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Mortgage brokers key to financing options.

The mortgage is traditionally and undoubtedly the best known and most widely used form of real estate financing. Since most properties are not bought for cash alone, almost every investor, builder or developer must find some outside source of financing. The mortgage broker is the key to this financing.

In choosing your mortgage broker you should seek much more than a person who just transmits an application to a lending institution. Many technical points besides business and tax ramifications arise in connection with the placing of mortgages.

Well Informed

Your broker must know the rules, so he can make the right moves to get the results you are after. Your choice should be one of a well informed, well recognized advocate who has worked as a team throughout the years with mortgage lenders. He must be a good negotiator and able to exercise ingenuity in this constantly fluctuating market.

The procedures and methods he employs and the route he chooses in placing a particular loan will vary according to the type of property, location, amount of money sought and interest rate that will be paid.

As a top mortgage authority, he will know the types of loans being made and be familiar with the institutions which are making them, as well as the general investment policies which govern them.

Bear one thing in mind. Whether it is a savings bank, savings and loan association, insurance company or pension fund, they are constantly changing their banking and investment aims. An amateur who is not in daily touch with the mortgage market cannot hope to know the particular interest and scope of the hundreds of lending institutions throughout the country.

Duty of a Broker

It is the business of the well informed mortgage broker to have an in-depth knowledge of his market, and this is accomplished through his constant contact and the volume of business he is placing. He will know which lender places a greater value on income or which lender has a particular interest in an area appearance and layout of different types of property. There are institutions which will consider only residential properties or underlying co-op loans. Others will only lend on commercial and industrial properties. The broker must keep abreast of the proper and various appraisal procedures and techniques employed by the different institutions. This will be his biggest help in guiding the type of submission that should be made for a particular loan.

Some of the major factors which are analyzed by the lending institutions and which are considered to effect the security of the mortgage are the following:

1. The community and neighborhood 2. Building activity and project growth 3. The actual site and the building on it, including condition of repair, cost of reproduction, and the suitability of the improvement 4. Loan-to-value and income-to-value ratios 5. The borrower's financial ability to repay the loan. The income of the property. Maintenance and operating expenses. Amortization schedule of the mortgage and date of maturity

A close eye must be kept on area development and the general money market not only in one location but throughout the country. Are interest rates, deposits and withdrawals rising or falling? Is the foreclosure rate high or low? Are new laws or taxes being proposed that would effect the general mortgage market?

In many cases various alternatives to financing must be considered. Still another valuable function of the mortgage broker is to attend special meetings, conventions, lectures and social functions of lending institutions and appraising associations which supply him with all the valuable knowledge and know-how to be a success.

Hard Bargain

Too often an individual who drives a hard bargain in other areas fails to obtain the largest mortgage possible or he pays more interest or higher closing costs than could be obtained by his broker. This is mainly because he is not in a position to explore the market as his broker can.

Through the years real estate investors, operators, builders and developers have been aware of the value and have relied on the services offered by mortgage authorities. For the real estate owner in many cases, the broker is the key man in recasting the financing of property.

Not only by supplying a new first mortgage but secondary financing as well, the broker can turn an otherwise unsalable property into one that is sold.

The builders and developers also are well aware part the mortgage broker plays in arranging the ultimate in sound financing at the very start of their project. In many cases a package financing plan is worked out which will include temporary short term financing as well as the permanent mortgage.

Prime Function

While the downturn in the commercial real estate market is still with us, savvy mortgage brokers are still getting deals done. There are always new sources of debt and equity players entering all areas of the market.

Remember the prime function of a mortgage broker is to secure the most favorable terms at the best possible rates. Through these functions the mortgage brokers of our country have contributed immensely by providing new investment opportunities to the economic growth of our communities.

If you plan to finance or refinance any real estate this year, now would be an excellent time to make your deal. There is money in our financial institutions for worthy properties. The two yardsticks by which to judge when is a good time to borrow are: The availability of credit and the cost of credit. Both the availability and the cost are now about as favorable as you can hope they'll be for some time to come.
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Title Annotation:Finance; how to choose a mortgage broker
Author:Corso, Robert P., Sr.
Publication:Real Estate Weekly
Date:May 20, 1992
Words:936
Previous Article:Lenders, borrowers must speak same language.
Next Article:Money: tough terms.
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