Tag Archives: Home loans
Are Reverse Mortgages the Devil?
About a year ago, the ole Boss Chad and I were chatting in his office and the topic of reverse mortgages came up. We both agreed that they just seemed crooked. Six months later, Chad did one. Let’s find out what happened, and whether or not Chad has gone nuts.
An Interview with the ole Boss, Chad Helmcamp
Just the Assistant: First thing’s first…are you a crook, because I thought we both agreed reverse mortgages are ca-reepy!?
Ole Boss Chad: Of course not. My original stance on reverse mortgages was that they had the potential to be abused, but my first experience proved very successful, and I had no idea the positive impact it could have on someone’s life.
JA: What is a reverse mortgage, anyway?
Boss: A reverse mortgage is when someone takes out a loan against their home, and instead of making a monthly mortgage payment, the equity from the home is used to make the payments, and the borrower ends up with either a lump sum of money, monthly payments to themselves, or an account from which they can make draws. 90% of people take the lump sum.
[Just the Assistant Note: I should know what equity is because I’ve worked with mortgage bankers for a lot of years now. Alas, I’ve been spending those years on Anthropologie’s website. I had to ask Chad what equity is. Equity: Let’s say your home is worth $200,000 and you don’t owe any money on it, that means you have $200,000 worth of equity. You owe $30,000? You’ve got $170,000 of equity.]
JA: Who gets these loans? Why?
Boss: The ideal candidate for a reverse mortgage is a person over 62 years old who owns their home free and clear, and has nearly exhausted their savings and is having a hard time getting by on Social Security.
JA: So basically you’re saying they take out a loan from the value of their home, and they get the money? But what if they live so long that it comes time that they’re supposed to pay the loan off? What then Boss? Is the little elderly lady out on the streets?
Boss: Because this is a government insured mortgage (and the borrower pays this insurance fee up front out of the equity of the home), the little elderly lady will be able to live in this home for as long as she lives, never have to make another mortgage payment and never worry about who is going to pay
the mortgage off. That’s what the insurance buys. Complete peace of mind for as long as she lives. That’s one of the misconceptions about this type of mortgage.
I should also note this is an expensive product, but that’s because the benefits of the product are substantial and the risk to the government is substantial. But the money comes from the equity from the home. It’s just something people need to
keep in mind.
JA: So tell me about the folks you worked with?
Boss: The couple I met with were in their late seventies, had lived in a nice house for 40 or 50 years that was worth about $500,000, but the couple had run out of most of their savings and was having a hard time even buying certain foods they wanted from the grocery store. But they knew they had this really nice home, and they didn’t want to move at their age.
Their daughter actually found me online. After doing some research on me and determining I am a good guy, she came to us on behalf of her parents.
JA: Then what, ole Boss?
Boss: I met with all four of them and explained everything. Then the couple had to go to counseling.
[Note: Not like lay on this leather couch and tell me what you see in the inkblot counseling. Because this is a government insured loan, the ole government makes sure people know exactly what they’re getting into, thus, lots of hoops through which to jump, which is a good thing. The counseling is required to make sure the borrower isn’t working with a crook. But Chad’s not a crook. He’s kind and smart. So this couple left counseling giving themselves a nice pat on the back for finding such a great mortgage banker.]
Boss: It really helped this family out, and the couple’s kids were really glad that their parents were taken care of. For the right person, this is a great product. It was so nice to see how relieved the couple was when they found out how much money they were going to get.
Actually, a few years ago I met with another couple about doing a reverse mortgage, and the adult children came along. Well, the parents were talking about how the first thing they were going to do with the money was buy the kids a new car.
Boss: Yeah, we didn’t do that loan. Like I said, for the right person, it’s a great product.
JA: Well ole Boss, this would’ve been a much more interesting post if we’d discovered you’re a crook. Oh well. Go answer all those phone calls!
If you’d like to talk to Chad about reverse mortgages for your parents (or yourself, for my young at heart readers), drop him a line at firstname.lastname@example.org or call him: 713.826.8136.
Fluctuation: Weights and Rates
So James hasn’t had solid food in eight days. And he’s still going to CrossFit. He’s lost so much weight that the other day I mistook him for Hayley. But then I noticed the blueberry/spinach juice stains on his upper lip and came to my senses.
Speaking of fluctuation, the ole Boss Chad is dealing with a pesky problem. Here’s the thing.
After clients meet with my ole Bosses to discuss a mortgage, often they take the information home, review the interest rate and how that will translate into their monthly payment, and kick back and reflect on the ole Bosses’ cordiality and knowledge.
Now, some of these folks sit and ponder their numbers for a day or so, and then call someone else for a quote [insert hissing and booing sounds here]. And sometimes the new quote from the much less fabulous mortgage banker shows a lower interest rate. Then the client stops calling my ole Bosses and finally emails to say, “I’ve found someone who can give me a lower rate.”
But ah HA! Here’s the part everybody has to understand. Mortgage interest rates fluctuate every single day. Just last week Chad went through this with one of his perspective clients, but you know what? All rates had dropped in the 24 hours since Chad had last talked to his client. If the client would have simply given Chad a call back after speaking with the sub-par lender, he would’ve found out that Chad’s quote would’ve gone down as well.
Market swings happen, and sometimes they happen very quickly. Make sure that when you are shopping for a mortgage, you compare real-time pricing. We’ve seen interest rates swing as much as .375 % in one business day. That number seems small, but when I plug that difference into my own interest rate for my mortgage, it equates to $50 a month. That’s real money people! Factoring in all my payments plus interest, it is a difference of $18,000 over the course of my loan.
Did you hear that? $18,000. Do you know what I could do in an Anthropologie with $18,000?
So here’s what you should remember. First of all, my ole Bosses are the best mortgage bankers in the country, so really you are in perfect hands if you simply email them and ask them to take care of your mortgage needs from start to finish. But if you are going to call around, make sure you are comparing real-time prices. Even a few hours can make a difference. And for crying out loud, do not believe the flashing interest rate on the side of your Hotmail account.
If you’d like to speak to either of my juice drinking, Crossfit training, P90X watching, mortgage banking ole Bosses, email me or contact them directly.
Finally, James “cleanse” ends Monday. I will be sure to report on all the results.
The Difference Between Mortgage Bankers and Big Box Banks
My cousin is getting married in a couple weeks, and the man she is marrying is in the process of selling his current house so that he can move in with my gorgeous cousin after they tie the knot. He got an offer on his house a couple of months ago. He counter-offered and went back and forth with the buyer a bit before agreeing on a price. The couple buying his house is in excellent financial standing, and is even planning on putting down nearly half of home price in cash as a down payment.
They still haven’t closed. They don’t know when they are going to be able to close. You know why? Because this couple used a Poopy Big Box Bank to get their mortgage. Poopy Big Box Banks do a really great job of providing checking and savings accounts. They do not do a good job on mortgages. I won’t say the real name of the bank they are using, but when my cousin told me how many problems they were having, I immediately thought, “I wonder if the buyers are getting their mortgage through _____,”
because I have heard these nightmare stories over and over. Then my cousin mentioned how the folks were in fact using Poopy Big Box Bank.
Now, my cousin and her soon to be husband are in a pickle since they’d planned to use the money from the sale of his home as a down payment for a new home.
The moral of this story: Using the Poopy Big Box Bank not only hurts you, but it hurts my cousin, and NOBODY messes with my cousin, you hear?
That’s not really the moral.
Anyway, to drive home this point a bit further, last week a client called my ole Boss James. This client has been a lifetime banker with another Big Box Bank that is actually well known for great customer service and loyal clients. So this guy naturally called them when he wanted to refinance his house. And the nice customer service agent said, “Oh we’d love to! We can maybe close in January?”
We’re in October, folks. The client called James. And you know what James Beaver said? “Oh we’d love to! Closing in 25 to 30 days sound good for you? And by the way, want to grab coffee or lunch later this week?”
In honor of James Beaver, and his love of charts, I offer you the following:
|Mortgage Bankers are more expensive than Big Box Banks. You end up paying more money for a loan.||My ole Bosses are usually the same price or cheaper. They are also more knowledgeable, which saves you more money.|
|My bank already has all my information so things will go quicker.||Your bank has your checking account number and your name. All the other documents, like pay stubs, W-2s, etc. will have to be collected by anyone providing you a loan. James and Chad close almost every loan in 30 days.|
|My bank has a big name, so I trust they know what they’re doing.||Envoy Mortgage is in the mortgage business. James and Chad do home loans every single day. They know more about mortgages than anyone at the Big Box Bank.|
|I’ll get great customer services. (You probably aren’t thinking this, but still.)||James takes calls from clients on Friday nights. And when you call, he knows who you are. He doesn’t ask for your loan number and social. He says, “Oh hey so-and-so! What’s going on?”|
And the last time I checked, the Big Box Banks don’t office in a charming bungalow in the Heights. Again, the Big Box Banks are fine for some things. I have my checking and savings accounts with them. But knowing what I know after snooping around mortgage companies for the past three years, I would never use the Big Boxes for a mortgage.
As always, please feel free to call or email the ole Bosses with any questions. Now, off to help my cousin fill out the application at the homeless shelter.