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Any Mortgage Broker Can Pre-Qualify Home Buyer

July 25, 1993

What does Robert Bruss have against mortgage brokers anyway?

Once again I found an erroneous statement regarding mortgage brokers in his article "How to Avoid 10 Common Home-Buying Mistakes" (June 20). He states, ". . . only a direct lender can pre-qualify you subject to appraisal of the home you decide to buy." This is simply not true. Any mortgage broker can obtain the same conditional approval for any client through virtually any one of hundreds of lenders subject to the appraisal. In this situation there is no difference between S&Ls, mortgage bankers or mortgage brokers.

A few facts about mortgage brokers, who last year funded more than half the home loans made in California:

First, mortgage brokers obtain financing for their clients through the wholesale division of lending institutions nationwide. This means not only do they have available numerous loan options, but can offer them to clients at prices often lower than retail outlets. Because of volume discounts and other incentive programs, mortgage brokers can frequently pass along added savings to borrowers. Second, since it is a referral business, and brokers work on commission only, service and customer satisfaction are crucial to their livelihood.

Third, and maybe most important to the consumer, mortgage brokers represent the borrower and not the loan program or the bank. Without bias, they can select the best program, lender, interest rate, even loan points to suit each client's needs.

As in any profession, there are unpleasant situations and/or questionable conduct. This is not a reason to condemn mortgage brokers as group.

DALE WHITING, Senior loan consultant Finance West Corp., Los Angeles

'Environmentally Sensitive' House?

Regarding "Hot Property" June 6 on Casey Coates-Danson:

To suggest that a single-family home can be simultaneously 7,800 square feet and environmentally sensitive is absurd.

Regardless of how resource-efficient the separate building elements may be, the sheer quantity of materials used is inappropriate. At best, the effect of such extravagance can be mitigated slightly by the choice of materials and building systems.

As a builder with active concerns regarding environmental quality and waste management in the construction industry, my principles would be sorely tested if offered the opportunity of building a project of this size and presumed quality, but from this safe distance I can echo E. F. Schumacker and say, "Small is beautiful."

STEPHEN A. McGRATH, San Luis Obispo

More on Accumulating Cash to Buy Home

I'd like to comment on Dian Hymer's June 6 story "How to Accumulate Cash to Buy Home."

--Borrowing against 401K. While this is an excellent source of accumulating proceeds, buyers should be cautioned that underwriting guidelines have changed and since you must pay back whatever is borrowed, the monthly pay back is treated as debt, which could cause serious problems unless a thorough strategy is adopted to offset the debt.

--Take a low-point loan. Even though this might be advantageous to reduce cash outlay, the repercussion of having a higher monthly payment is much more costly than paying the loan and costs at the market rate. Of course, the rare exception is where a homeowner plans to sell in a short period of time.

--Close escrow late in the month. Many agents have adopted this strategy and it is simply a financial illusion because one way or another a homeowner will pay.

Assume that you closed on the last day of the month, you would have to pay one day of prepaid interest. You would skip the next month and your payment would be due the 1st on the following month. You might assume this is great because you only paid one day of interest.

The bottom line is that closing at the end of the month simply means while there may be an illusion of savings or cash outlay, the reality is that your payment will be due that much quicker, thus the savings is a moot point.

--Regarding down payment. While the comment regarding 5% could be considered correct, most first-time buyers fall into the Community Home Buyer Program guidelines, of which only 3% of the down payment must come from their own funds.

FRED THOMAS III, President, Professional Realty Mortgage, Los Angeles

Shredding: The Dirty Work of Composting

Perhaps the most time-consuming part of composting ("Developing a Sense of Humus," June 27) is the chipping and shredding of material that goes onto the compost pile. I would never consider using pruners to cut material into one-inch pieces. My $400 electric shredder failed after producing less than 10 cubic yards of chipped and shredded material. At that rate, is easier and cheaper to buy finished compost, but such commercial compost may contain unknown ingredients such as heavy metal residue.

The most physically demanding part of composting is turning over the pile. For older people and those with bad backs, taking more time and using less labor to complete composting is a good compromise.

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