March 4, 2003
Jack Campbell of Mortgage Loan Specialists, Inc.
…And now for something completely different. We receive a number of questions from individuals in the industry asking how to handle "real world" needs such as taxes, mortgages and health insurance. To give you an idea of how you and the industry are viewed by these groups, we asked Jack Campbell to answer a few questions for us. Jack is a mortgage broker with Mortgage Loan Specialists, Inc., in San Diego, California, and helps people obtain mortgages around the country.
Mortgage Loan Specialists, Inc. is a rapidly growing broker/banker company that originates and brokers residential and commercial loans. MLS has been in business since 1993 and has originated over $2 billion in loans over the last 3 years. The company is currently the seventh biggest mortgage broker in the United States. Jack Campbell is a broker with the company in one of its San Diego offices.
AIL: Initially, what is a mortgage broker and what services do you provide clients?
Campbell: Traditionally, most people go to their bank branch where a loan officer looks at their situation and determines if they fit within a loan program. The problem is that a bank will only have 3 or 4 different loan programs. Just as the Internet changed the face of business, my value as a mortgage broker is added flexibility. As a broker, I have relationships with over 325 different banks and lending institutions. These relationships allow me to help you find the programs with the best rates and terms to fit an individuals needs. I often laugh at some of the rates quoted by banks to their customers.
AIL: Banking is traditionally considered a conservative industry. In your experience, will people working in the adult industry have problems obtaining financing?
Campbell: Being employed in the adult industry does not impose any additional difficulty in obtaining financing. However, people in the adult industry have different needs than most consumers. For example a high percentage of your income is likely to be derived by market volume and fluxuate from month-to-month. A high percentage of people in the adult industry are self-employed. The client might even be in a position where they are earning a strong income, but don't want to document it because of tax strategies. In such a situation, a bank may not be willing to get you financing while we can.
AIL: The online adult industry is still fairly new in relation to other industries. Are there issues with obtaining financing based on the length of time our readers have been in business?
Campbell: Unlike retail banks, many of the loan programs we access do require being in business for any specific period of time. For example, we have 3 loan programs that don't even look at your employment history. There are 2 other loan programs that are satisfied as long as you have been in the same industry for the last 2 years. In that we have access to so many different funding sources, you would be surprised at the thousands of different loan programs available.
AIL: Is there any significance to the type of business entities used by our clients in the loan process?
Campbell: As a business owner, the entity is not as important as the consistency of income. For example, the bank will want an average of your monthly income over the last 24 months. Sometimes it's easier to leave out the income all together versus trying to document an average of income for the business owners.
AIL: Can you explain the typical process required for obtaining a mortgage loan and the time involved?
Campbell: The mortgage process is similar regardless of whether we are discussing a purchase or refinance. First, we talk over the phone for about 20 minutes to get a feel for the client's circumstances. Following this conversation, I will create a client profile in a way to present it in the best way possible to the investor or bank that has the best program for the client. Once we have negotiated favorable terms with the bank for the loan, I call or email the client regarding required documentation for the loan. Once we receive the documentation, we finalize the loan terms by locking the interest rate and proceeding to prepare the loan documents. I then review the loan documents with the client to confirm the accuracy, rate, etc. Approximately 3 days later, I instruct the lender to wire funds to the client. The entire process can be as fast as 2 weeks in a rush, but normally takes 30 days.
AIL: What fees and costs should a client expect to pay when getting a mortgage?
Campbell: Depending on the loan balance and terms, I have seen closing costs and fees that range from 0 to 6 % of the loan balance. For most loans, you can expect to pay for all the services related to organizing the transaction. The basic services involved in a transaction are: Loan Services, Appraisal, Escrow (or attorney) and Title Insurance. The normal range for these expenses are from $1,800-$3,600 depending on loan balance. As part of the loan process, we try to negotiate a package wherein the lender pays all of these costs.
AIL: How do "points" work and should a client expect to pay them?
Campbell: A "point" is equal to 1% of the loan balance. Points can be thought of as interest on the loan paid in advance. We try to avoid points in our loan packages, but they can be useful in certain situations. Since points are pre-paid interest, a client can agree to pay points up front in exchange for a lower rate of interest on the loan, a technique commonly known as "buying down the rate." The decision on whether to buy down the rate is one that has to be evaluated for each client. If the client intends to keep the property for the entire length of the loan, buying down the rate can make a lot of sense, as it will save the client a tremendous amount of money in interest payments over the length of the loan. If the client is only going to live in the residence for five years, there is little reason to go in this direction.
AIL: How do credit ratings figure into the process of getting a loan? If I have a poor credit rating, can I still get a loan?
Campbell: There are loans out there for almost anyone. The banks I work with look at 3 main things: income, assets and credit. Good loans are available for people that are strong in at least 2 of the 3 categories. Again, it really depends on the circumstances of each client, but bad credit is not going to prevent them from getting a mortgage. This is a common misconception.
AIL: If a reader filed for bankruptcy at some point in their life, is it going to be impossible to get them a loan?
Campbell: No! I know it defies everything that people hear or read, but it is a misconception that a bankruptcy will prevent a client from getting a mortgage. In fact, we have one program that allows clients to get loans one day after filing bankruptcy!
AIL: What are the advantages to working with a mortgage broker instead of simply going directly to a bank?
Campbell: The situation is similar to buying a new car. A car dealer is only going to have one brand of vehicles. Most people will want to look at a variety of brands to find the car that fits them. Shopping for a mortgage is exactly the same situation. A particular bank is only going to have a few loan programs. Many people walk away from the bank thinking that they cannot qualify for a mortgage. They would be surprised to learn that the bank down the road would definitely give them a loan. Importantly, many of the top lending sources for mortgage do not even deal directly with the public! As a MLS broker, I have invested enormous amounts of time to build relationships with all the banks you already know and most of the ones who don't even open their doors to the public. Essentially, a mortgage broker gives you access to a huge variety of loans and finds the one that best fits your needs.
AIL: If I am thinking about applying for a loan, what steps should I take to give me the best chance of getting the loan at a good rate?
Campbell: To get the best interest rate, work with someone that knows the marketplace and get your application into the bank before you are expecting to lock in a rate. Most banks are only locking interest rates for short periods of time (i.e. 15 days, 30 days & 45 days). When the interest rates dip, the volume of loans increases and it slows down processing times and many consumers miss their locks and lose the good interest rate. Advice: get all the paperwork done before the market takes a dip and wait. You can save much more money and get a better interest rate this way than trying to shop bank to bank.
AIL: Are most mortgage loans of the "30 year fixed" variety?
Campbell: If you can dream up the perfect loan for your situation, there is probably a lending source offering it. Mortgage loans can range in length from 2 to 40 years. There are even 30-year loans that are only fixed for the first 3, 5 or 7 years and then convert to an adjustable interest rate. A popular loan program on the market only requires a client to pay interest and not principal. This results in a very low monthly payment. My self-employed customers have shown a distinct tendency to use an "option loan" program. With the option loan, you get to choose each month if you want to make a minimum payment (less than interest only), interest only payment, or a 30 year amortized payment or 15 year amortized payment. It simply doesn't get any more flexible than this option.
AIL: Interest rates have been very low for the last year. How long do you think this will last?
Campbell: I really wish I had the answer to that. What I do know is that the rates are at the lowest level in 40 years and we are not likely to see these types of interest rates again in our lifetimes. My advice? If you are waiting for them to go lower, stop waiting and do it now. You will really kick yourself if you miss an opportunity like this. The chance to lock in a fixed loan at less than 6% is something that comes along only so often.
AIL: With rates being so low, should a person always try to obtain a fixed rate loan?
Campbell: No. A loan is only good for the amount of time that you are going to keep it. If you are going to keep your home or refinance in less than 10 years there are loan programs that can save much more than a 30-year fixed loan. These loans are called intermediate arms and they are 30-year loans that are fixed for the first couple years.
AIL: As for yourself, what type of work do you handle and in what states?
Campbell: I handle residential and commercial clients seeking loans, including the various loan programs mentioned above. Depending on the type of loan that best fits the client, I can represent clients in the continental United States.
AIL: Thanks for the education. Can you provide an email address for clients that might have questions or be interested in discussing your services?
Campbell: I encourage emails or phone calls; whichever makes the client most comfortable. email@example.com or (800) 847-4680.
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