In my last article I described how getting a conventional loan instead of keeping an FHA loan with mortgage insurance could be advantageous. To explain my reasoning, I presented a conversation I had with one of my clients, Thomas. Thomas is a creative type who mentioned that he “gets lost in the minute details associated with finance and such,” yet understands that his decisions can make a significant impact on his future.
Thomas seemed upset when I noted that some loan officers get higher commissions for selling FHA loans compared to other products that might be better for a borrower. I remember him saying that, “No wonder I got an FHA loan instead of a loan where the interest is a write-off and there’s no mortgage insurance.”
“I don’t want to make anybody out to be the bad guy,” I said, “and FHA loans have their place, especially for lower-income borrowers, since the goal is to provide a path to homeownership, but that could be why you ended up with an FHA loan.”
“We were definitely in a different financial situation when we bought our house,” said Thomas, backtracking, “but when we refinanced things weren’t that different than they are now. And you said mortgage brokers make the same money regardless, right? Geez, I wish I had met you two years ago.”
I smiled. “The important thing to realize is that there are loan officers out there who work directly for lenders. Their goal is to further their employer’s best interests. Mortgage brokers like me work with multiple lenders and shop around. Conversationally speaking, we act as the middle man between the lender and our clients. The effect of this is that our clients are our employers, so it’s always in our best interest to find the best possible deal for our clients.”
I continued: “Not only that, but there are a lot of pre-licensing courses that brokers have to take, from federal laws and ethics to nontraditional methods of financing. Then there are 12 more hours of electives we have to take. And that’s not even counting all the continuing ed –”
“Can’t believe all the money I threw away on mortgage insurance,” said Thomas, interrupting. “Seems like my wife and I need to refinance our house … then again we are thinking about moving at the end of the year, so I’m guessing we shouldn’t be applying for new lines of credit?”
“Probably, but maybe not. I would have to look at some things before I gave you a definitive answer. The easiest thing would be for you to get some information together and come back with your wife. Then we can go over all of the particulars and find a strategy to help you achieve your goals.”
“That sounds awesome! Thanks Patrick.”
“Hey, no problem, Thomas. It’s what I do. My job is to be a consultant and provide you with the information and guidance you need to make an educated decision.”
Patrick Stoy has 15 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.
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