What does Robert Bruss have against mortgage brokers anyway?
Once again I found an erroneous statement regarding mortgage brokers in his article “How to Avoid 10 Common Home-Buying Mistakes” (June 20). He states, ". . . only a direct lender can pre-qualify you subject to appraisal of the home you decide to buy.” This is simply not true. Any mortgage broker can obtain the same conditional approval for any client through virtually any one of hundreds of lenders subject to the appraisal. In this situation there is no difference between S&Ls;, mortgage bankers or mortgage brokers.
A few facts about mortgage brokers, who last year funded more than half the home loans made in California:
First, mortgage brokers obtain financing for their clients through the wholesale division of lending institutions nationwide. This means not only do they have available numerous loan options, but can offer them to clients at prices often lower than retail outlets. Because of volume discounts and other incentive programs, mortgage brokers can frequently pass along added savings to borrowers. Second, since it is a referral business, and brokers work on commission only, service and customer satisfaction are crucial to their livelihood.
Third, and maybe most important to the consumer, mortgage brokers represent the borrower and not the loan program or the bank. Without bias, they can select the best program, lender, interest rate, even loan points to suit each client’s needs.
As in any profession, there are unpleasant situations and/or questionable conduct. This is not a reason to condemn mortgage brokers as group.
DALE WHITING, Senior loan consultant Finance West Corp., Los Angeles
‘Environmentally Sensitive’ House?
Regarding “Hot Property” June 6 on Casey Coates-Danson:
To suggest that a single-family home can be simultaneously 7,800 square feet and environmentally sensitive is absurd.
Regardless of how resource-efficient the separate building elements may be, the sheer quantity of materials used is inappropriate. At best, the effect of such extravagance can be mitigated slightly by the choice of materials and building systems.
As a builder with active concerns regarding environmental quality and waste management in the construction industry, my principles would be sorely tested if offered the opportunity of building a project of this size and presumed quality, but from this safe distance I can echo E. F. Schumacker and say, “Small is beautiful.”
STEPHEN A. McGRATH, San Luis Obispo
More on Accumulating Cash to Buy Home
I’d like to comment on Dian Hymer’s June 6 story “How to Accumulate Cash to Buy Home.”
--Borrowing against 401K. While this is an excellent source of accumulating proceeds, buyers should be cautioned that underwriting guidelines have changed and since you must pay back whatever is borrowed, the monthly pay back is treated as debt, which could cause serious problems unless a thorough strategy is adopted to offset the debt.
--Take a low-point loan. Even though this might be advantageous to reduce cash outlay, the repercussion of having a higher monthly payment is much more costly than paying the loan and costs at the market rate. Of course, the rare exception is where a homeowner plans to sell in a short period of time.
--Close escrow late in the month. Many agents have adopted this strategy and it is simply a financial illusion because one way or another a homeowner will pay.
Assume that you closed on the last day of the month, you would have to pay one day of prepaid interest. You would skip the next month and your payment would be due the 1st on the following month. You might assume this is great because you only paid one day of interest.
The bottom line is that closing at the end of the month simply means while there may be an illusion of savings or cash outlay, the reality is that your payment will be due that much quicker, thus the savings is a moot point.
--Regarding down payment. While the comment regarding 5% could be considered correct, most first-time buyers fall into the Community Home Buyer Program guidelines, of which only 3% of the down payment must come from their own funds.
FRED THOMAS III, President, Professional Realty Mortgage, Los Angeles
Shredding: The Dirty Work of Composting
Perhaps the most time-consuming part of composting (“Developing a Sense of Humus,” June 27) is the chipping and shredding of material that goes onto the compost pile. I would never consider using pruners to cut material into one-inch pieces. My $400 electric shredder failed after producing less than 10 cubic yards of chipped and shredded material. At that rate, is easier and cheaper to buy finished compost, but such commercial compost may contain unknown ingredients such as heavy metal residue.
The most physically demanding part of composting is turning over the pile. For older people and those with bad backs, taking more time and using less labor to complete composting is a good compromise.
Good capital equipment, priced unrealistically high for the typical gardener, greatly improves the efficiency of composting. If Los Angeles and other cities really want garden waste recycled, they should make shredded material available. At this time, I am willing to take a minimum of five cubic yards just for mulch. I am even willing to pay a reasonable cost for such material. To buy that much a bag at a time is just too costly for me and many other gardeners to consider.
WILLIAM BUCHMAN, Los Angeles
No Need to Refinance If You Have an ARM
To the CPA who wrote to suggest a law to save homeowners money on their refinancings: There is already a great way to save money. It’s the adjustable rate mortgage.
Since sometime in the 1970s, no single homeowner has saved any money by getting a fixed-rate loan. As little as a year or two ago, “the experts” were recommending a fixed-rate loan, as they were at “historic lows,” below 10%. Those homeowners now could benefit by refinancing, but as the reader states, homeowners don’t have enough equity. However, if they had taken an adjustable rate mortgage, there would be no reason to spend any money, no reason to refinance.
How would a homeowner know that interest rates would go down and the ARM would be better? No way, other than basic economics and finance. Any economist, any financial expert, any CPA will tell you that in the long run, short-term interest rates average lower than long-term interest rates. Thus, loans with rates locked for the long term will pay more than a loan locked in for a short term. That is why 15-year loans are lower than 30 and ARMS are less than 15-year fixed.
Another way to look at it is simple supply and demand. Give all other things being equal, the average American home buyer would take a fixed rate mortgage over an ARM, given what is printed in the media and tradition. What would one expect to pay more for? The loan few want, or the preferred mortgage? Which would you suspect the lender to charge more for? The wanted or the unwanted?
While an ARM is not for everyone, because some people require stability, a fixed rate mortgage is unlikely to save anyone money.
DOUG OSBORN, Lomita
‘Street Smart’ Readers
When we were shopping for a home in Whittier, the first thing we checked for was painted lines on the street. We even told our real estate agent: “No double yellow lines!” If you want a quiet, low-traffic neighborhood, stay away from painted streets.
--Patty Schwalbach, Whittier
1--Go to the market. This will give you an idea as to the types of people living around there.
2--Go to the school. Same as above.
3--Be sure to drive your route to work during those hours.
4--Do a 24-hour stakeout on the house--weekday and on the weekend. There may be airport flights, shooting ranges, dogs, trains and traffic noise. It will save you a giant shock once you move in.
--Rebecca Bostow Scales, Upland
Check the libraries of the schools in any neighborhood you are considering. According to SchoolMatch, a Westerville, Ohio, school-rating company, there is a stronger correlation between library and media expenditures and student achievement and performance on exams than any other expenditure in school.
--Richard K. Moore, librarian, Bolsa Grande High School, Garden Grove