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How To Sell Mortgage Loans

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If you carefully selected your lender for a mortgage, a student loan or some other type of debt, you might be surprised or even upset to receive a letter telling you that the obligation is being sold to another financial institution.

Although theres nothing inherently bad about loans being sold the terms of the loan will not change you could run into problems if you fail to receive a notice or paperwork gets lost. That could cause you to miss payments, costing you late charges and even hurting your credit. Heres a look at why loans are sold and how you can protect yourself.

You May Need To Sell Yourself To The Seller

Its smart to be transparent and straightforward about the reasons you didnt qualify for a traditional mortgage. Some of that information may emerge anyway when the seller checks your credit history and other background data, including your employment, assets, financial claims, and references.

But make sure, too, that you point out any restrictions on your ability to borrow that may not surface during the sellers due diligence. A potential buyer who has solid credit and a sizable down payment on hand may have recently started a new business, and so be unable to qualify for a loan for up to two years.

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How To Be A Mortgage Broker Plus Advantages Of A Career In The Mortgage World

Of course, snagging a comfy salary isnt everything . Is brokering loans rewarding or even fun?

Shayna Rabaiotti, an Arizona mortgage loan officer with Guardian Mortgage, has this to say about it: Its such an amazing feeling when I get to see my clients reactions after they get their keys to their new home.

Rabaiotti also notes that mortgage loan brokering is a good transition career.

After being in the customer service and sales industry for over 15 years, I find that I really enjoy helping people, which is why I was so drawn to this, she says.

Here are the basic steps you need to take to become a licensed broker:

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Your Mortgage Broker Is Still Your Mortgage Broker

Remember, your broker doesnt own your loan, the lender does. Your broker is simply your guide through the mortgage application and approval process, the person or persons who help you lock in the best interest rate for your loan.

So even despite your mortgage being sold to a new lender, your mortgage broker is still able to assist you with refinancing efforts, any new mortgage needs, as well as answer any questions about the loan in question.

Using A Home Equity Loan

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A home equity loan also gives you a lump sum of cash at a fixed interest rate, but it doesn’t replace your mortgage like a refinance. Instead, it’s an entirely new loan that you’d normally repay monthly, along with your existing mortgage payment. If you’ve already paid off your home, the only monthly payment you’ll have to make is on your new home equity loan. The benefit is that your interest rate won’t go up and your monthly payments are fixed, too.

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What Is The Secondary Mortgage Market

The secondary mortgage market is a marketplace where investors buy and sell mortgages packaged into bundles with many individual loans. Lenders originate loans then place them for sale on the secondary market. Investors who purchase those loans receive the right to collect the money owed.

Just like any market for securities, the value of mortgages on the secondary market depends on their risk and potential return. Higher-risk loans must offer higher returns, which is one of the reasons that people with lower credit scores pay higher interest rates.

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Alix Langone

Reporter

Alix is a staff writer for CNET Money where she focuses on real estate, housing and the mortgage industry. She previously reported on retirement and investing for Money.com and was a staff writer at Time magazine. She has written for various publications, such as Fortune, InStyle and Travel + Leisure, and she also worked in social media and digital production at NBC Nightly News with Lester Holt and NY1. She graduated from the Craig Newmark Graduate School of Journalism at CUNY and Villanova University. When not checking Twitter, Alix likes to hike, play tennis and watch her neighbors’ dogs. Now based out of Los Angeles, Alix doesn’t miss the New York City subway one bit.

Senior Editor/CNET Money

If you’re a homeowner who has paid off the mortgage after toiling for years to make payments on time, there’s good reason to celebrate: Your home is finally yours. Another reason to celebrate is that your paid-off home can help make you a more attractive candidate for a home equity loan. You can take out various types of loans including a home equity loan, a home equity line of credit , a reverse mortgage if you’re age 62 or older, a cash-out refinance or a shared equity agreement.

Here’s what you need to know to decide which home equity option makes the most financial sense for you if you’ve already paid off your mortgage.

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How Much Is Amortgage Noteworth

The value of a mortgage note depends on several variables. Reputable buyers may offer around $0.70 on the dollar for the remaining principal balance, depending on the amount of risk they must take on should they purchase the note. Since someone purchasing an existing mortgage note cant raise the interest rate to offset a riskier investment, theyll lower the offer price instead.

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Just like there are lots of homebuyers needing a mortgage at any given time, there are always countless mortgage loan officers vying for their business. And you dont want to lose potential or current clients to your competition, especially when it can be prevented with the right mortgage sales techniques.

If you want to stand out in this competitive industry, generate mortgage leads, and learn how to close more mortgage loans, you need to make the loan process more personal. You have to make relationships the core of your business practices.

Moreover, you also need to provide an exceptional experience that sets you apart from other loan officers so more clients and referral partners will want to work with you. Here are some tips to get you on the right track:

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Reasons Consumers Choose Private Mortgages

Stricter lending requirements and bruised credit scores led to an influx of private mortgage notes after the recent recession.

During the recession, many homes were left abandoned and fell into disrepair, making getting traditional mortgages next to impossible. Because homes must pass an inspection as part of a bank-based mortgage, a home that needs extensive repairs or renovations may only be able to be purchased through a private mortgage.

Those with less-than-perfect credit and those who are self-employed can turn to private mortgages when they might not qualify for traditional bank options.

Others use private mortgages to keep an asset in the family. If one family member is selling a home and another family member needs a home, it can make sense to pay the interest on a home loan to a family member rather than a faceless bank.

Money: Consider Your Financial Position

Ideally, youd be able to have concurrent closings, selling your home in the morning and closing on your next place that afternoon or at least within a few days. But what if things dont go according to plan? You could suddenly find yourself without the necessary funds to close on your new home, or wind up paying two mortgages for an extended period of time. Worst-case scenario, you may be unable to get final approval for a mortgage and potentially lose your next home.

If you dont have the means to handle two mortgages simultaneously, you might want to include a contingency in your offer that gives you an escape route should the sale of your current home fall through. You may also consider adding a financing contingency, in case your new loan approval hinges on selling your current home. Such contingencies are fairly common, and a good agent will be able to help you make the right decisions for your needs.

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Increasing The Value Of A Mortgage Note

Many factors that determine the value of a mortgagenote are beyond the current owners control. However, one of the most significant things they can control is paperwork. Buyers want to see timely payments, so proper record-keeping and proof of those payments are necessary.

While a note holder has littlecontrol over whether a borrower pays, they do have some small measure of control over a borrowers credit score. By working with a loan servicing company, note holders can ensure that timely payments are reported to credit agencies.

Knowing the factors that a potential buyer looks for at the beginning of the process can help you create better terms for a future sale. Helping the borrower maintain good credit, setting the shortest possible loan period, and ensuring collateral to secure the loan will increase a notes sale price should the mortgage note holder decide to sell at some point.

Prepare Your House To Sell And Stage

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When youre selling a home, you want to compare as if you were trying to win the apple pie contest at the state fair. Just as you would only use the best ingredients in your pie, you want to make sure youre showing your home in the best possible light.

We recommend all sellers always do a few basic things:

  • Do some deep cleaning and de-clutter. Especially in the evermore health-conscious world we live in, when you have the potential for many people to be going through your home, deep cleaning is never going to hurt. You also want to de-clutter. This will make it easier for potential buyers, appraisers and home inspectors to walk through your home.
  • Paint a picture without personalization. Youll want to remove personal touches from your home, but you also want to give someone the impression that they could see themselves living in this space. You should leave ample walkways, but at the same time, consider leaving furniture in the space.
  • Even little renovations can matter. Replace knobs on doors and cabinets. Put a fresh coat of neutral paint on the walls. Plant some flowers in the garden bed. While granite countertops are nice, not everyone has the budget to redo the main bathroom before they sell, but you can do lots of small things to spruce up your home.

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Why Loans Are Sold

Many consumers dont realize theres a thriving market for loans, referred to as the secondary market. When you borrow from a bank or credit union, you may not notice that the fine print on the lending agreement says the loan may be sold.

Most lenders sell loans due to liquidity reasons, meaning they dont want the loans in their balance sheet, says Cristina Zorrilla, assistant vice president of mortgage pricing and investor relations with Navy Federal Credit Union. They sell loans so they can lend to more borrowers.

Some lenders sell loans to other financial institutions but keep the servicing rights.

This means the customer still deals with the same lender and sends the payments to the same place. It hardly affects consumers, since the point of contact doesnt change. However, many lenders dont have the capacity to continue servicing all the loans they make, so they sell both the debt and the servicing rights. When that happens, customers have to send their payments to a new organization and will deal with that new party if problems arise. Only a few, including Navy Federal Credit Union, never sell servicing rights.

Is It Better To Pay Off Your Mortgage Before Selling

Paying off your mortgage early, before selling, might seem like a good way to avoid mortgage payment confusion, assuming you have enough cash. However, theres limited benefit to paying the mortgage in full before selling. Yes, it would allow you to offer seller financing to a buyer, but it also may set you up to owe more at closing. Why? Because you could be subject to a prepayment penalty, depending on the terms of your loan.

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Why Do Banks Sell Mortgages

Again, its all about liquidity. Banks and lenders need to have enough money to extend mortgages to homeowners. With the real estate market constantly changing, financial security is important for all parties involved in the mortgage process.

Think about the typical 30-year loan term. If a mortgage lender has its money tied up in that transaction for the full 30 years, it will have less money to offer future mortgages. By allowing the mortgage to be sold to an investor, the lender now has the capital and money flow to continue to lend to other borrowers.

On a larger scale, this process is a part of how the mortgage market works. Investors keep the market liquid so lenders can continue to help borrowers purchase homes.

Can You Sell Your House Before Paying Off The Mortgage

How to Buy and Sell Mortgage Notes

Most home loans have a repayment period of either 15 or 30 years. So what happens if you want to sell before then or before youve paid off your loan? The typical seller lives in their home for 13 years before selling, according to the Zillow Group Consumer Housing Trends Report 2018, so selling while you still have a balance on your mortgage is actually quite common.

As long as your home is worth more than what you owe the bank, youll probably pocket some profit after youre done paying commissions, fees and closing costs.

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Line Up Homeowners Insurance

The lender will require you to have homeowners insurance, but its a wise investment even if you are paying in cash. Homeowners insurance covers damage to your property from certain risks, such as fire. Your policy also covers personal property, such as furniture, and provides liability coverage if someone is injured while visiting you.

The cost of insurance can vary, depending on factors such as your coverage limits and deductibles. You may be able to save money by buying your homeowner policy through the same insurance company that insures your car, so shop around for a policy.

What To Expect If Your Loan Servicing Transfers

Finding out you have a new loan servicer after your mortgage has been sold is completely normal many lenders sell mortgages.

The transfer notice will provide the information you need to get ahold of your new servicer. From there, you may need to set up a new online account, direct deposit schedule and account profile on a new online servicing system. Be sure to act on this quickly so there are no delays that could cause your home loan payments to go through past the due date.

If there are delays that cause your mortgage payment to be missed, dont panic. Reach out to both providers to explain the issue. For instance, if you were notified on the 29th of a change in service and your next mortgage payment was already scheduled to go through on the 30th with the old provider, you might not be able to set up a new payment in just 24 hours.

Be sure to talk to your original lender to ensure your last payment went through and that you have clear expectations of when you should stop paying them. Then reach out to the new lender with this information, particularly if you missed a payment because you scheduled it with the old provider. If you accidentally make a payment to your old servicer within 60 days of the transfer of servicing, they arent legally allowed to consider it a late payment.

Communication is key during this process, so make sure youre covered and communicating with both providers.

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What Are Your Rights

Both the buyer and seller of the mortgage must provide you with written notice at least 15 days before the mortgage transfer takes place, according to federal regulations.

In addition, the new mortgage owner is required to provide you with its contact information within 30 days after the transfer. Youâre also entitled to a 60-day grace period in case you send a payment to the old lender.

Beyond that, the lender has every right to sell your loan and you canât do anything stop it, said Tammi Lindley, senior loan officer for the Tammi Lindley Team, a mortgage lender.

âIf as a result of the sale you find yourself with a lender you donât like, your only recourse is to pay the loan off, most likely with a refinance,â said Lindley.

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