Helping Families One Home at a Time

Portland Mortgage Information

Lower interest rates have helped propel sales of new and existing homes to record levels.  Financing costs and a strong job market (in the 90s) have helped stretch the purchasing power and home ownership has risen to new heights - fully two-thirds of all American families now live in a home they own.

Find an Upfront Mortgage Broker

Jack M. Guttentag, emeritus professor of finance at the Wharton School of the University of Pennsylvania coined the term, Upfront Mortgage Broker.  Professor Guttentag states that "An Upfront Mortgage Broker"  (UMB) is one who has elected to do business in an upfront and fully transparent way."  To quote from his Web site, the major differences between a UMB and a conventional mortgage broker (MB) are:

UMBs disclose their fees to customers in advance and in writing, and disclose the wholesale prices (rates and points) passed through from lenders.  Customers of UMBs pay the broker's fee plus wholesale loan prices. 

In contrast, conventional mortgage brokers (MBs) add a markup to the wholesale prices, and quote the resulting retail prices to customers.  Most MBs reveal their markup only in required disclosures after an application has been submitted.

Professor Guttentag states that if you don't find a UMB in your state, you can convert a conventional broker into a UMB for your deal.  He says just to copy the Commitment of an Upfront Mortgage Broker, and ask the brokers you approach if they are willing to do business with you in this way.

According to the Upfront Mortgage Brokers Association (UMBA) Web site, the following mortgage brokers have offices in the Portland area and are members of UMBA:

• Michael Dolan - BrokerPro  Mortgage Portland, Oregon

• Michael Grant - Grant Financial Company Portland, Oregon

• Stuart Fox - JPS Equity  Beavercreek, Oregon

You can learn more about mortgages by visiting Professor Guttentag Web site.

Mortgage Broker or Lender?

Mortgage brokers, middlemen who shop for homes buyers among banks and lenders, now do the majority of mortgage loans according to Wholesale Access, a mortgage research company.  Because brokers can choose from programs from many banks, they may be able to offer a variety of deals that are not available at your own bank.  Examples of deals include: first-time buyer programs, low- or no-down-payment loans for certain occupations (police and firefighters), and low-cost mortgages for energy-efficient homes.

Most of a broker's compensation comes from fees paid by the lender.  The lenders that mortgage brokers deal with quote a "wholesale" price to the broker, leaving it to the broker to derive the "retail" price offered the consumer by adding a markup. For example, the wholesale price on a particular program might be 7% and zero (0) points, to which the broker adds a markup of one (1) point, resulting in an offer to the customer of 7% and one (1) point (Each point is equal to one percent of the loan amount). But if the broker adds a two (2) point markup, the customer would pay 7% and two (2) points.

Licensed Oregon Mortgage Companies

Consumers can check to see if the mortgage company they wish to use is licensed in Oregon at the Department of Consumer and Business Services Web site.

Suggested Portland Metro Area Mortgage Brokers

• Associated Mortgage Group  Licensed in both Oregon and Washington.  Telephone:  (503) 221-0064  Fax: (503) 221-0396.  Mr. David Jolivette is the contact.

• Mortgage Trust  4386 SW Macadam Avenue, River Forum Two, Suite 401, Portland, OR, 97239.  Mr. Kevin Gienty is the contact.  Kevin's telephone is (503) 282-5626 and his e-mail address is kevin@mortgage-trust.com.  Kevin is a cyclist, hiker, and all-around outdoor guy.

• Mortgage World  Telephone: (503) 292-4900.  Mr. Tim Bolen is the contact.

• Northwest Mortgage Group  1600 NW Cornell Road, Suite 190, Beaverton, Oregon 97006.  Telephone: (503) 439-9191 or toll free (877) 439-9191. Fax: (503) 439-9292. Contact is Ms. Nancy Kinzer, Senior Loan Officer, nkinzer@nwmortgagegroup.com.

• Mortgage Express  Lincoln Tower, 10260 SW Greenburg Road, Suite 830, Portland, Oregon 97223.  David Dishman is the contact and his direct telephone number is (503) 517-8671.  Toll free line is (877) 520-1141.  David's e-mail address: daved@mortgagexps.com.

• Windermere Mortgage Services  Ms. Bertha Ferran at (503) 464-9215 or (800) 867-1337.  Bertha is located at Irving-Portland Northwest, 636 NW 21st Avenue, Portland, OR 97209.

Suggested Portland Area Mortgage Lenders

• JPMorgan Chase & Co.  Their office is located in the Pearl District at 422 NW 13th Avenue, Portland, OR, 97209.  Telephone: (503) 804-8850.

• Flagstar Bank  A Michigan-based full service bank.  In Oregon they offer home mortgage services.  Telephone:  (866) 733-3700 or (503) 223-2162.

• Washington Mutual  One of the largest home mortgage lenders in the Pacific Northwest with numerous offices in the Portland area.  A public company, they are a full service bank offering checking, investment banking, online banking, etc.  In early April, 2008 Washington Mutual stop making home loans.  Their aggressive home lending the last few years have resulted in the lost of billions of dollars.

• Wells Fargo Bank  Ms. Cherie Stanley at 503-670-1920 - Cherie is located at 5100 SW Macadam Avenue, Suite 550, Portland, OR 97239.  Mr. Clayton Scott  at (503) 497-5060 - Clayton is located at 200 "A" Avenue, Suite 200, Lake Oswego, OR 97034.

Other Mortgage Sources

• Bankrate  Online mortgage services allow you can click through to lenders whose deals you find appealing.

• Costco  If you are a Costco member, the mega warehouse company offers a full range of financial services to include mortgages.  They partner with LendingTree for home loans.  Telephone:  800-237-3806.

• HSH Associates Online mortgage services so you can click through to lenders whose deals you find appealing.

• Mortgage Loan Place  They specializes in FHA and VA loans.

Oregon Mortgage Lending Regulations

According to the Oregon Division of Finance and Corporate Services Web site (Oregon Revised Statute 59.840 to 59.996), the below rules govern the licensing of mortgage bankers and brokers in Oregon:

Beginning on Jan. 1, 1994, the State of Oregon required licensing for mortgage bankers and mortgage brokers. The licensing law required that each licensee maintain a surety bond or irrevocable letter of credit of at least $25,000 and use an in-state clients' trust account if the licensee accepts clients' funds prior to the close of escrow. Each licensee is also required to employ an experienced person who has at least three years experience in mortgage lending. The law provides for the licensing of the company, not the individual loan originators.

Since Jan. 1, 2002, licensees have been required to notify DFCS of the names of loan originators working for the licensee that originate Oregon residential mortgage loans. All loan originators also must complete 20 hours continuing education every 2 years.

As of Mar. 31, 2003, there were 1,225 licensees with 982 additional branch locations and 7,760 loan originators.

Your Credit

Check Your Credit  Credit scores and reports are now used to determine the rates you pay on loans and credit cards, your insurance premiums, whether you get a job or an apartment.  Lenders have long used credit scores and reports to determine whether to lend you money and how much interest to charge you. Some utility companies are linking credit scores to the size of the deposit you must pay to have your power turned on.

Consumer Reports, in their July 2005 issue, noted that, "Scores from the three credit bureaus can vary by 50 points or more because of errors or out-of-date information. That gap could result in a $100-per-month swing on a $150,000, 30-year fixed-rate mortgage."

Free Credit Reports  Credit scores are based on credit reports, which will be free to all consumers by September 1, 2005.  Reports from the western states are available as of July 2005.  As of early July 2005, the government-mandated Web site set up to provide the reports is difficult to use and doesn’t include credit scores.  The official government sponsored Web site address for the free credit reports is annualcreditreport.com. You can request a report by mail, download a form, or call 1-877-322-8228.  Scammers and marketers are exploiting the federal law (2003 Fair and Accurate Credit Transaction Act) by creating Web sites with similar names (over 200 Web site have domain names similar to that of the government sponsored site) so be careful.  You can visit the Federal Trade Commission Web site at www.ftc.gov - it has a link to the free-report site.

Review your FICO scores and credit reports several months before applying for a loan.  Consumer Reports recommends that you buy your reports and scores at www.myfico.com and order the $44.85 FICO Deluxe package. If you have a spouse, you should order separate credit reports.  Even if you've been married for a long time and share a credit history.  Here are the three major credit reporting companies:

• Equifax  Telephone (800) 658-1111

• Experian  Telephone (888) 397-3742

• Transunion  Telephone (800) 888-4213

Factors That Lenders Weigh when Examining a Buyer's Credit Report  Lending institutions - in conjunction with Fannie Mae and the Federal Home Loan Mortgage Corporation - have based loan decisions on credit scores that are provided by the credit bureaus.  Factors:

• Level of delinquency (30, 60, 90 day late).

• Derogatory public record (lawsuits or legal judgment) or collections files.

• Proportion of balances to credit limits.

• Length of time accounts have been established.

• Too many inquiries from creditors in the last 12 months.

This can mean that even if you have perfect credit, are never late with payments, but have all your credit cards at their maximum and you keep moving them to get lower rates and not closing them, your scores could be the same as the person with minimal credit and a few small collections in the past.

Acceptable Debt Load  Every loan program has different acceptable debt ratios.  Your top ratio will be your new house payment against your annual gross household income; your bottom ratio would be your house payment and all other debts (consumer debt, child support, and union dues but not utilities and insurance payments) against your annual gross household income.

Active Credit Accounts Too many credit cards may cause your credit score to be lower than expected.  If you have several credit cards open with little or no balance, this would give you an opportunity to go out and incur further consumer debt.

Secure Cards Can Improve Credit Record  If you have having a hard time establishing credit, you can put your own money on deposit - say, $350 - and obtain a secured card.  You need to use this card and pay it off monthly to have some activity on it.  Don't take it to the limit quickly, it might negatively impact your credit score by being a new account already at the maximum credit limit.

Hints on Getting The Right Home and Mortgage

Estimate How Much You Can Afford  Start by estimating how much you can afford to borrow - especially first time buyers.  Most mortgage lenders say that, to be manageable, your total monthly payment for principal, interest, mortgage insurance and property taxes should not exceed between 28 and 36 percent of your family's gross income.  You can calculate this online at Quicken or Microsoft's Home Advisor.

Consider what it would cost if you were to take out a conventional 30-year fixed-rate loan and what you could expect to pay on an adjustable-rate mortgage (ARM).  Rates on ARMs are initially lower than those on fixed-rate mortgages.

Preapproval  You can make yourself more attractive to sellers by getting a lender or broker to issue you a preapproval letter for a mortgage.  Preapproval includes a check of your credit history, your earnings, and your family's financial assets.  You do NOT have to ultimately choose to finance a purchase with the lender who preapproves you, but to a seller, a preapproval letter puts you on nearly the same ground as a buyer offering to purchase for cash.

Borrowing  A 30-year fixed-rate loan may offer a lot of peace of mind, but you pay more for that security.  One of the newer multiple-year ARMs that remain fixed for 7, 10, or even 15 years before they are readjusted may be more affordable without significantly adding to your risk that interest rates will continue upward.  On average, owners tend to relocate with 6 years of purchasing a house, so one of these longer ARMs may serve for as long as you remain in your home.  Look for an ARM offering an interest rate at least one-half percentage point below what lenders ask for a conventional 30-year fixed-rate mortgage.

Risky Mortgages  In the July 2005 issue of Consumer Reports, the publication warned that many loans mortgage brokers and lenders are pushing increase the odds of foreclosure by allowing borrowers to accept more risk than they can manage, especially if home prices level off or if interest rates increase. That’s because some loans, such as interest-only mortgages, keep monthly payments artificially low at first but can skyrocket to unaffordable levels later on.  They concluded, "With today’s low interest rates, the best option for most buyers is still a 30-year fixed loan."

Hints

1. Dial mortgage lenders until your fingers hurt when checking out rates.  You will be surprised at the range of quotes (and costing costs) you'll receive.  Just a quarter point can save you $25 a month on a $150,000 30-year mortgage.  Points and fees can also vary widely between lenders.

2. Make certain you obtain a written disclosure of all loan costs in advance from any mortgage broker or direct lender with whom you do business.  Be prepared to challenge any large discrepancies between the quote and the actual fee(s) at closing.  In Oregon, you have three business days after signing the final papers to revoked the transaction - this applies only on  refinancing.  Examples of honest third-party charges to expect include appraisal fee (about $300), credit report fee (about $15), recording fee (varies by county), mortgage or transfer tax (in some counties), courier fee, wire fee, title insurance fee, and escrow or attorney fee.  Names of unnecessary, undisclosed loan fees include an administration fee, documentation fee, processing fee, preparation fee, overhead fee, management fee, and even "miscellaneous charges" when the lender runs out of creative names.

3. After you get all the quotes and start comparing, you may find a lender or broker who you would like to do business with but their rate was higher than your lowest quote.  Call them back and tell them that you would like to do business with them but they need to match your low rate.  They may surprise you and readily agree. Last, when you lock a rate, agree (get it in writing) what happens if the rate drops before you close. 

Bidding

You stand a better chance of finding sellers who are more willing to bargain if you focus on homes that have been on the market for several weeks;  they exist even in the tightest of markets.  Bidding is briskest on properties that are newly listed. 

Should You Pay Points

Points are mortgage loan costs typically in association with an interest rate. One point is equal to one (1) percent of the loan amount, so one point on a $200,000 loan is $2,000.

Points are often looked upon as prepaid interest, hence the potential tax deductibility. If you paid points last year for your new home then you may be entitled to deduct those points from your taxable income. Note, the tax deductibility can vary for points between purchase and refinance transactions. Points paid during a refinance are usually only deducted over the term of the mortgage. With a purchase, points may be tax deductible for the year paid.

If you pay points, you're paying your lender some of the interest up-front, in a single fee, in exchange for a lower rate. There is no correspondent trade off between points and rates, but usually one point will get you 1/4%.

Deciding Whether or Not to Pay Points - Here are the steps:

1. First calculate your monthly payments by paying a point then do run the same routine with paying no points. Subtract the two amounts to find the monthly savings.

2. Now divide the monthly savings into the point you paid. The result is the number of months it will take to recover the cost of the additional funds to drop your rate.

Example Let's say you've got a loan amount of $250,000 and you're quoted 7.00% with zero points. That's $1,653 per month in principal and interest for a thirty-year note. Your lender can also offer a rate reduction of 1/4% for one point. The monthly payment on a $250,000 note at 6.75% drops to $1,612, or a difference of $40 per month. In this case, it would take just more than 62 months, or five years, to recover that money. On the other hand, your lender will make an additional $40 per month at the higher rate in lieu of your up-front $2,500.

A lot of the decision rides on how long you anticipate keeping the mortgage in question, either by selling the property or refinancing later if rates drop. If you in fact don't anticipate keeping the house for a long time then paying additional points may not make much sense. But that $40 per month savings adds up to $14,400 more than thirty years. It's really not necessary to rely on outside experts to tell you if paying points is worthwhile or not. Do some of the math yourself, then determine if paying points are really in your best interest.

How The Home Mortgage Loan Process Works

In most cases, lenders will sell your mortgage loan to Fannie Mae and Freddie Mac, which repackage them as securities for sale to investors. These two private shareholder-owned corporations (operating under a congressional charter) guarantee nearly $3 trillion in mortgages. The government does not guarantee the debt issued by Fannie and Freddie.  It does provide the companies with some special privileges, including exemption from state and local taxes.

They have relatively strict guidelines for the loans they buy.  That is why the origination firm is such a stickler about qualification and processing details.  They have to make certain that your loan can be sold without any glitches.