Minnesota business attorney Mark Santi speaks with Loren Johnson on issues surrounding refinancing mortgages.
Loren Johnson, American Mortgage and Equity Consultants, Inc.
lorenknowsmortgages.com | (651) 226-4363 | firstname.lastname@example.org
Mark Santi, JUX Law Firm (Formerly Thompson Hall)
http://jux.law/attorneys/mark-santi/ | (612) 466-0090 | email@example.com
Mark Santi: Hello. This is Mark Santi from the law firm of Thompson Hall Santi, Cerny, & Dooley. I’m a business attorney here in the Twin Cities. I’m here with Loren Johnson from American Mortgage and Equity Consultants. How are you doing today, Loren?
Loren Johnson: Very well, even though it’s 3 below outside. It’s pretty nice and warm here in your room so thanks for having me.
Mark Santi: Thanks for being here. Today, we’re going to talk a little bit about what you do. So, if you could give us your background and how you got to where you are today?
Loren Johnson: Well, very simply put, I work in the mortgage industry. Most people know what happens in the mortgage industry. I either help people buy homes or refinance the home that they’re in. The bigger trick nowadays is you need to be state-licensed or federally-licensed, you have to show some competency and take a test, which I’ve done, but it’s more to know the types of available products that are out there to help people.
Ten years ago, it was real simple. We work with a bank, try to find the lowest rate, and that’s all we needed to do. Now, it’s much more complicated in terms of- If it’s your first time owning a home, there may be money available from the state of Minnesota, there might be money available from a city or a county. There’s also ways if you’re looking to refinance your home to get today’s good interest rates, and you’ve paid your bills on time, you’ve got great credit. But because you may have bought your home toward the height of the housing market craze four, five years ago, it might be that you owe more on your home than on paper someone says it’s worth right now.
There are different programs both government-sponsored and state sponsored that can help people in those situations that have decent credit refinanced. For people that don’t have really good credit, there are lots of programs. I am not a credit specialist, but having done this for the last 11 years, there are certain things you can do to help people with credit scores, help them through the maze of talking to credit bureaus, try to get their score not only good enough to buy a home but, in today’s market, as you probably know better than I do, Mark, credit scores can be important to your job, to future earnings, to lots of things besides just buying a home.
Mark Santi: Right. And one of the things I do, I’m interested in personal financing. I like to help clients who are having financing difficulties. It’s obviously very prevalent today, even in 2013, as the economy starts to pick up, it seems that the anchor people have weighing them down is still their house. They’re underwater on their house or they’re not taking advantage of the low interest rates.
Now, why–Typically people would go to their real estate broker first. How can you help them in a way that a real estate broker couldn’t?
Loren Johnson: Well, I guess I’ll break that apart into two responses for you. If someone’s looking to purchase their new home, it never hurts to talk to a real estate professional first. A realtor knows [?] knows the market. But their specialty is in helping find a home, negotiating a price for that home, and assisting that buyer in every way possible to get them into a home.
My speciality is in helping with the bank financing of that loan. I mean, for almost all people, a home that they buy is the biggest financial investment or financial transaction they’re ever going to make.
Mark Santi: Right.
Loren Johnson: So, in dealing with it like I mentioned, dealing with the bank or dealing with the intricancies of qualifying for the best possible loan… Do you put 3.5% down as a minimum downpayment? 5% down? 10%? 20%? Those are things that I help with that a realtor may not have necessarily the knowledge or the time to be able to help with. Not because they don’t care, realtors are very good people, it’s just that their specialty is getting people into a home, my specialty is helping them finance them.
The other way to answer the question that you mentioned is, when people feel like their home might be in anchor, a lot of times, as you mentioned, it may be a job loss, an unfortunate medical condition; it could be a death in the family, lots of different reasons why. In those cases, a realtor can help in terms of putting a house on the market to sell. But again, does it necessarily deal with the banks in terms of finding a true value.
Again, so you sell the house, where will you go to live? Those are things that realtors can help you with, but I can help from the financial end very quickly, what can you do and how can you do it? So that between myself and the realtor and the customer, we can formulate a game plan that we’re on the same page. In any situation like that, we’re on the same page.
And if they’re involving you and your services, it would be the same thing. It’s ‘How can we all get on the same page so we can achieve the same endgame?’ Because the only endgame that is right is the endgame for the customer. And I don’t say that because it sounds right, but it’s true. I mean, at the end result is we want them in a home, in a home that they can afford, in a home that they like, and we’re all on that same page. You with what you do, a realtor with what they do, myself in the mortgage business.
Mark Santi: Good. I understand that the laws are changing a little but in this area, or the requirements, I believe that the FHA requirements. Can you talk a little bit about that?
Loren Johnson: Right now, currently, with FHA is the easiest way for the person to get into a home, in that their credit requirements are a little bit looser than a conventional loan. People hear the words [?]. [?]. and [?]. Those tend to be called conventional loans. FHA loan is a government-sponsored loan, goes all the way back to the early ’30s, in the Federal Housing Authority where the FHA loan actually started.
But you only need 3.5% down, the lowest possible downpayment unless you’re a veteran. It also allows you the opportunity to get into a home with a credit score that may be less than what a [?] or Freddie Mac loan would be. The reason they can afford to be a little more lenient is because they charge something called mortgage insurance. That mortgage insurance basically insures the lender in case of a default or a problem with the loan.
Currently, that mortgage insurance, once somebody owns 22% of their home on paper, equity we call it, once thay have that or they’ve been making their payments on time for at least five years, mortgage insurance can go away. You don’t refinance, you don’t have to fill out a new enrollment, it just goes away.
With the new FHA requirements that will be starting here this spring, mortgage insurance never goes away and the cost of that insurance goes up. Now when they say it only goes up a couple of cents, that’s true. But a couple of cents per thousand on a $150,000 home, every month, that adds up very quickly.
So, for a lot of people again, it’s not just a question of not only ‘how cheaply can they get in a home?’, that’s always been the question. Now it’s ‘when’s the proper time to get into a home?’ ‘Is it better to get it cheaper with FHA, knowing full well that you may be paying mortgage insurance, which is tax deductible, but it’s an extra expense. Do you want to continue paying that?’
‘Is it better to maybe wait a couple of months and be able to pay a conventional loan?’ And again, putting that game plan together.
Mark Santi: That’s a lot to think about, and it sounds like your services probably pay for themselves in the long run. Like you said, buying a home is a major investment, probably one of the biggest investments in a person’s life. I think it’s great that they can take an active role in purchasing a house and they seek out professionals like yourself. Why don’t you tell folks where they can reach you, if they reach out for your services?
Loren Johnson: Easiest way to reach me would either be on the Internet, you can go to my website address which is www.lorenknowsmortgages.com. You can e-mail me at firstname.lastname@example.org or you call me: at (651) 226-4363. That goes directly to my phone. It’s a cellphone. It’s always with me. I answer my phone until 10:00 every evening.
Mark Santi: Well, thanks a lot Loren. I appreciate you being here today. Thank you so much.
Loren Johnson: Thank you, Mark, very much.
Mark Santi: Thank you so much for watching. I’m Mark Santi with Thompson Hall Santi, Cerny, & Dooley. Thank you.