“Well, it was simple, our loan was a better overall loan and a less expensive loan. How? Their bank was offering them an FHA loan, and we offered them a Conventional loan.”
Avoiding A $5,000+ Mistake
Although the FHA interest rate was slightly lower, their proposed Monthly Mortgage Insurance or commonly referred to as PMI (Private Mortgage Insurance) was much higher (more than double) than the Conventional loan options PMI.
Blink’s interest rate was .125% higher which came out to a $22 difference in monthly payment but our PMI was only $75 per month for the Conventional loan versus $198 per month for their FHA loan option. That was a $123 savings per month in PMI and when they subtracted the $22 in additional interest, the net savings was $101 per month.
Not to mention that FHA financing also requires an up-front Mortgage Insurance Premium of 1.75% of the total loan amount to be financed into any new FHA loan.
That means the Client was not only going to pay $123 more per month in PMI but that their initial loan amount balance was also going to be 1.75% higher than their initial Conventional loan balance, a difference of $5,250 which would have increased even more over the life of the loan considering the interest paid on the additional $5,250 (1.75%) loan balance.
“Liking your bank or Loan Officer is one thing, paying them $5,250 and an extra $101 a month when you don’t have to is a completely different story and one I do not wish to be a part of,” says Paul Lamnatos.
“If you didn’t already know in most cases FHA lending requires the Monthly Mortgage Insurance to be paid for the life of the loan, so not only was this homebuyer going to be paying a higher total monthly mortgage payment but they were also going pay the mortgage insurance for the life of the loan.”
That’s right – an extra $198 per month for however long they kept their FHA loan. Luckily, they switched lenders with about 3 weeks left on their purchase contract which gave Blink just enough time to close their loan which allowed them to not make a 30-year (or however long they kept that home) mistake.
The Need To Educate Buyers On How To Shop For Loans
They had a similar situation where a Client almost chose an online Mortgage Lender as they too were being offered a lower interest rate only to find out they were paying a little over 2 points to lower their rate.
Those 2 points they almost paid equaled over $6,500, and it only reduced their mortgage payment by $44 per month. That means our Client would have had to wait 147 months to recoup the difference in cost versus interest saved not taking into account time-value-of-money and/or principal reduction. 147 months is more than 12 years, and they only planned on living in their new house for 3 – 5 years. After laying this out, it became very easy to point out that spending over $6,500 to save $44 a month for 3 – 5 years was simply not in their best interests.
There are likely thousands of other scenarios like these that have led homebuyers down the wrong path of which mortgage loan is truly best for them.
They all knew to ask the lenders the basics about interest rates, but there is so much more to ask to ensure you are getting the absolute best home loan. With almost two decades of experience as an independent Mortgage Lender, Paul Lamnatos knows the right questions to ask to ensure you receive the absolute best loan for you.
Buyers, be bold. This investment deserves complete transparency for you to be confident in your mortgage decision. Although there are perhaps countless queries, stick to these three categories and you’ll be well on your way to securing your home loan with certainty and confidence.
Scoring The Best Loan Terms
Buyers have no problem asking questions about their mortgage loan, but do they know the questions they should be asking to truly know if they’re getting a loan that is in their best interest?
He urges you to dig deeper with these seven questions after a mortgage lender gives you a mortgage interest rate.
- Is that a Fixed Rate or an Adjustable Rate?
- And is that a 30, 20, or 15-year loan term?
- What type of loan is this? Conventional, FHA, or VA?
- Sounds Like a Pro: Don’t ask this question if a) your down payment is 20% or more, b) your loan amount is above $440,000 and below $650,000 c) you or your spouse are a U.S. military veteran, in which case you will likely get a VA Loan.
- Buyers Beware – Loan Officers are often incentivized with higher commission earnings to offer FHA loans vs Conventional loans. Make sure you’re asking the right questions and not being dubbed
- What are the total lender fees for this interest rate? And does that include your a) Underwriting Fees, b) Processing Fees, c) Origination Fees, d) Admin Fees and/or e) any other Lender-related Fees?
- Just to reconfirm, what is the Loan-to-Value (LTV) for this (same interest rate)?
If your down payment is less than 20% make sure to ask these last two questions as well.
- What is the Private (monthly) Mortgage Insurance (PMI) factor as a percentage and how long do I have to contractually pay the PMI?
- Home Buying Tip – FHA PMI has a higher monthly premium and a required 1.75% upfront cost of your total loan amount that is financed into your new loan or added to your down payment. The duration of the monthly PMI is most often for the life of the loan versus Conventional Private Mortgage Insurance which is less expensive, does not require an upfront cost, and is not required for the life of the loan.
- Does this interest rate require me to escrow my property taxes and homeowners insurance, and if so, can I waive this requirement and at what cost?
- If there is a cost to waive the escrow requirement remember to add it to the total lender costs to ensure you are making an apples-to-apples comparison.
Getting To Know Your Loan Officer
Understanding the tangible and intangible benefits of your potential mortgage is vital, but another important step to take is to learn more about the Loan Officer that will be responsible for what is likely the most important purchase of your life. Don’t be afraid to shop around several companies to find a loan representative that is the best fit for you. Asking your Loan Officers the questions below will help you determine whether they’ll be a good match and appreciate not only your wants but, more importantly, your needs.
- How long have you been a Loan Officer?
- Experience: If less than 3 years, ask them what they did before becoming a Loan Officer and for how long. This provides two things: a) their overall experience and b) do they constantly job-hop and can they be trusted to finish what they started?
- Are you independently licensed or do you operate under your company license?
- “I strongly suggest you find a licensed Loan Officer who lives, works, breathes, and pays taxes in your state as when it comes to lending regulations. Just ‘cause you’ve been to Texas or seen one of our football teams play on TV, it doesn’t mean you understand Texas or our lending laws, including the importance of being independently licensed,” says Paul Lamnatos.
- How long have you worked with your company?
- Pay Attention to Details: Take answers to Questions 1 and 3 to find out if they have experience working with a different Mortgage Lender and if so, ask them what they like about their current company versus their old company.
- What are your days and hours of availability?
- Availability: Are they available when you need them and do you have their cellphone number or just their office line?
- Where are your loan processors and what is their availability?
- Teamwork: Are their Loan Processors in the same office, city, and state as they are, or do they work remotely? Also, same question as before: did you get a cellphone number as well or just their office line?
- Do you mind if I ask what mortgage lender your personal mortgage is with?
- Why this is important: This is a great question to uncover two key items.
- First, do they personally know what it is like to go through the experience of buying a home and getting a mortgage loan? Travel Guides tell you about the Coliseum in Rome and all the fun you are going to have when you get there although few have ever actually even been there. A Tour Guide, however, knows the Coliseum and therefore can show you firsthand what you need to know rather than tell you.
- Second, it shows whether they are a believer in their own company, after all, we seriously doubt anyone at Apple works with an Android device and vice versa.
If keeping it local matters to you, ask question number 7 below, if not, skip ahead to Getting To The Bottom Of Who’s Servicing Your Loan.
- Where is your office located and do you live in the same city and/or state?
- Why Local Matters: “Last I checked, it has always been local independently owned companies sponsoring and supporting your neighborhood little league teams, school events, and local outings, not the corporate banks and/or Superbowl commercial retail lenders. What better way than to continue that generational support by also supporting local companies, including a local independent mortgage company in your neighborhood? Assuming they provide great loan terms and service of course. Find one near you at www.findamortgagebroker.com,” says Paul Lamnatos
Home Buying Tip – We also encourage you to spend a few moments reading online reviews of your potential Mortgage Lenders and their Loan Officers as this simple step alone can help you make your decision on who to select without asking the above questions.
Getting To The Bottom Of Who’s Servicing Your Loan
The last questions future homeowners ought to consider asking are questions regarding their future loan servicing company as, more often than not, the mortgage company that initially finalizes your home loan is not the same mortgage company you make your monthly mortgage payments to.
This company is commonly referred to as a “loan servicer”, and chances are, your loan will be sold multiple times. “For any loan servicing company or bank to tell any of its Clients that it will retain the servicing rights to their loan for the entirety of their loan is at best asinine and at worst a flat out lie.
Think about it, how can anyone or any company predict with certainty that they will be around for 15, 20, or 30 years? They can’t. If you don’t believe me, remember BBVA Compass Bank? They were one of the largest banks in the world and their loan representatives likely told their Clients the same thing Wachovia Bank, Washington Mutual and hundreds of other banks told their Clients as well until they either sold or merged their banks with other banks as did BBVA Compass when they sold to PNC Bank at the tail end of 2021,” says Paul Lamnatos.
“And should your loan be sold, you truly have nothing to worry about as your loan terms will remain the same and any future loan servicer will honor them for the life of the loan. If you don’t believe me, ask your parents” he adds with a smile.
The following questions will not only reveal more about whether to proceed with them, but also help to shed light on whether you’re achieving the ideal situation of having the best loan options, the best Loan Officer, and the best loan servicer for you.
- What type of mortgage lender are you? Are you a Corporate Bank, Credit Union, Retail Lender, Online Lender, or a Local Independent Mortgage Company?
- Home Buying Tip: When comparing the lowest rate, lowest fees, and the smoothest process, the above 5 options would be in the following order 1) Local Independent Mortgage Company, 2) Corporate Bank, 3) Online Lender, 4) Credit Union, 5) Retail Lender.
- Do you service your own loans or do you sell them?
- The likelihood is that your loan will be sold multiple times over its term. Don’t worry when or if that happens as your initial loan terms never change, the only change that you’ll see is where and how you make your monthly payments.
- Are you available by phone and if so, what hours?
- Convenience: Are they only open when you’re working or are you able to call them during your time off?
- Do I have online access to my account?
- Technology: We’ve found this can often eliminate the phone call and any anxiety of holding music as you can get your answers on your timeline when you need them.
- How am I able to make payments, do I have auto-draft options and can I pay bi-monthly if I like?
- Ease & Flexibility: We don’t know about you, but we sure would hate to get stuck with a loan servicing that only accepts handwritten checks.
- Do you offer loan recast options and if so, what are the details?
- You can make a lump-sum payment of typically $10,000 or more towards your home loan balance at any time and request a lower monthly payment without having to go through the process of refinancing. This is called a loan recast, and although it’s becoming more and more popular, not all loan servicers offer this amazing feature just yet so be sure to ask your potential Loan Officer if theirs does.
7. What is your reputation as a Loan Servicer?
- Check Your Gut: If they won’t say or give you an evasive answer, this is where searching a company’s online reviews can help out if you haven’t already done so.
- Something to keep in mind: Who in their right mind is going to take time out of their day to write a glowing review about a Loan Servicing company? The reviews will usually go to the Realtor or the Mortgage Lender, but a Loan Servicer? Not likely.
Don’t be surprised if you find zero reviews. After all, they are a Loan Servicing Company, but remember to follow your gut and consider positive reviews a cherry on top for these guys.
Bonus Question: Inquire as to their available online servicing calculators that show the potential interest savings over the life of a loan depending on any extra monthly principal payments made.
Countdown To An Unbeatable Mortgage
These questions may or may not seem like a lot with a major decision like buying a house, but Paul Lamnatos has the credentials to know the ideal way to produce the most detailed responses that could be the deciding factor between succeeding in this year’s unsettled property market by getting the loan and home you want or missing out on your perfect opportunity.
Media Contact
Blink Lending – NMLS 1795324
Paul Lamnatos – NMLS 332922
Blink Lending is an Equal Housing/Equal Opportunity Lender.
