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When it comes to searching for the right kind of mortgage to meet your needs, you will probably come across a decision about who you should borrow from: Do mortgage brokers or banks make better lenders?

A mortgage broker is a mediator that facilitates the process of acquiring a mortgage for individuals as well as businesses. Essentially, they are like home loan supermarkets. Their broad access to lenders as well as their wide offering of various programs makes them a convenient source of help for many borrowers. If you have less-than-perfect credit or are in unusual circumstances, mortgage brokers can still find you the type of funding you need. Mortgage brokers will charge a brokers fee, which you should ask about and take into account when calculating your initial payments.

Mortgage brokers will typically originate, process, and pass the loan on to a lender who will subsequently sell it to an investor. They take commission and will have higher closing fees. Beware of gouging, as brokers have full discretion on how much they want to charge the borrower for processing the documents necessary for the loan.

Today, about 20,000 mortgage brokerage operations account for more than 80% of mortgages are issued by mortgage brokers in the U.S. The convenience and resources they offer to borrowers is the key to their popularity.

The term mortgage banker refers either to an individual loan officer who works at a bank or to the bank itself. They specialize in originating mortgages and selling them to investors and continue to service them. Both the origination and servicing processes require fees, which are the two primary sources of income for mortgage banks.

A key difference between mortgage banks and mortgage brokers is that banks have more of a standardized and set approach to setting fees. Bankers are told what fees to charge and are told not to stray away from them. This allows for more stability and prevents the borrower from being surprised when it comes to discovering what the fees for the home loan will be.

Now the question is which is the better option? The answer is quite simple: Whoever gets you the better deal. It should be noted that while some borrowers enjoy the comfort and help of having a mortgage banker see them through the life of their loan (though not all do), while others do not mind either way. This discernment, along with a thorough comparison of deals that you can get from mortgage brokers and bankers, should give you a fairly clear idea of which path to take.

For more in depth coverage on various mortgage and real estate related topics, please visit Mortgage

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A mortgage broker is an individual which acts as a middle man between lenders and borrowers. A skilled mortgage broker can look at a variety of different loans to find one which suits the needs of the borrowers. Once they have found a mortgage which meets the needs of their clients, they are then paid a fee which is a percentage of the money loaned.

What Is A Mortgage Brokers Purpose?

If you don’t have the time to look for a good mortgage, a mortgage broker can assist you. Looking for a good mortgage requires you to contact a variety of different lenders and compare the interest rates on different loans. You will also need to know about the different fees and closing costs which will be included with the mortgage. This can be tedious and time consuming, especially if you are a very busy person. A mortgage broker should be able to perform all of these tasks, saving you a lot of time.

Poor Credit? A Mortgage Broker May Help!

If you have a less than perfect credit history you may have trouble locating a mortgage at competitive interest rates. Using a mortgage broker in this situation may allow you to find better deals than you would find on your own. Many banks aren’t flexible with down payments, and a mortgage broker can find companies and negotiate a down payment which is much lower than you would find at many banks. If you don’t like negotiating deals, mortgage brokers may be an excellent choice for you.

Speculate To Accumulate

While using a mortgage broker may sound expensive, it is often a lot cheaper than the price you would pay to use the services of the lender in locating a good mortgage. If you are able to get a lower interest rate by using a broker, this is more money you will save. At the same time, you can run into problems if you use the wrong broker. Below are some things to look at when choosing which mortgage broker you want to use.

Shopping Around For The Best Deal

You should first talk to multiple brokers to compare their services and fees. You should also ask them for references. A mortgage is a serious part of your financial picture, and you can’t afford using brokers which will not give you the best service possible. All of the fees charged by the broker should be explained up front. In fact, you will want to make sure they are put in writing. The price a broker charges will typically be between the retail and wholesale price of the mortgage.

Many brokers will mark up the price of their services. You should look at multiple brokers to make sure the prices are comparable. If one broker has a much higher price than another, this typically means they are marking up their prices to get the highest commission possible. It is also important to make sure you read the agreement carefully. Ask about any terms you don’t understand.

Reading The Small Print

You should also make sure all the information on your application is accurate. Make sure the broker doesn’t add information which is inaccurate or false. Once you have found a service you’re interested in, go back to your bank or other lending institutions to see if they are willing to beat the price. You should also only borrow the money you need and keep a close watch on interest rates.

If the mortgage broker charges you for locking in a certain interest rate, make sure you get a copy which shows information from the lender. Mortgage lenders have been known to keep the fees they charge for locking in interest rates. You should also make sure the loan you get is the one which was promised.

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When applying for a home loan, it can be difficult to ascertain your options and the best deal out there. Mortgage brokers can help you shop for the best loan for your situation.

Mortgage Brokers

A mortgage broker is an independent professional assisting homebuyers with their mortgage needs. Instead of a loan officer for a bank, a mortgage broker typically works with tens or even hundreds of lenders. This independence lets mortgage brokers hunt for loans that fit the credit history and particular lending needs of a person.

Lets assume you have less than stellar credit when you apply for a loan at ABC Lender. The lender pulls your credit report and determines you dont qualify for any of the loans offered by the lender. The lender is going to drop you like a rock and move onto the next potential borrower.

Now, lets make the same assumption regarding your credit score, but put a mortgage broker in the place of a lender. The mortgage broker is going to look at your credit score, income and overall borrowing circumstance. The broker is then going to give you options and a recommendation regarding the best loan for you. Instead of hoping to get financing, you are now in a situation where you are evaluating the best financing options.

Mortgage brokers can help anyone, but are particularly valuable in two circumstances. The two circumstances are bad credit and document overload.

If you have bad credit, even horrible credit, a mortgage broker is going to be able to hunt down loan options. Many people make the mistake of believing bad credit precludes them from getting a loan. It doesnt. The loan terms may require more points or a higher interest rate, but bad credit doesnt preclude home ownership.

For some borrowers, the monstrous amount of paperwork required in the loan process can be overwhelming. When you use a mortgage broker, the documentation is all taken over by the broker and his staff. In fact, mortgage brokers have people known as processors on their staff who do nothing but compile, organize and process all the documentation needed for loans. The do this everyday and are masters of the process.

The decision to use a mortgage broker is often a good one. A good broker is going to help you get the best loan while making the actual loan process a lot easier than going it alone.

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If you want to be a successful mortgage broker there are a few things that you can do to increase your chances. There are thousands of mortgage brokers across the world, and to set yourself apart you are going to have to be the best at what you do; there is no two ways about it.

Here are seven mortgage broker training tips that you can follow if you want to be the best in the industry.

1. You do not need to use hundreds of lenders in order to be a successful mortgage broker. Many mortgage brokers think that the more lenders they work with, the more money they will make. By getting five reliable lenders on your side, you will be able to do all of the business that you could hope for.

2. Make sure that you know your lenders rules and guidelines for loans. After all, if you are going to be selling their loans, you need to know everything about them. Many people make the mistake of skimping in this area. Do not let this happen to you.

3. Stay in touch with your lenders, underwriters, and anybody else that is integral to the loan process. By doing this they will be more inclined to stick with you through the thick and the thin. You can stay in touch via mailers, brief calls, or gifts during the holiday season.

4. Determine what your market is, and how you are going to define it. In other words, know what you sell and stick to it. This includes the loans that you are trying to sell to borrowers, as well as what type of people you will work with. Some mortgage brokers only work with borrowers that meet a certain credit score requirement. This is not a bad idea as long as you are consistent.

5. Try to carve out a niche for yourself. By doing this you will have much less competition to go up against. One example would be specializing in foreclosure loans. Sure, you are going to have competition, but it will not be nearly as fierce.

6. When you are communicating with borrowers and lenders make sure that you are professional at all times. This process can be hard on everybody; but a good mortgage broker can make things seem much easier.

7. Ask people that you know in the industry if they can help you garner new business. This way you will have a marketing technique working for you. This is one of the most overlooked but effective mortgage broker training tips.

Overall, these are only some of the mortgage broker training tips that you should consider. In order to be more successful come up with a list of your own tips to follow.

Tags: Bad Idea, Borrowers, Credit Score, Foreclosure Loans, Holiday Season, Lenders, Loan Process, Mailers, Mistake, Money, Mortgage Broker Training, Mortgage Brokers, Mortgage Tips, Mortgage Training, Niche, Two Ways, Underwriters

Let’s be honest: April 15th is a day of reckoning, the moment when we find out what we really owe for taxes. In households nationwide wallets are drained and many who were rich on the 14th are greatly impoverished by the 16th.

But for those with real estate the load is made lighter by tax rules which encourage the ownership of homes and investment property. Such rules are not only good for homeowners, they’re also good for the country: About 20 percent of all economic activity nationwide is related to real estate, so policies which encourage real estate activity help everyone.

It seems that almost every year changes to the tax code require the production of new forms and a re-education process. That said, the real estate basics remain in place and they’re good news for buyers, sellers, borrowers and owners.

Mortgage interest is generally deductible.

The IRS says there are three categories of deductible home mortgage interest:

Mortgages you took out on or before October 13, 1987 (called grandfathered debt).

Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2005 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately).

Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2005 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2).
Substantial profits can be sheltered when a prime residence is sold.

When a prime residence is sold, up to $500,000 in profits can be sheltered from federal taxes if married, $250,000 if single, providing the home has been used as a prime residence for two of the past five years. Generally this deduction cannot be used more than once every two years, according to the IRS.

There are also provisions which may be helpful to individuals who must sell a prime residence in less than two years. Under the 2004 safe harbor rules, individuals may be able to get some capital gains relief under certain circumstances, such as being forced to move because a job has been relocated at least 50 miles or a home that must be sold because of multiple births resulting from the same pregnancy.

Also, individuals in the Armed Forces and the Foreign Service may be entitled to special consideration under the Military Family Tax Relief Act of 2003 (MFTRA). For instance, you may have longer to take a capital gains deduction or to amend a tax return. There are other provisions under MFTRA that also may be helpful, so check with a tax professional for specifics.

Points may be deducible by both buyers and sellers.

Picture a situation where a home is sold for $500,000 and the owner — to help close the sale — offers to pay 1 point for the buyer. If the property was financed with a $350,000 mortgage, a point would be worth $3,500. According to the IRS, “the seller cannot deduct these fees as interest. But they are a selling expense that reduces the amount realized by the seller.”

Interestingly, in this situation the buyer can also deduct the points when the home is sold.

“The buyer,” says the IRS, “reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them.”

In effect, the seller gets to write-off the $3,500 cost by reducing any profit from the sale. The buyer essentially lowers the purchase price of the property when the home is sold at some point in the future — thus increasing the size of any profit. However, since up to $500,000 in sale profits may be untaxed, most buyers will effectively never pay a tax on the seller’s contribution for points.

If a prime residence is refinanced then the deal with points is different: The expense of a point must deducted over the life of the loan. If the home is sold before the loan term ends, then any undeducted cost for points can be used to reduce owner’s profit from the sale.

Home offices may be deductible.

If a portion of your home is used regularly and exclusively as your principal place of business or for the convenience of your employer it may be possible to write off a portion of such costs as mortgage interest, property taxes and utilities. There are a number of tests which must be met to take this deduction, see IRS Publication 587, Business Use of Your Home for details.

In some cases there may be tax advantages associated with not deducting your home office in the year or two before you move. Speak with a tax professional for specifics.

Natural Disasters

The Katrina Emergency Tax Relief Act of 2005 provides extensive tax benefits and assistance to those who were victims of hurricanes Katrina, Rita and Wilma. For details, go to the IRS Katrina relief page or call 1-866-562-5227.

If you have been in a natural disaster — a flood, hurricane, tornado, etc., contact your local congressional office to see if special tax help is available. Links to congressional offices can be found by pressing here.

Investment real estate can generate substantial write-offs.

If you own rental property you must seek a fair market rental for your property. You may generally deduct mortgage interest, property taxes, repair costs, management by an outside party, depreciation, advertising, insurance, utilities, legal services and other expenses.

It’s possible with rental properties to have both a positive cashflow and a loss for tax purposes. However, the ability to use real estate losses to reduce overall taxes may be phased out as income rises above $100,000.

If a rental involves relatives special rules and restrictions may apply. Check with a tax pro for details.

A 1031 exchange may allow investors to defer all capital gains taxes.

With a 1031 transaction, investment property is exchanged for “like” real estate. The basic requirements are that within 45 days after the “relinquished” property has been sold, a “replacement” property must be identified. The identified replacement property must then be acquired within 180 days after the sale of the relinquished property.

What’s important about a 1031 exchange is that the capital gains tax on the relinquished property is deferred — but it does not disappear. What really happens is that the basis for the new property (the “replacement property”) is reduced by the adjusted value of the “relinquished property” (the old property).

A 1031 exchange is complex and requires the services of a “qualified intermediary.” Among other tasks, a qualified intermediary holds the money from the sale of the relinquished property and applies it to the purchase of the replacement real estate. This must be done because under the rules for 1031 exchanges, the seller of a relinquished property cannot touch money from the sale — it must be held by the qualified intermediary.

Accounting for a 1031 exchange is also complex. Essentially there is a need to figure out the sale value of the relinquished property, add back depreciation and account for financing. Ed Horan, a well-known exchange authority and the author of How To Do a Like Kind Exchange of Real Estate, has posted a free 13-page exchanging guide with an accounting worksheet that’s well worth reviewing before meeting with a tax pro.

Sources and Publications

As always with taxes, nothing is ever simple or easy. Speak with a qualified tax professional for specific advice — an enrolled agent, a CPA or an attorney who specializes in tax issues.

Also, the IRS itself has excellent information at its website, www.irs.gov, by phone at 1-800-829-1040 and with specialized publications such as those below:

Publication 523, Selling Your Home

Publication 527, Residential Rental Property

Publication 530, Tax Information for First-Time Homeowners

Publication 535, Business Expenses

Publication 587, Business Use of Your Home

Publication 936, Home Mortgage Interest Deduction

Publication 946, How To Depreciate Property

Tags: 1 Million, Acquisition, Borrowers, Economic Activity, Education, Federal Taxes, Home Equity, Home Mortgage Interest, Households, Interest Mortgages, Investment Property, Irs, Nationwide, Real Estate, Substantial Profits, Tax Breaks, Wallets

After watching home values soar during the past few years it looks as if real estate reality is finally about to set in. The home-pricing forecast for 2006 is mild and modest with higher prices projected for the year but not the double-digit increases seen in 2005.

Then again, the forecast for 2005 was also mild and modest and it turned out to be wildly understated.

According to the National Association of Realtors existing home prices were expected to increase 5.3 percent in 2005. Now, however, NAR predicts that 2005 existing home prices will increase 12.7. If the most-recent NAR estimate is true, it would be the largest one-year price increase since 1979.

As to 2006, NAR says existing home prices should grow 6.1 percent.

In the context of what we know about existing home prices, a yearly increase of 6.1 percent hardly seems impressive — NAR records dating back to 1968 show that cash prices have increased an average of 6.4 percent annually. Also, it’’s important to say that real estate is a localized commodity — what happens in a particular area may be radically different than what happens nationwide. It’’s entirely possible that neighborhood prices may rise while national averages fall — and vice versa.

The result of NAR’’s moderate forecast and the visible slow-down in price appreciation nationwide plainly raises two issues: First, is the “bubble” over? Second, what’’s the next step for prudent buyers, owners and borrowers?

Let’’s start by saying that there has not been a “bubble,” a term which suggests unwarranted appreciation. Instead, what we have seen is an unusual combination of circumstances which together have made real estate the investment option of the moment.

In the past few years we have had interest rates at historically low levels. For much of 2003 to 2005 you could finance or refinance at 6 percent or less. As interest rates get lower demand increases because more people can compete for homes and bid up prices.

In many metro areas new home construction is delayed, complicated and made more costly by restrictive zoning regulations and a declining supply of close-in buildable land. The result? Higher prices for those properties that are available.

Between 2000 and December 2005 the population increased from 282.2 million people to 297.9 million — that’’s an additional 15.7 million individuals who need housing. Again, more demand pushes up prices.

In most areas — but not all — real estate has been a good place to invest, especially when one considers the alternatives. For instance, on January 14, 2000 the Dow Jones Industrial Average reached 11,722.98. By December 14th of this year — nearly six years later — the average was more than 800 points lower at 10,883.51. In contrast, typical existing home prices went from $139,000 in 2000 to $218,000 in October 2005 according to NAR.

Home prices have gone up in part for the simple reason that houses have gotten bigger. The National Association of Home Builders reports that in 1987 a typical house had 1,755 sq. ft. By 2004 the typical house had 2,140 sq. ft. More size produces a higher cost per unit.
What we’re seeing today is that some of the factors which have pushed up prices in the past few years are moderating.

Interest rates are now above 6.3 percent for 30-year financing — a terrific rate for much of the past half century but a full percentage point above the fixed-rate mortgage levels seen in 2003.

Higher interest rates mean two things: First, they limit the ability of borrowers to bid more. Second, they limit the number of bidders at any given price point. A $200,000 fixed-rate loan at 5.3 percent costs $1,110.61 per month for principal and interest over 30-years. At 6.3 percent and the same monthly payment, the borrower can only finance $179,428.

Not only have rates increased in 2005, there is reason to believe they will increase further.

The recent hike in energy prices, as one example, is nothing more than a universal tax on every transaction, product and service. It effectively raises costs that people, governments and businesses will try to re-capture through higher prices, taxes, wages and interest levels. Higher energy prices also directly increase the cost of homeownership.

What does it all mean? Look for a gradual and growing preference toward smaller, energy-efficient properties which cost less to buy and less to operate. With smaller appreciation, watch for reduced speculation which in turn will further shrink demand. Finally, look for savvy borrowers to limit future costs by refinancing now with fixed-rate mortgages — before rates go still-higher.

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