When it comes to finding a lender for a mortgage loan, many borrowers take the same approach as with most other needs – they resort to the internet. This approach can be very fruitful, but it can also have some pitfalls. Today, we’re going to discuss some of the advantages of working with on-line lenders as well as advantages of working with local lenders.
Often times an on-line search for mortgages will result in finding mortgage brokers that are advertising very competitive rates. While getting the lowest interest rate is a goal for most borrowers, it may come with some unforeseen costs. Mortgage brokers usually have access to multiple investors so that they can “shop around” for low rates when it is time to lock in a loan for their borrowers. Generally speaking, the more investors they have access to, the better chances of getting a very competitive rate.
ONLINE LENDERS
So why not go on-line to find a mortgage broker that can offer a low interest rate? Because the rate is only part of the equation. Is the broker charging discount points to be able to offer such a good rate? If there are points involved, the lower rate could results in a worse financial scenario for the borrower.
Most mortgage brokers do not participate in the processing or underwriting of the loan. The mortgage broker is just a “middle man” that is paid to link a borrower with an investor and is left out of the most critical part of the loan approval process. They often gather the information from the loan application, along with supporting documentation, and then send it off to the investor so that they can process and underwrite the loan. Many times, the loan will have some “issues” that require additional documentation or explanations from the borrower. In some cases, the broker is not aware of any issues with the loan. Even worse, if they are aware of the issues, they have no control as to how the issues can be corrected or how long it may take to get the problem resolved.
Another important aspect of any loan is the appraised value of the property that is being used as collateral. If your mortgage broker is from a different part of the country, how do you know that they are using appraisers that have a keen understanding of the nuances of property values in the DC Metropolitan area? Just in Northern Virginia alone, property values for similar type homes can vary greatly by zip code, school district, and city. It is important that the appraisers understand these differences when compiling an appraisal report.
LOCAL LENDERS
Sometimes it is important to be able to have a face-to-face meeting between the lender and the borrower. Many borrowers would prefer to hand deliver valuable and sensitive personal financial information versus sending it via email or some other electronic format. In addition, it is also comforting for some borrowers to be able to shake hands with the people that will be making the determination of whether a loan of hundreds of thousands of dollars will be approved.
There are mortgage programs that are specific to a general area or state. Recently, VHDA was offering to pay 3% of a sales price to qualified borrowers purchasing a home in Virginia. The benefit to borrowers qualifying for this program could be as much as $15,000! Having knowledge of these types of programs is essential when determining the best loan solution for borrowers. It is unreasonable to expect a mortgage broker from another part of the country to know about specific programs in your area.
OUR PREFERRED LENDER
Intercoastal Mortgage Company is a local lender with headquarters located in Fairfax, VA and has been providing residential loan solutions for the DC Metro area since 1987. Intercoastal Mortgage Company will fund loans that have been processed and underwritten “in house” at our Fairfax, VA location. Similar to mortgage brokers, Intercoastal Mortgage Company (ICM) has access to multiple investors which allow us to look at various outlets when locking in a rate for a borrower. If the borrower has good credit and income, it may be as simple as seeing which investor has the lowest rate at time of the loan lock. If the borrower has experienced credit challenges, a short sale or foreclosure, ICM has access to investors that will service loans of this type. Perhaps there are programs such as the VHDA grant program that can save thousands of dollars for the borrower. We work very hard to keep updated on all local loan programs.
Because the processing and underwriting is completed “in house”, ICM is able to meet closing dates that many mortgage brokers are unable to meet.
The appraisal process is completed by having access to multiple “local” appraisers that know the DC area very well. The “pool” of certified appraisers that ICM uses have all shown their knowledge of the local area for an extended period of time.
The chart below sums up the advantages of working with a local lender versus an online lender.
As you can see, a local lender can access multiple investors to offer very competitive rates, along with excellent service and timeliness that is extremely important in today’s lending environment.
NMLS # 838973
Keith Harris
Senior Loan Officer
Office: 703-259-0788
keithh@icmtg.com
treatment you are able to take advantage of on your individual tax return. Deducting mortgage interest and real estate taxes is often what makes it more beneficial for taxpayers to itemize their deductions (rather than using the standard deduction); along with state income taxes paid. This makes itemizing more advantageous. These deductions reduce taxable income, which in turn, reduces taxes due. Typically, personal interest, such as credit card or car loan interest paid is not deductible, but qualified residence interest (with a few restrictions) is fully deductible.
You can also deduct the interest on a second home mortgage (such as a vacation or mountain home), as long as the second home mortgage amount, when combined with the principal residence mortgage, does not exceed a combined total loan amount of $1,000,000. For example, if your principal residence mortgage equaled $700,000, and you purchased a second home with a mortgage of $600,000, you would be able to deduct the interest on your $700,000 principal residence mortgage and you would be able to deduct the interest on $300,000 of your second home mortgage ($1,000,000 – $700,000) for a total interest deduction on $1,000,000 of your mortgage balances.
The interest on home equity loan debt is also deductible. The home equity loan interest deduction is the interest on a loan amount that is the lesser of the loan balance, up to a $100,000 loan, or the fair market value of the home minus 
A final major tax advantage comes when it is time to sell your home. If you own and live in your home for two of five years and you haven’t sold another home within the two years prior to the sale date, the gain on the sale, up to $250,000 ($500,000 for married filing jointly), is excluded from income tax. The con side to this exclusion is that any loss on personal residence is not deductible.
The 
Another scenario where a buyer can escape the need for a down payment is a loan from the 
A third loan option that has no down payment is a 
Conventional
Contacting a lender to get pre-approved for a loan should be the first action item for anyone that is interested in buying a home. The pre-approval process will typically begin with a phone conversation or a face-to-face meeting between the borrower and the loan officer. The prospective borrower will need to fill out a loan application and give the loan officer permission to run a credit report.
-Permission to run a credit report
-Does the borrower own any properties currently
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After gathering information from the initial conversation, loan application and credit report, the lender may need additional documentation in order to provide a pre-approval letter. Once this information is received and reviewed, a lender should be able to let a borrower know the amount of a monthly housing expense payment they would qualify for. A pre-approval letter is a written commitment by a lender to provide a mortgage loan to a borrower. With a pre-approval letter in hand, potential buyers are able to look for properties in their price range with a high degree of confidence that they can purchase a home that fits their needs.
If you are curious about how the process works, check out our previous blog on the entire 
These three reporting entities will provide a credit score that is used to determine the risk associated with a particular borrower regarding repayment of the loan. A number of credit related variables are used to calculate the credit score. The credit score is used as a predictor as to the likelihood that the consumer will have late payments in the next 24 months. The lower the score, the greater likelihood that the borrower will be late on a payment or payments.
Payment History………….7 years(Date of last activity)
HAZARD INSURANCE
WHAT IS INCLUDED – Be very clear about what is covered and more importantly what is NOT covered. You don’t want to lose something and later find out it wasn’t included in the policy.
BUSINESS NEEDS – Do you have a home office? There are both property and liability business exposures that most standard homeowner policies don’t address, as well as low levels of coverage. The typical policy appears to be around $2,500 for in-home office equipment. And while that may sound like enough, by the time you add the costs of your computer, software, tablet, printer, scanner, phone, furniture, etc., it could very well exceed that amount. You’ll need to find coverage that can include all of your home office equipment and supplies.
LOWER INTEREST RATES – Interest rates can be lowered due to a change in the industry as a whole, such as the example above. Interest rates can also be lowered by shortening the term of the loan. 15 year rates will be lower than 30 years loans. Adjustable Rate Mortgages (ARM’s) are loans that are fixed for a specific time period such as 3, 5 7 or 10 years and will typically be offered at rates lower than a 30 year fixed loan.
Most loans require the borrower to pay for property taxes and homeowner’s insurance on a monthly basis as part of the mortgage loan payment. When property taxes are due (typically twice a year), and homeowner’s insurance (annually) the lender will pay the bills out of the escrow funds.
–Government Recording Fee – fee charged by government to record the deed of trust
interest rates from the low 3% to over 4.5%.
No one can tell for sure what rates will do, but everything I hear and read indicates that interest rates will rise gradually through 2015. We may see rates approaching 4.5% or even higher by the end of the year.
Interest rates and mortgage bond prices are inversely related. If mortgage bond prices go up, interest rates go down.
Federal Reserve System:
In summary, there are many factors that influence mortgage interest rates. All of these factors are outside of our personal control. When it comes time that you need a loan to purchase or refinance a home, you will be faced with making a decision to lock in your interest rate or let the rate “float” in hopes that the market improves and you can get a lower rate. Here is my advice in regards to that decision: It is much better to be locked in with rates falling than floating with rates rising.