New York City First time home buyer and Investor MUST READ! Know Your Buying Power pt. 2 of 5

Part 2 - KNOW YOUR BUYING POWER:
The best thing for a buyer in today's market is understand your buying power. Knowing your buying power means more than just having an idea as to what you qualify for and what your monthly payments are going to be.

We always ask during our initial consultation appointment with new buyers what amount of down payment they have. Down payment is so important because it will determine what type of product, condominium or co-op, which is suitable for you. Aside from the amount of the down payment, it is also important to know where your down payment is coming from...such as parents, inheritance, gifting, personal accounts. Some buildings require that you have 30% down, 50% down, or even buy with all cash. Some buildings do not allow parent gifting, or co-purchasers, so this will narrow down what a prospective purchaser should look at.

The overall financial picture is so important when finding the perfect apartment in New York City especially if you are looking into a Co-op. The reason being that each co-op has its own specification for what they look for in a prospective member. Do they allow guarantors, co-purchase, parents monetary involvement, the debt to income ratio and work history. So not only do you have to work with the banks to qualify for the loan, but you have to satisfy the co-ops requirements also.

It's best to discuss your financial conditions upfront so as to not waste time or get excited about an apartment that you would not be able to purchase anyways.
The next major question that I think can confuse a lot of first time homebuyers is what are the differences between a bank lender and a mortgage broker and what are the pros and cons of each? I work with both bank lenders and mortgage brokers so I asked them this exact question and this is what they had to say.

This is the information I received from a mortgage broker...

Working with a Mortgage Broker
More Options working with a Mortgage Broker
When you work with a mortgage broker you have more financial institutions to work with. The broker will research which banks offer the best products that the borrower will qualify for.
When you work directly with one bank you have a loan officer who is hard selling you their products and is not necessarily looking out for the best interests of the borrower.
Banks may change requirements on the mortgage commitment

A mortgage broker is constantly looking at what the bank's requirements are for the borrower and the property that they are looking to finance. When the bank's guidelines change and financing may no longer be viable........the mortgage broker can research the market to find another financial institution to finance the loan.

If you are working directly with a bank and that happens the borrower either has to take what ever new options the bank has to offer or.........go out into the market and start the process of finding financing all over again.

Rates many drastically change after a borrower starts the process
Not often but there are times that after you apply to a particular bank that another bank comes into the market that has much lower rates; ½ point lower. If the new bank's guidelines are ones that work with the transaction and the time parameter still makes it possible that the bank can close when the sales contract requires........the mortgage broker will move the borrower's deal to the new bank.
If a borrower is working directly with a bank and that bank's rates are no longer competitive..........

The borrower now is going to have to determine who has the lowest rates. Time is going to be wastedtrying to find that new bank to work with.
Trying to get the financial institution to grant an exception
When you are working with a mortgage broker they will research which banks are most competitive for the borrower. Sometimes the mortgage the borrower wants is 5% larger than the bank's guidelines or they don't have sufficient credit. A mortgage broker will work towards trying to get the bank to grant an exception or finding other documentation that will satisfy the bank's requirements. Part of that influence, in getting the approval, is the standing that the mortgage brokerage firm has with the bank. If they have a history of having loans in good standing with the bank; the mortgage broker has a better chance of having their request granted.

If a borrower is working directly with a bank they need to know if the loan officer they are working with is in a position to have some exceptions granted. Loan officers at the many banks are not equated with the same credit authority. It is important for the borrower to understand if their loan officer has the authority to get exceptions approved.

Work with a Mortgage Consultant or Banker who has proven experience in this market place
Now is not the time to work someone who has not worked in this industry for many years. In years past borrowers had to be qualified in order to obtain financing. In recent years mortgage brokers and bankers could qualify their borrowers with very little effort.
Now you need someone who knows how to qualify a borrower and the property that they want to purchase.
Debra K. Bedell has been a Mortgage Consultant for over 17 years. She originally worked in the industry when the bank's requirements were very stringent. We have come full circle and those days have returned. It is best to work with a Mortgage Consultant who understands the system and can navigate it.

Working with a Bank

According to my loan consultant at a local Manhattan bank, the best deals are usually at a bank The reason being is because there aren't a lot of confusing add-on fees and middlemen ie. Mortgage brokers, who touch the loan and have to get paid for the work they do. Banks do volume business and make money servicing the loan, not by charging you origination fees.
Brokers don't work with every single bank so if a bank is offering terrific rates on a certain type of loan program they won't have access to it, the consumer will only have access to it through the bank directly. A mortgage broker is not going to tell you what banks they do and don't work with.

In conclusion, whether you work with a broker or a banker you should talk to a professional consultant to talk about your specific needs and goals. Finding someone that listens and gives you the service that you require is what counts.