Financing in New York (1)
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After three days of fielding press and industry-insider interviews, I have a new perspective on people's knee-jerk reaction to what we are doing. Now, keep in mind that these are, by definition, the most jaded and cynical questioners with regard to new business models in the real estate arena. They know all the ways people have tried to skin the cat, and they assume we fit into one of the pigeonholes they've created.
The greatest skepticism was reserved for our Free Mortgage. The assumption is that this is done with smoke and mirrors. Partly, this is due to the way traditional brokers have used ABA and in-house mortgage companies to abuse their customers--making extra money from them in the name of "one-stop shopping". So there is a tradition in the industry of using mortgage as a sneaky way to make money and pad the bottom line.
Second, mortgage is such an easy thing to play numbers games with. It's like a balloon--squeeze on the rate and the points increase; squeeze on the points and the "fees" increase. Anyone can offer a "no closing cost" loan (if you don't care about the rate). Anyone can offer a super-low rate (if you don't care about points and fees).
So, I wanted to address this issue directly: What makes our Free Mortgage legit? How can our buyers really get a well-below-market rate AND pay no closing costs?
I'll start with the origin of our company. My co-founder and I have owned a successful mortgage company for the last four years. We know all about the residential mortgage business, from the investors on the secondary market to the big lenders to the local retail shops and loan officers. We know how they work, how they make money and what their incentives are.