Kimber White is Managing Partner of United American Mortgage and President of the Florida Association of Mortgage Professionals (FAMP) Broward Chapter. He has over 27 years of experience in the mortgage industry. White was awarded Mortgage Broker of the year award for 2013 in Broward County as well as being awarded the 2013 Mortgage Broker of the year by his peers in the Florida Association Mortgage Professionals. He has also been presented with the President’s award for outstanding service to the association. Kimber serves currently as President of The Florida Association of Mortgage Professionals, Broward Chapter and state government affairs chair for FAMP.
We asked White give us his expert insight into today’s mortgage lending market.
Kimber, explain the difference between a mortgage bank and a mortgage broker.
Kimber White: There is no such thing as a mortgage broker any longer. It is a mortgage brokerage business. The people who work in a mortgage broker business are Mortgage Loan Originators.
With that said, the difference between a lender and a mortgage brokerage business is a lender is someone who lends their own money, who is a direct lender such as banks, credit unions. They directly lend their own money. At the same time, a lender is only tied to one product. That is their bank’s product.
A mortgage broker business is a company that brokers to the lenders.
What are the advantages and the disadvantages with each?
Kimber White: In the old days there used to be disadvantages. The mortgage brokerage business could have higher prices and they had more points and fees. We don’t find that true in the market anymore. The lender, usually the banks, have the higher fees.
So by going to a mortgage brokerage business you have two advantages. The rates are more competitive, there’s no additional fees. You have someone who’s usually more versed in the business and product knowledge, because a mortgage broker is, at this time, the only one that’s required to have a license. You get quality service from a broker business, you are dealing with the loan originator from start to finish in loan process unlike the banks or big lenders, the mortgage broker business will shop your loan to many lenders and get you the best pricing and the best rate because they’re competing for your business.
So a broker is going to shop around for your loan and they’re going to be more of an advocate for you as a consumer. Am I correct in that assumption?
Kimber White: That’s correct.
Let’s go into the types of loans that a broker might have available. I know that’s a broad topic, but can you explain what’s available out there and the differences between the types of loans?
Kimber White: Let’s start with your plain vanilla conforming loans, which is Fannie Mae and Freddie Mac. Basically what they call them is conventional loans that are written by Fannie Mae and Freddie Mac. With that, you have to have at least a 640 credit score to get conventional financing.
The conventional loans typically will go up to a 45% debt to income ratio, so that’s a hindrance if you have a lot of debt. A debt to income ratio includes your housing payments, your credit card payments, all of your monthly payments. It does not include housing, as far as lights, utilities, those things. That is your conventional loan.
Then you have an FHA loan, which you can put down as little as 3-1/2%. They do not have a credit score threshold, but usually most lenders go down to 560. The max debt to income ratio is based on the automated underwriting findings usually they max at 58% with compensating factors.
That is the difference, if you’re looking and you’ve had dings on the credit. A conventional loan, four years out of bankruptcy, FHA two years, so that is your difference in those. It can go all the way up to seven years with a foreclosure on conventional loans. People getting back into the market, that’s the loan to be looking for.
There’s another loan called Home Path which is by Fannie Mae. That is 5% down. Fannie Mae owns the property. There is no appraisal. Of course, then there’s renovation loans, all variations of that. You can do a renovation loan with an FHA, which means that you can buy a house, fix it up and roll the money into it for repairs. You can do Home Path Renovation, which a lot of people do, buy the Home Path loans, which is a Fannie Mae product, fix them up.
Then we have VA. If you’re a veteran there is 100% financing. There’s really no credit score. It’s a total package scorecard. That’s the way to go if you’re a Veteran. Rates are good, they’re low and they’re easy to get into.
What kinds of fees are associated with a loan application and approval? Does it vary from the types of loans you just mentioned or is it pretty much standard across the board?
Kimber White: Point blank, there are no application fees allowed to be collected because of the new rules. You cannot collect an application fee, zero. It is not allowed. The broker or the lender, whoever it may be, is to be paid only if the loan closes. As far as any upfront fees, except for a credit report fee, which is a legitimate third party fee when you want to get qualified, or an appraisal fee made directly to the company assigned to do the appraisal, but there can be no other fees charged.
I know there are a lot of factors that go into this whole process, but generally, how long of a time period are we looking at to close a loan?
Kimber White: If you go with the big bank and with a lender, the average process is sixty to ninety days. If you go with a market brokerage company such as our company, we can close as little as two weeks. If the paperwork is together. The average turnaround time in a loan process closing with a good broker is three weeks, as long as everything’s in place. If there are no title issues. No one can close a loan under seven days, because there’s a seven business day waiting period from the time a loan is submitted to the time that actually it is allowed to be closed under guidelines.
Let’s talk a little bit about credit blemishes. I know that’s a big factor in the approval process. Can you tell us how that factors into your loan approval?
Kimber White: Your credit blemishes are based upon the type of loan you get. As I discussed, if you’re getting a conventional financed Fannie, Freddie loan, they usually don’t like to see anything late in the past twelve months. Either one of these don’t want a mortgage late in the past twelve months. Collection charges above a certain amount have to be paid off on a Fannie and Freddie loan. FHA is a little more lenient. If you have a late payment and it is a onetime thing, you can usually get it off. Medical collections do not have to be paid off.
For example, student loans under Fannie Mae, no matter whether they’re deferred or not, you have to count 5% of the payment. If you have student loans under FHA and they’re deferred for up to twelve months from the time it closes, then you don’t have to count that percentage at all. It all depends on the product.
The thing I have to bring that up about blemishes, as far as income, is that you may make $95,000, but because you travel or you have expenses and you write off another $15,000, the average consumer doesn’t realize that when they write off that $15,000, they’re going to have to qualify on it as if they made ninety because unreimbursed expenses factor into people qualifying for a mortgage.
What kind of research do you think the home buyer or homeowner should do on a broker before deciding if he or she is a good fit for them?
Kimber White: I personally think number one, you can always Google the person. You ask your friends for referrals. That’s a big thing. The other thing is, if you’re going to a broker, if you’re going to a broker see if they a member of their local and national trade associations. They are held to a higher standard in your local and your national trade associations, plus they are more knowledgeable. I think that’s a big selling point. The National Association of Mortgage Professionals (NAMB) has an integrity seal of lending, which everyone has a chance to go through and there are standards they have to live up to be an integrity lender. At the same time, when you interview your person, ask. You need to ask for that to compare. You need to ask for a good faith estimate and compare that with what other people are offering you.
You can have a lot of people quoting you on the phone. You need to make sure you have everything in writing. Internet? Remember the Internet is not local. It’s not face-to-face. It’s not the people in your area. It’s not someone you know. The best thing is referrals.
Word of mouth really counts for a lot, the experiences that your friends and family members and relatives have had. That’s usually one of the most reliable sources I would imagine.
Kimber White: You also can go to the NMLS website for consumers and look at that person’s name and see if they hold a license. You can go to the local state regulatory agency that governs that. Here we have Office of Financial Regulations here in Florida. You can look the person or company up. It will tell you about the license. It will tell you if it’s active, how long that person’s been active. How long that person’s been renewed in their business, all of that and MLS will tell you the same thing. It will also tell you if there’s any pending complaints on them. The last thing I’m going to say is I would also check with the Better Business Bureau. Has there been any complaints on that person? A big thing is integrity and consumer awareness.
Kimber, thank you for your time today.
Kimber White: It was my pleasure.
Kimber White can be contacted directly at United American Mortgage by calling (954) 306-3553.
More information on Kimber White can also be found by visiting his LinkedIn profile at: https://www.linkedin.com/pub/kimber-white/18/644/136.