendingTree, the company has a solid 4.6-star rating out of 5 from nearly 400 customer reviews, along with an 89% recommended score.

Additionally, Spring EQ was the #1 lender in the home equity category for customer satisfaction in the second quarter of 2020, and top-3 in the third quarter of 2020.

Over at Google, they’ve got a 4.2-star rating out of 5 from nearly 300 reviews, which is also a superior rating.

On Zillow, it’s a similar 4.53-star rating from a smaller sample size of about 55 reviews.

Lastly, they’ve got a 4.47/5 rating on the Better Business Bureau website, which is surprisingly high for a complaint-driven site. And they’re an accredited business with an ‘A+’ rating.

In summary, Spring EQ could be a good choice if you’re interested in a second mortgage, such as a home equity line or loan, and want to keep your first mortgage intact.

This could become a popular trend if and when mortgage rates really begin to rise.

But they also provide home purchase financing now as well, and could structure your loan as a combo to take advantage of better pricing while avoiding costly PMI.

Spring EQ Pros and Cons

The Good Stuff

  • Can apply for a loan directly from their website in minutes
  • Provide a fast, digital process and an online borrower portal
  • Offer second mortgages (HELOCs and home equity loans)
  • They say many loans close in 20 days or less
  • Serve both salaried and self-employed borrowers
  • Excellent customer reviews from past customers across all ratings sites
  • A+ BBB rating and an accredited business since 2016

The Maybe Not

  • Aren’t licensed in all states currently
  • No mention of rates or fees
  • Do not offer FHA/USDA/VA loans

(photo: Liz West)

Source: thetruthaboutmortgage.com

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Today we’ll take a deep dive into “Lend Plus,” a Southern California-based direct-to-consumer mortgage lender that aims to provide world class customer service.

They say their average loan officer has over 10 years of experience, which means you should be in good hands should you get in touch.

Their customer reviews seem to back this up, with near-perfect ratings across several review sites. Let’s find out more about this refi-centric lender.

Lend Plus Fast Facts

  • Independent nonbank mortgage lender that offers home purchase and refinance loans
  • Founded in 2007, headquartered in Aliso Viejo, California
  • A dba of parent company Tri-Emerald Financial Group
  • Currently licensed to do business in Arizona, California, Colorado, and Texas
  • Primarily a refinance shop that helps existing homeowners obtain a lower rate and/or cash out
  • Also offers reverse mortgages and non-QM loans for hard-to-close scenarios

Lend Plus is an independent nonbank mortgage lender based in Aliso Viejo, CA that offers home purchase financing, refinance loans, and reverse mortgages.

The company was founded back in 2007, which is a mature age for a mortgage lender these days.

While it probably wasn’t the best time to start a mortgage company, they were able to navigate the housing crisis and are still originating home loans a full decade later.

The company is currently licensed to do business in just four states, including Arizona, California, Colorado, and Texas.

They employ about two dozen loan officers, and as noted, their average staff member tends to have a decade or more experience under their belt.

Based on their HMDA data, they are primarily a refinance shop, with such loans accounting for about 90% of their business.

Most of their loans also come from their home state of California.

How to Apply for a Mortgage with Lend Plus

  • You can call them directly or fill out a short lead form on their website to get started
  • Or browse their online loan officer directory to find someone specific
  • They offer a digital mortgage process powered by ICE Mortgage Technology
  • It allows you to complete most loan tasks electronically like eSigning and document scan/upload

There are a few different ways to get started with Lend Plus. You can call them up and speak to a loan officer, fill out a short form on their website, or browse their loan officer directory.

Your best option might be to browse their loan officers, find one that’s best suited for you, then get in touch.

It might be good to start with loan pricing over the phone, then if you like what you hear, apply online via their digital mortgage application.

Their app is powered by ICE Mortgage Technology, formerly Ellie Mae, and allows you to complete much of the loan process electronically.

This includes scanning and uploading documents, linking financial accounts, eSigning disclosures, and potentially even performing an eClosing when you get to the finish line.

They aim to close loans in as quickly as 21 days from the day you open escrow, so they might be pretty speedy as well.

All in all, they should make it easy to apply for a home loan – you’ll just want to ensure the loan officer you select prioritizes communication to keep you in the know.

To that end, be sure to check out individual loan officer reviews for Lend Plus employees.

Loan Programs Offered by Lend Plus

  • Home purchase loans
  • Refinance loans: rate and term, cash out, streamline
  • Government-backed loans: FHA/USDA/VA
  • Jumbo home loans
  • Non-QM loans
  • Reverse mortgages
  • Foreign national loans

Like most mortgage lenders, Lend Plus offers both home purchase loans and refinance loans, including cash out refinances and streamline refinance products like the VA IRRRL.

Additionally, they offer reverse mortgages for homeowners aged 62 and older, along with non-QM loan products for borrowers who don’t fit the standard mold.

This can include bank statement programs and asset-based loans where income might be harder to document, along with mortgages for self-employed borrowers and foreign nationals.

They’ve got the full menu of common loan types, including conforming loans backed by Fannie Mae and Freddie Mac, government-backed loans (FHA/USDA/VA), and jumbo home loans.

In terms of specific loan programs, you can get a fixed-rate mortgage like a 15-year or 30-year fixed, or an adjustable-rate mortgage, such as a 5/1 ARM.

You shouldn’t have any issues when it comes to loan choice, and they lend all major property and occupancy types, including vacation homes and multi-unit investment properties.

Lend Plus Mortgage Rates

While you won’t find any mortgage rates listed on the Lend Plus website, I was able to view some of their rates on Bankrate.

From what I saw, they were pretty competitive (maybe not the absolute best) and had some of the lower rates among the dozens of lenders listed.

In other words, they might beat out the big banks and name-brand mortgage lenders, but be priced slightly above some of the cheapest online lenders. Of course, results may vary.

Based on their listing on Bankrate, they appear to charge a flat $1,195 loan origination fee, though it can be offset via a lender credit.

They don’t seem to charge a processing or underwriting fee, which is also a good sign.

Overall, you should find their loan pricing competitive, but do take the time to shop other lenders and negotiate your mortgage rate with them as well.

Lend Plus Reviews

On Bankrate, Lend Plus has a flawless 5-star rating out of 5 from about 50 reviews.

Every single review is rated 5-stars and 100% of customers who reviewed them would recommend the company to others.

Over at Google, they’ve got a stellar 4.6-star rating out of 5 from over 200 reviews, which is a much larger sample size.

Their own questionable reviews seem to be on Yelp, where they have a more average 3.5-star rating from about 30 customers.

Lastly, Lend Plus is an accredited business with the Better Business Bureau, and currently holds a perfect ‘A+’ rating based on customer complaint history.

In summary, they could be a good choice for an existing homeowner with a straightforward loan scenario looking to refinance.

But because they operate online and lack physical branches, they might be better suited for an experienced homeowner who needs less hand-holding throughout the process.

Lend Plus Pros and Cons

The Good

  • Can apply for a home loan electronically from any device
  • Offer a digital process backed by ICE technology
  • Lots of different loan programs to choose from
  • May offer lower rates than brand-name lenders and big banks
  • Excellent reviews from past customers
  • A+ BBB rating, accredited business since 2015
  • Free mortgage calculators on site

The Maybe Not

  • Do not publicize their mortgage rates or lender fees
  • Only licensed in a handful of states currently
  • No physical locations
  • Website a bit slow, information limited

(photo: Rob Brewer)

Source: thetruthaboutmortgage.com