I'm a Realtor but want to understand more clearly how loans work, especially in the Refi realm.

I'm starting do some loans but so far only simple ones ---

My question could probably be answered easily but sometimes its better for me to see it in writing ---

Here goes:

Client wants to Refi 90% of their current loan, do a cash out and have closing cost paid for through this one REFI --

What does this mean and where is the other 10% or how does that 10% get accounted for with the new loan amount?

I know, I know... this sounds lame but this is the place to get questions answered by professionals’ right?

So if anyone of you who understand this and can explain it to me in a way that I can have my "AHA" moment -- You've made my day!

Thanks!!

I really dont think you should be writing loans if you do not understand basic mortgage terms. The potential harm to your borrower is great if you do not know what you are doing. What the borrower (not customer, you are not selling them anything they are your client) wants is a loan at 90% of the appraised value of his house. Lets keep it simple and say the house is appraising out at $100,000. 90% of that is $90,000. What your customer wants is a loan for 90k that will wrap closing costs into it. The extra 10% stays in the equity of the home.

I understand I shouldn't be writing loans if I don't understand them....

I wasn't asking about a purchase loan, I've done a few of those with no problems -- what I was asking about was REFI's -- I haven't done one, and wanted to know more about it -- to understand it more clearly...

I appreciate your feedback but why is it that most members on here act like their better than others and make such negative comments?

This is a place to ask questions, chat, and grow in this industry, am I wrong?

Anyway appreciate the feedback.

Smiles,
I didn't read Adel's comments as condescending...he's just simply saying the truth. Reading your question, I was feeling sorry for the borrower. The scenario you proposed is very basic, and I would definitely recommend holding off on writing more loans until you have had an opportunity to learn the mechanics of such loans.

Please ask away with your questions, we'll be happy to answer them to help get you up to speed on writing loans!

Sammy

Smiles, you should approach a refi exactly the same as you would a purchase. Assess their ENTIRE financial situation (income, debts, credit, employment, savings, short-term AND long-term fiancial goals...) to determine which loan program and terms will be best for them. Are they salaried or self-employed? How long do they plan on living in the property? What is the purpose of the cash-out? Do they have a prepayment penalty on the current loan?...Once you collect the necessary documents, just as you did with the purchase, you need to calculate their income, DTIs, PITI, and fill out the 1008. Do they meet the guidelines? Then estimate the closing costs. Do they want the CC rolled into the loan amount, do they want a "no cost" loan with lender paid CC with a higher interest rate, or a split between the two?
Are you doing one loan or two loans?

These are SOME of the questions you must find the answers to before you do anything else.

It is great that you are trying to learn about loans; however, I would definitely discourage you to go at it alone as well. Finding the right mortgage for your client involves so much more than finding the best interest rate and the lowest closing costs. Sometimes a "no cost" loan is not always in the borrower's best interest even though they may think so. Doing a mortgage comparison with several loan scenerio, can help them understand that.

And remember, it's not just a house, it's their home. Not only that but it is the biggest asset on their balance sheet. If you are serious about learning and doing a good job for your borrower, it is in THEIR best interest that you have an experienced loan officer guide you, teach you what you need to know. A mortgage is great financial responsibility, and giving the wrong mortgage to someone can be sometimes catastrophic.

I am sure you want the best for your client and I admire your desire to learn about the financing because it is not as easy as most make it sound if you are in it to do it right and do right by the client. Our job is to protect their financial well-being as much as it is to get the loan close.

I hope this helps.

I appreciate the advice. I do understand the great responsibility comes with finding the client the best loan. I am a real estate agent and got in this business because I care about people. I approach my deals with careful thinking putting their needs and interest first.

I wouldn’t' do anything to hurt my clients future.

My Refi scenario was just to gain more insight on REFI's ----

Thanks, I do understand it much better.

I'm sure you'll do great. If you have any other questions, we're here for ya.

Smiles... "Good Luck" in dipping into loans. It's not for everyone but with determination, anything is possible. I have a free Mortgage 101 packet that can give you a starting grasp on originating.

If anyone is interested, shoot me an email to Sean.Pham@yahoo.com .

Think Big!

EMail or call when you are in a pinch I will help.

Smiles, how on earth did you meet your CE Requirements for California? I am absolutely floored! You should NOT be writing loans....

I'm wondering why you are so negative. I've done a few purchase loans and have not had any problems.

Forgive me for asking about REFI's --- it must be a touchy subject. All I wanted was just more insight on Refis and you're acting like a kid.

Anyway, Greg pretty much explained it (thanks Greg)so you can get off the floor, go grab a beer, and watch some sports.

Oops, I meant to thank Alea (you too Greg for the positive support)!

I'm so negative and angry because you are completely stumped on mortgage financing 101 basics. Why would you even consider handling the most important financial obligation a person will have in their lifetime when you can't even figure out "where the other 10% is" if you are refinacing to 90% LTV. This business is FULL of regulatory issues of which I am certain you have no clue. I bet you can't even tell me what 3 docs must go out within 3 days of loan application to be in compliance with RESPA or California's state specific required disclosures in addition to the federal disclosures sent out with the initial package or the federal disclosures for that matter. Im just sayin'. Get some training or you will cost your company a whole lot of money and your borrowers a whole lot of grief. I'm all for you learning, but for god sakes get some training.

I'm afraid I have to agree with AZlender on this one. It is a little hard to beleive that you passed the CA DRE salespersons exam if you don't know how the other "10% gets accounted for with the new loan amount" on a 90% LTV loan.

The point is Smiles that we are not trying to be negative but is is apparent that you need much more training in mortgages than you are going to get from an internet board. Please get some serious, formal training before attempting to do any more loans for your sake and your borrowers sake.

Will do. Thanks!