Comments on: Bank Financing - Some Important Considerations

By: Chris

Chris — Tue, 17 Mar 2009 00:19:06 +0000

interesting thing about mortgage broker is they will tell you it is going to take all this time when in reality they know everything in about 24 hours the rest is just show and scam.

By: Bonnie

Bonnie — Sun, 31 Aug 2008 13:03:55 +0000

Are points money and are they necessary? If they are money, who gets the points, the realtor, the lender or the buyer? What are they for anyway?

A “point” is equivalent to 1% of the loan amount. Yes, it is real money. Generally speaking, the lender and/or mortgage broker receive points. They’re not legally required, though most lenders/brokers will charge them in one way or another. Sometimes they’re very clearly apparent because they are a part of the up-front closing costs that must be paid. And sometimes they’re hidden in the form of “back-end” fees that the broker receives from the lender in exchange for the broker causing the borrower to accept a less attractive loan. — Bryan Ellis

By: Jeff Miller

Jeff Miller — Tue, 19 Aug 2008 16:31:00 +0000

Jeffrey, I use the clause that Bryan uses because it also covers your situation.

What your solution doesn’t cover is any condition that doesn’t *directly* involve the loan.

Lets say you are using a buy and hold strategy and you specify loan terms that will insure a reasonable monthly net income. What happens if, during the time it takes to close, you find out that a new condo complex is going in a block away and it’ll drive down rents? If you use your loan clause, you are stuck if you got the loan that you asked for in your contract.

In Bryan’s case, he can say that the loan payments are not acceptable (since it would result in a negative cash flow). The main difference here is that by putting your loan conditions in the contract, you allow someone else to decide if the loan is acceptable. By putting in “by your sole discretion,” you are reserving all rights to make that decision yourself.

By: Jeffrey Smith

Jeffrey Smith — Tue, 19 Aug 2008 14:37:01 +0000

On one of our deals, we had exact financing terms spelled out in the purchase contract. We got a firm loan commitment for those exact terms. Very near the closing date, our mortgage broker tried to alter the terms by slipping in a higher interest rate and a prepayment penalty (so he could get a higher fee from the lender). We told him that the financing terms cannot be changed because it’s in the contract. We must get our terms or we void the purchase contract. He backed down and we got the terms we wanted. We haven’t used his services since then.

On another deal, I specified the financing terms, including zero points. We got the loan commitment for the exact terms. Near the closing date, the mortgage broker (different from the above broker) tried to slip in a couple of points (each point is 1% of the loan amount). I explained that I cannot accept paying the extra fee, because my contract states “zero points”. My real estate broker ended up paying the points out of her commission to avoid losing the deal.