Marin County Mortgage & Home Loan Information

Review of Online Lending and Mortgage Websites and Services

In the past 8 years online lending has exploded and local mortgage brokers are now competing with online brokers that have little to know overhead. As with many online transactions one needs to approach online lenders with extreme caution. Getting a home mortgage or refinancing your is a major financial decision and should be treated as such. Online deals that seem “too good to be true” often are and one needs to navigate wisely to avoid scams.

Before we begin to discuss online lenders we need to discuss some recent trends of fraudulent websites. Hundreds of "Home Refinance" and “Cheap Loan” websites have popped up, claiming to offer the best deals and to avoid the scams, watch out for the following characteristics: 
  • Excessive interest rates
  • Application fees (Online sites should never have an application fee)
  • High loan fees
  • Hidden charges
  • Non-existent customer service number or email address
State and local governments are constantly shutting down scam sites but most of the time the Attorney General cannot get borrowers out of agreed upon contracts, even if the terms are excessive.

marin_mortgage_300If you do insist on shopping for a mortgage/home loan online then there are a few factors that you need to be aware of:  First, when comparing loans, make sure that you're comparing loans on an apples-to-apples basis. For example, you find that "Loan A" for a 30-year loan has a much lower interest rate than "Loan B" (also for 30 years). Upon further inspection, you find that "Loan A" is technically an adjustable rate mortgage. Its payment is based on a 30-year amortization, but becomes due through either payment or refinancing at the end of 5 or 7 years. These are frequently referred to as a 5-year or 7-year fixed-rate mortgage. While both said "30-year", they are not the same type of loan.

Second, you should always ask the lender for a statement detailing all fees associated with the loan. Factors such as "points" (loan fee), interest rate and "garbage fees" (extra fees which some lenders charge) can vary greatly from one lender to another. If you are interested in shopping for a mortgage online then we recommend working with one of the following sites:

LendingTree.comLendingTree is essentially a mortgage loan search engine. Despite their claim of “when banks compete, you win” banks don’t actually “compete” or bid for your business. LendingTree simply aggregates all current loan offers to someone of your credit profile. LendingTree is a great place to get a feel for what type of rates you should expect and it is a quick and easy way to obtain a pre-approval letter. LendingTree.com is free to browse so it makes sense to use it as a diligence tool. In the past, our clients have NOT gotten the best deal from LendingTree.

BankRate.com:  BankRate advertises itself as the nation's leading aggregator of 100 financial products. The company surveys 5,000+ financial institutions across the United States to provide current rates for mortgages, new and used auto loans, credit cards, and more. While BankRate is a great place to get a feel for current lending rates in your area, the sites real value is its content.  BankRate is full of useful articles and blogs on topics ranging from mortgage pricing to homeowner taxes.

ELoan.com ELoan is a simple, easy to use loan search engine that is very similar to LendingTree.com. Similar to LendingTree, we do not recommend using the site to obtain a mortgage on your home, but rather, use it as a tool to diligence rates that your Mortgage broker is offering you. Historically we have not found that ELoan provides our clients with the most competitive Mortgage Rates.

Mortgage101.com:  As with all of the sites reviewed here, Mortgage101 offers local current mortgage rate pricing as well as mortgage calculators and research. Mortgage101 differentiates themselves with their comprehensive “Lender Directory” which allows visitors to view and search local mortgage broker and bank directories.

Marin County Mortgage Brokers

We recommend that all of our clients use a local mortgage broker as this usually yields the best terms and gives you a point of contact for any questions or concerns you have. Be sure to ask friends and associates who have refinanced or purchased recently if they have a broker they can recommend. You'll want to find a broker who is energetic, flexible and knowledgeable about finance and loans and someone who has your best interests in mind. Below are a few of local mortgage brokerages that we have had good experiences with. Please contact us for more recommendations:

John Wilson (415) 451-4116
Greg Merrill (415) 464-3107

Types of Mortgages

Fortunately for buyers, there are a variety of mortgages to choose from. It is in your best interest to investigate each of them to determine which is best for you. Most buyers will not qualify for all of them. In fact, many only qualify for one. But if you do qualify for more than one, make sure that you do your homework before signing.

Fixed Rate Mortgages
Consider a fixed rate mortgage if either of the following describes you: you plan on living in your new home for many years, and/or you are not a risk-taker and prefer the stability of knowing how much your payment will be each month. Since most home loans are for a period of 30 years, if you want a payment you can count on for that long of a period of time, a fixed rate mortgage may be what works best for you. Once your loan amount and interest rate are calculated and locked in, a fixed rate mortgage will guarantee that you will have the same payment over the life of the loan. Making extra payments to principal will allow you to pay your loan off sooner.

This may not always be the best choice, however. If interest rates are very high at the time you take out your loan, with a fixed rate mortgage you'll be stuck with that high interest for the life of the loan (unless you choose to refinance). Conversely, if interest rates are very low, you'll come out the winner with interest rates that will stay low no matter how high interest rates go in the future.

Adjustable-Rate Mortgages (ARMs)
If you are more comfortable in taking a risk with your money or if interest rates are very high at the time you take out your loan, an adjustable-rate mortgage (ARM) may be the solution for you. You may also choose this type of loan if your planned ownership of the property is short-term or if you expect your income to increase to cover any potential rise in the interest rate.

Generally, the initial interest rate on ARM loans will be lower than fixed-rate mortgages.

Since an ARM rate rises and falls depending on the prevailing interest rate, your mortgage payment will rise and fall accordingly. If your income is not sufficient to cover the highest possible payments, then this option is not for you. On the positive side, the lower initial payments will allow you to qualify for a larger loan than if you choose a fixed-rate. The downside is that your payments will increase if/when the rates go up.

Typically, ARM interest rates are tied to a specific financial index (such as Certificate of Deposit index, Treasury or T-Bill rate, Cost of Funds-Indexed Arms or COFi, or LIBOR (London Interbank Offered Rate) and your payment will be based on the index your lender uses plus a margin, generally of two to three points. Get the formula used by your lender in writing and make sure you understand what it means.

Fortunately, the amount an ARM can increase is limited. There are "caps" on how much your lender can increase your rate, both for a period of one year and for the life of the loan. Plan ahead, and have your lender calculate what the maximum payment would be if your rate went to the highest amount allowed by the cap for your particular mortgage. If you are not confident you'll be able to pay that amount on a monthly basis, perhaps you should reconsider this type of loan.

Convertible ARMs
If neither the fixed-rate nor the adjustable-rate mortgage seems like the best option, perhaps the convertible ARM will be right for you. This alternative combines the initial advantage of an ARM with a fixed rate after a predetermined number of years. This type of mortgage is advantageous when the current rate is lower than average.

Government Loans
If you qualify, government loans from a variety of social programs may be the best value. Speak with your mortgage broker about your government loan options. 

VA Loans
Veterans may qualify for a loan from the Veterans Administration. There is a limit on the amount you can borrow, so this option works best for those buying a lower priced home.

FHA Loans
The Federal Housing Association offers loans to lower-income Americans. Look for the phrase "FHA approved" when looking at ads for homes.