Is it better to rent or buy a house when you’re in your 20s?

This is an interesting question that never gets old. Right now, it is more important as young professionals are embracing the American dream. Let me tell you a personal story:

While in his 20’s, my uncle bought a house in Monroe Michigan for $26,000. 50 years later, today, the house is worth $70,000.

While it may seem like a massive appreciation of over 250%, there are vital things to consider. First, 50 years is a lot of time. Second, by the time you pay for upkeeps and upgrades, this house investment has very little profit.

Was he better off renting this house for 500 bucks a month? Probably. More importantly, he missed out on other investment opportunities that he might have had.

While my uncle could afford the house in Monroe Michigan, it would be hard to buy a house in areas like NYC or San Francisco in your 20’s, where mortgage payment is almost 1.5X the rent. Good investment properties are at .8x the rent, so you have a positive cash flow.

When evaluating the critical choice of buy vs rent, there are certain things you must consider in your 20’s. First, check the rent-mortgage ratio. Zillow often put up rent amount vs mortgage payment. Although, you can calculate the ratio yourself. For instance, if the rent is $1000 and the mortgage is $1500 renting becomes a better option. However, if the rent is $1000 and the mortgage is $900, buying is the right thing to do.

Apart from the rent-mortgage ratio, you may want to consider your career and schooling plans. For instance, if you plan to go back to school, buying a house may not be the right option. There are a few exceptions though. If you are sure you are going to stay in the house during the schooling program and can afford the mortgage along with the expenses, buying may be a viable option.

In the end, like a lot of real estate decisions, it always boils down to Location, Location, Location.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

Why does buying a house bring down your credit score?

Buying a house may affect your credit score if you are not doing your mortgage shopping the right way.

The usual process for obtaining a loan is not always the best approach. For instance, when a borrower wants to buy a house they get pre-qualified with perhaps their own bank. The bank offers them an X rate, and the borrower starts to think, “I wonder if I can get a lower rate.”

Then, they check Google for mortgage rates. Most often, Google directs them to lead generation sites (the so-called comparison sites). These companies have their own unique methods of sucking in the borrower. For example, LendingTree will use low “Bait” rates to trick the potential borrower into thinking they can do better than they really can.

Zillow promises home price maps which they use in capturing your info. Bank rate or Nerdwallet will pull you in through unrelated articles they might have published.

Ultimately, they want the same thing. They want the personal and contact info of borrowers so they can sell them as Leads to loan officers.

This is where the borrower’s nightmare typically begins. They talk to one Loan officer at a lender and the LO asks to pull the borrower’s credit to verify the credit scores. But what the LO is actually doing by pulling credit is holding the borrowers best FICO. As the borrower move on to shop with another LO he also will do a similar credit pull.

If the borrower slips and allows their credit to be pulled multiple times, the first LO who pulled their credit will be holding the highest FICO score as the borrower’s credit starts to go down due to multiple credit pulls.

The first LO is at an advantage by holding the best possible score of the borrower and able to offer the best pricing compared to all the other offers. Even though this dirty trick is not discussed in widespread, it is still in practice and must be watched out.

Essentially there is no practical way to shop 400 thousand loan officers that offer different pricing using any of the existing comparison sites which are actually in the business of selling your personal info as a lead.

That is why created Parlend. Parlend’s patent-pending fair mortgage calculator calculates the best rate you can qualify for your loan and then shops that rate for you with thousands of loan officers and find the loan officer who is willing to offer you that rate instantly and anonymously


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

What credits can I ask mortgage lenders when I get them to compete against each other?

If Lenders compete, your job would be very easy; but, they do not compete with each other. Instead, they hire Loan Officers (LO) who are put on the different commissions. In turn, these Loan Officers (LO) offer different pricing that suits their commission plans.

This explains why you may get a quote when you contact a lender, but it does not mean the lender is offering you that. That lender could have thousands of LO’s who offer slightly different pricing. Examples of Lenders include Wells Fargo, Chase, and Quicken.

Now let’s get to your question. To know what credits you can ask lenders, you have to understand what the lowest rate your risk profile can even qualify for. This is known as the PAR pricing. In other words, PAR is your fair pricing, and you deserve it.

Once you know your PAR pricing, you also need to know the closing cost associated with it. This helps you to figure out how much money is needed. To make closing cost simple, you should always ask for a ZERO-point closing cost. With zero-point closing cost, the lender will front many of the initial closing costs and fees, while charging a slightly higher interest rate over the duration of the loan.

This will even out the playing field and you can focus on the rate by itself. Read more about closing cost here

Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

Are online mortgage lenders more problematic than traditional ones?

You first need to ask why a loan becomes problematic in the first place. The answer to this could be a tricky one. Borrowers and loan officers both blame the lenders, brokers, processors, underwriters, appraisers and anyone that may touch the loan.

In other words, it’s the biggest chain of the blame game in any transaction. Yes, we know the process is broken, likely beyond repair. Companies like SoFi are the closest answer to a peer to peer process that can fix this chain but we are still a long ways away from a good solution for the mass market.

Bottom line is, online, brick and mortar or your cousin’s best friend’s broker is all the same when it comes to the process. The process is not good and problems are bound to happen regardless of how great your loan is.

Pricing is another matter and that is something that is being addressed by us so even if you get a crappy process, you are at least not overpaying.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

Should I shop around for mortgage rates? How would you do it?

You should shop around for a mortgage if you want to save an average of 25  thousand dollars. That’s what the average borrower leaves on the table because they don’t know how to shop for a mortgage.

The problem is borrowers do not have the right tools to shop. They google, they connect with the first few brokers offering rates that catch their attention but the problem is they just become leads, get harassed and give up.

Most of the so-called “Comparison sites” (Lending Tree, Bankrate, Zillow) etc are all just lead generation models that barely dent the surface when it comes to shopping for a mortgage.

Parlend, on the other hand, calculates the lowest rate you can qualify for your loan and finds a loan officer, from among the 400K loan officers out there, who can offer you that rate, all anonymously, and with just a single click.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

Why do mortgage underwriters wait until the last minute to request documents to close a home?

The mortgage process is severely broken almost beyond repair. There is a bunch of old and new startups including Quicken Loans “Claiming” they are trying or have fixed the process. Not even a chance. The reason is that underwriters are just mid-level workers.

Imagine your school principal doing your surgery that’s exactly what it’s like. I come from a family of surgeons and can tell you Just like surgery, underwriting has a lot of moving parts that require precise detailed attention. They will overlook things and make more mistakes than a trained surgeon who has attention to detail and immaculate memory to go with it.

Are we going to pay someone what a surgeon gets paid to do underwriting? Nope so, in other words, this broken process continues until the business is overhauled with future tech Blockchain etc. Document verification etc is a big part of the problem and tech will likely fix that to a high degree.

Until then borrowers will be asked for the same document 3 times and underwriters will hold up closings because they took a long lunch.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

Must I use the mortgage company that my builder directs me to?

The short answer is HELL NO…..When there are 400 thousand loan officers with different rates, why would you just pick one? With that said, builders will typically throw in some sweet incentives to get you excited. New refrigerator, landscaping and of course ZERO closing cost.

Incentives are wonderful but if they are giving you 5k in incentive and you can save 30k elsewhere where would you go? if you said 5k I don’t really have a good argument for you.

Your best bet is to properly shop the mortgage then take your best offer to the builder to match and throw in the incentive if they don’t want to lose the deal. That’s how you negotiate with a builder who has an inside deal with an LO.

Unfortunately, due to borrowers lack of resources, builders and agents can take advantage of them directing to their own benefit.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

What is the most stressful part of getting a mortgage?

The most stressful part of obtaining a mortgage is the mortgage underwriting. The appraisal process is a delay period which can easily build up stress.

Usually, the mortgage underwriter evaluates the borrower’s documents to check if they are creditworthy. This evaluation period, however stressful, is essential for the mortgage broker to make sure you would not default in the future. If there are issues with your financial history such as a not-so-perfect credit score, or an inability to provide vital documents, getting a mortgage can be a frustrating process.

The underwriting stage is also the point at which the underwriter (usually one person) looks at your pay stubs to check if they are too old or needs more income when matched against your tax returns. If the underwriter needs more information he will ask the processor, the processor will check for it in their files and if not found will ask the Loan Officer to get it from you.

It builds up frustration and delays which may affect the purpose of the loan and as a result, the loan may be rendered ineffective. In extreme cases, it leads to loan’s death— Low wage employees combined with the inefficient protocol is the culprit.

However, all hope is not lost. There are startups springing up to solve this challenge. Peer to peer companies like SoFi have the best shot at solving these problems, however, they don’t have the necessary capital to operate like secondary markets. Until then you will submit your pay stub 3 times, get questioned on your rental income write-offs and given the financial colonoscopy.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

Why do all mortgage brokers offer such terrible service?

It is not the service, it is the mortgage process which is broken at its core. The process is broken because of one single step, “Underwriting”. This stage of the process is where a human (the underwriter) looks at your supporting documents (pay stubs, assets etc) and confirms your ability to pay for, say the next 30 years.

The “underwriting” stage in the mortgage process is often the main reason why mortgage companies offer services that are not satisfactory. Many aspects of the mortgage process are now automated, largely with the advent of emerging technologies like artificial intelligence and machine learning. Nevertheless, humans cannot be totally eliminated from the mortgage process; and, humans have emotions.

Like every human, they could be nervous. This is because it is risky, as they are placing a bet on a borrower’s ability to repay a loan. Also, the borrower is nervous because the deal could fall through. So there are a lot of emotions riding on this step alone.

Can this process be fixed by tech?

Yes. Peer-to-Peer lending companies like SoFi are working on simplifying the whole process to eliminate the usual challenges that both borrowers and underwriters face.

Will it be fixed?

Well, maybe not soon. It requires a huge capital to issue loans, and it is hard to have access to huge capitals if there are no government backings.

So regardless of all these startups and established companies like Quicken trying to “Rocket” your app or use blockchain or “insert your own tech term”, it is still a marketing ploy to fool the borrower into a process that may or may not fall apart.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora

How much money do you need to have in the bank before applying for a mortgage?

Depending on the type of loan, you may access a loan with zero down mortgage. There are programs designed to get you a house with ZERO down payment or have the seller kick in 3% to cover the cost. However, we do not recommend such practices.

There are several hidden costs associated with homeownership that many borrowers are not aware of:

  • Inspection cost
  • Appraisal cost paid outside of the loan
  • Possible repairs before moving in

It is always wise to have some amount of money in your account to cushion yourself when applying for a mortgage.

This is why you need an extensive and reliable set of shopping tools. At Parlend, we offer free mortgage shopping tools that will help you in finding a fair rate and cost in real time, while keeping you anonymous.


Check out our free mortgage shopping tools at https://www.parlend.com

This question was initially answered in Quora by our co-founder and mortgage ninja Kevin. View in Quora