Since the Consumer Financial Protection Bureau has safeguards to protect consumers, does it really matter which mortgage company you choose to finance your home purchase or refinance?
Yes, it does matter. The CFPB insists on a level playing field with regard to rates and pricing, but pays no attention to how various banks determine the risk factor in lending to you. And of course, the more risk a bank perceives, the higher interest rate you’ll pay.
In addition, because banks operate under differing underwriting guidelines, a borrower may be rejected by one lender, but approved by another.
Why are there differences? Because some mortgage companies have what are known as investor overlays. These are additional constraints that go over and above the Fannie Mae and Freddie Mac guidelines.
The constraints may cover debt to income ratios, credit scores, and even the source of funds. Additionally, some banks will allow borrowers to pay off debts in order to bring their debt to income ratios into line for qualification while others will not.
In addition, some lenders originate loans and immediately sell them on the secondary market. Thus, they may be far more conservative in product offerings and underwriting than a lender who deals directly with Fannie Mae or Freddie Mac.
Not all lenders offer all types of loans.
One of our popular loans is the “jumbo” loan – a loan that exceeds the conforming and conforming high-balance loan limits as set by The Federal Housing Finance Agency (FHFA). Here in Texas, the conforming loan limit is $417,000.
Many lenders, fearing the higher risk, refuse to grant a conventional loan if the borrower’s debt to income ratio exceeds 43%. Here at Homewood Mortgage, the Mike Clover Group, we follow Fannie Mae and Freddie Mac guidelines and take more factors into consideration. We grant conventional loans with much higher debt to income ratios.
FHA loans were designed to help borrowers with credit scores as low as 580, but some lenders refuse to consider a loan for a borrower whose score is less than 640.
We have no investor overlays, and we use the automated underwriting engines approved by Fannie Mae and Freddie Mac. As a result, more of our clients qualify for home mortgages. We are able to operate without undue restrictions and to operate slightly outside the box to help our clients qualify.
As lenders, we’re dismayed by seeing the low, low teaser rates advertised to unsuspecting consumers. Too often, those promises apply only to borrowers with hardly any debt and credit scores in the high 700’s. So before you say “yes” to one of those lenders, insist that they get you pre-approved and that they give you their complete offering in writing.
Meanwhile, whether you’re looking for a new home or need to refinance your existing home, give us a call us at 469.621.8484. We at Homewood Mortgage, the Mike Clover Group, will be happy to talk with you and show you the loan programs available to you.
We’ll also be happy to get you pre-approved in writing, so you can both shop for your new home with confidence and compare our low rates and fees to any other lender you may be considering.
Call us at 469.621.8484.
18170 Dallas Parkway
Dallas, TX 75287