Tuesdays Tip

How NOT to apply for a mortgage

2009-06-16T14:26:00.003-04:00

Nobody expects you to know exactly how to apply for a mortgage if you have never done so before. Even if you have, chances are you have only applied a few times in your life - hardly experienced considering guidelines from 1 week ago are now old news!

Here is my list of 10 moves you should NOT make when applying for a mortgage:

Spend a few days calling 5-10 mortgage companies - mortgage rates change too fast to spend hours, let alone a few days!
Use the phrase, "I'll be making my decision within the next week." - my response will always be, "Well please call me when you are ready and we can discuss the mortgage again". Once again, the industry changes too fast.
Ask, "What is the best rate you can give me?" - rates can come with points, no points, adjustable rates, fixed rates, 10 years or 40 years. This is the equivalent of asking, "What's the best price you can give me on a car?"
Make the claim, "I can get X rate from Y company". Proooooooooooooooooove it! Get it in writing and we'll match or beat the offer. (Disclosure: I will bet that 95% of the time you will not be able to get the offer in writing)
Compare closing costs strictly based on the number - there are actual closing costs, then there are escrows & prepaids. If you don't understand the numbers, ask!
Ask to use "your" attorney - unless your attorney specifically works in real estate, you are probably wasting your time. This is like going to a brain surgeon for your ankle surgery.
Guess your income - you will over estimate. It happens all the time. Then you will provide documentation that shows otherwise and you will be upset when the loan is declined because your income is "only off by a few thousand".
Use all of your savings to purchase/refinance - you will need reserves. Plus, have you ever heard of an "emergency fund"?
Follow the "1% drop" rule to refinancing - hint: It does not always hold true. Try to tell me that saving .5% on your 300k mortgage doesn't matter.
Rely on newspapers, the news or Internet for current rates - you are wasting your time. It's old news.

There you have it folks, the 10 things I hate to come across in this industry. You may be guilty of a few, but it could always be worse!

Mortgage rates could go (back) down

2009-06-15T12:08:00.004-04:00

The media caught on to the pitfalls of rising mortgage rates. As a result, more people are asking me if I think rates will go back down. The answer is a big "IF". However, I must credit Yahoo! Finance for this great article that documents why mortgage rates could fall.

Traditionally, my advice is, "If your 401k is doing well, rates probably aren't. If you're losing money, rates are probably falling." The article mentions this as one of the 5 reasons, along with widening spreads. Smaller spreads make it difficult to offer no points/no closing programs and limit a broker's advantage to knowing which lenders off the best rates on certain loan scenarios. Larger spreads will bring back that added incentive and allow brokers to present more competitive offers for borrowers. Sounds like a win/win to me!

Check back tomorrow for Tuesdays Tip! Make it a great day!

This is your warning...

2009-06-11T13:14:00.003-04:00

Consider this your warning: Mortgage rates are the highest they've been in six months. If you missed the boat waiting for "4.00% rates", you may want to consider doing something with your 6.00%, 300k mortgage if rates drop back to below 5.5%.

The aforementioned article from the associated press is further evidence that the media is always a step behind the mortgage industry. Rates have been hovering just below 6.00% for nearly 2 weeks! Also, be aware that the 5.59% rate referenced in the AP article does not include points and closing costs.

I am using this opportunity to point out that you need to be ready if the opportunity to take advantage of lower rates presents itself. The window may not be open for long. More to come on the violent fluctuations in rates! Make it a great day!

Why Mortgage Rates are Rising

2009-06-09T15:40:00.002-04:00

Did you get the memo? Rates are up nearly a full percentage point in the last 2 weeks. I hate to say "I told you so" (see the last paragraph). It certainly isn't pretty in the mortgage market the past couple of weeks. In terms of payment, a $300,000 mortgage now costs you an additional $240 per month.

You may be asking yourself, "what happened?" The answer: The global economy does not approve of the massive US debt we continue to acrue and there are concerns over inflation. The complete answer is material for a thesis, but the basic premise is here. The government has kept rates artificially low buy purchasing mortgage-backed securities. Inflation is on the minds of every economist and person on Wall St. We know that if the economy rebounds, inflation could soar. Mere speculation can torpedo mortgages rates - hence the impact of the last two weeks.

If you were planning to refinance or intend to purchase a property, there are a few moves you should make to put yourself in position to get the best rate. First, understand that internet and print advertising are archaic in the mortgage industry. Rates change too fast (in fact, every 2 hrs, 36 mins last week) to rely on tomorrow's newspaper for the "best rates".

Make sure you have someone looking out for your best interests. Know what you can afford. Do not hope for a rate to drop .125% if you know you cannot afford the mortgage if rates rise .25%. Rates rose .5% in 2 hours last week.

Lastly, focus on what you can control. You cannot change mortgage rates. Take the best rate and terms available because most lenders offer programs that allow you to re-lock a rate if it comes down.

Email me if you do not have someone watching rates for you. If you have any questions or further discussion, please feel free to leave a comment or contact me. Make it a great day!

The State of the Mortgage Industry

2009-06-03T08:46:00.003-04:00

Dare I say the mortgage industry is worse than ever? One would think increased regulation leads to greater efficiency, better performing loans, and advantages for the borrowers. The Rolling Stones put it best - "You can't always get what you want!"

Underwriting turn-times average 3-6 weeks. Once an application is submitted, you will not hear anything for nearly a month. Tack on another couple of weeks to review any additional documentation required by the underwriter and your loan takes about 2 months to close. How's that for efficiency! Oh, did I mention we used to be able to close a loan in 1-2 weeks? (My record is 3 days!)

The HVCC (click here to sign the petition) guidelines are destroying the integrity of the appraisal industry. Would you like to wait 4 weeks for an appraisal that could have been produced in less than 24 hours? How would you feel if appraiser A came back with a value $110,000 less than appraiser B who was at your house one week earlier? The service has been horrendous and to make matters worse borrowers are paying more for the service. The average HVCC compliant appraisal costs a borrower an additional $100, and approximately 50% goes to the appraisal management company (AMC) for simply assigning an appraiser to complete the appraisal. (Note: Our appraisers used to charge $275 for a single family appraisal; AMC's charge $385 in most cases)

The volatility in rates must be driving rate shoppers insane. The average rate quote is only good for about 2 hours, then it's back to square one. I had a borrower turn down a 4.875% rate last week, needless to say his rate is now 5.5% -- a $163/mo difference! I am afraid that without government intervention, the days of rates below 5.00% may be gone and we are now on the fast track to "inflation period" rates...my best guesstimate is 6.5%.

To make matters worse, lenders do not seem to care. On Monday, I had an operations manager from a top 10 lender say to me regarding an upcoming deadline, "The seller can wait a couple of days to close. Does he really think he'll sell the house again in 2 days, we'll close the loan in a couple of days when we have time". (It cost that lender about $3,000,000 in business from us that we otherwise would have sent to them.) The statement shows no respect for contract law and put the buyer at risk of losing his deposit. The comment demonstrates the sentiment of overworked, underpaid representatives in the mortgage industry who are forced to comply with hundreds of new procedures and guidelines imposed by members of Congress that have zero understanding of the business. Would you want an attorney handling your brain surgery? Probably not. Then why would you allow a politician to set forth the guidelines that govern the mortgage industry. As if we didn't have enough problems!

There is a laundry list of problems that plague the mortgage and real estate industries. Unfortunately the list does not seem to be getting any shorter. Be patient. Do your homework. And understand to the best of your ability the process you are about to embark on before you dive in head first. Feel free to use me as a resource for updates on procedure changes, rate fluctuations, or trusted referrals. And as always, make it a great day!

How do you pick a mortgage professional?

2009-05-20T08:56:00.003-04:00

Reputation of the company? Best rate? Lowest closing costs? Reputation of the mortgage professional? Customer service? Every person has their own criteria, but you may want to consider yours prior to entering the mortgage process.

Ask yourself, "How much do I really know about mortgages?" There are many articles and posts out there lately that discuss personal opinions on how to find the best mortgage. Some finance advisers recommend Bankrate.com, while others recommend a trusted professional they have worked with in the past. J.D. at Get Rich Slowly posted a great article on his advice and received dozens of comments from people regarding their experiences. The comments concern me. Here are a few comments from his post and others:

"Don't be afraid to change to a different company" -- I couldn't agree more. But this only holds true if you minimize the upfront costs. Lock fees, applications fees, etc. are designed to prevent borrowers from going elsewhere and ensure the mortgage company cuts their losses. Be very cautious with any mortgage professional who says, "I need a credit card to get the application process going". At that point, you're pretty much stuck! If there is not something tangible you are paying for upfront (credit report, Fannie Mae findings, etc.) you should be able to pay for it at closing -- assuming you close, right?
"Go with someone that holds the mortgage" -- You have no control over who owns the mortgage. Banks make money buying and selling loans. Regardless of what anyone tells you, a "promise" your loan will not be sold is a big lie. A bank can retain the servicing rights on a loan, sell the loan off, and you would have no idea the loan has been sold. Don't lose sleep over what you cannot control. Servicing rights can be sold just as easily.
"Get educated" -- I couldn't agree more. Hopefully that's why you are reading this!
"Relationships don't matter..." "It is strictly business" -- Garbage. I have seen more personal acquaintances and past customers get taken advantage of by other mortgage professionals in the past 2 months than I have in the previous 3 years. Tell me "relationships don't matter" when your closing costs come in double, your rate is higher, the loan isn't what you asked for, or you can't get ahold of your mortgage professional when a question arises.
"I went with a company because they never wrote any bad loans or sub-prime loans" -- With mortgage delinquencies over 8%, if you believe that then I have some great swamp land I'll sell you for a few million!
"If it sounds too good to be true, it usually is" -- Touche! This could not be more true for mortgages!

I always say that reading a couple of articles does not make you an expert, nor does owning a couple of properties. I know very little about cars, and I don't pretend to. But my approach has worked well and it applies similar to mortgages -- find someone (a mechanic) you trust, make sure everything is explained to you, compare costs, and make sure they're not going to jerk you around.

Yet somehow it amazes me there is still more "bad" information available than "good" info when it comes to mortgages. Ask yourself, how do you make your decision? I have seen alot of bad decisions the past few weeks and I'm at a loss for words trying to analyze the logic of the borrowers. Nonetheless, I realize people make stupid decisions (Myself included!). I'm just trying to help everyone make fewer of them!

Make it a great day!

Biggest Supporters of HR 1728!

2009-05-13T13:03:00.002-04:00

Yesterdays tip focused on the potential destruction of HR 1728. Today, additional information was released regarding Barney Frank, the Massachusetts representative primarily responsible for supporting HR 1728.

Take a guess who his biggest campaign contributors are...

Bank of America
American Bankers Association
JP Morgan Chase
Morgan Stanley
NAR - National Association of Realtors

Coincidentally, these parties are among those that will benefit the most if HR 1728 is passed.

Yet Another Reason Congress Isn't Helping Homeowners

2009-05-12T12:11:00.004-04:00

I must sound like a broken record. Yet, every week more legislation is in the works that is a detriment to homeowners. I used this metaphor in a previous post, but you wouldn't trust a lawyer to perform your brain surgery, so why are we trusting lawyers and lawmakers to dictate mortgage guidelines? It's ridiculous! First the HVCC, now this week it is HR 1728.

HR 1728 is a housing reform bill intended to protect borrowers and renters. I agree with the verbiage that protects renters from being stiffed by landlords who are in foreclosure. However, a portion of the bill would prevent yield spread premiums (YSP) from being paid to banks and brokers. This is a fee that lenders pay to a broker or bank for a rate above the par rate. Think of it this way, if you are not paying origination points, the mortgage professional is receiving compensation in the form of a YSP. I don't know anyone that works for free! Lenders provide YSP incentives to generate business, which can then be passed on to borrowers in the form of lower rates or to avoid paying origination points. HR 1728 will change that. Here are just a few problems with the bill:

Big lenders (Countrywide, Chase, Bank of America, etc.) can still make a "gain on sale" which is just another term for YSP.
Lobbyists for these major lenders, who also happen to be major TARP recipients, are among the biggest supports of the Congress representatives voting on the bill
You will have to pay points to obtain a rate from any broker (IE, no points loans will no longer exist)
No points/No closing costs loans will no longer be available through brokers because the YSP is used to pay the closing costs on these loans.
Smaller companies will be put out of business. Less competition will generally lead to higher rates.
Vague language in the bill leaves portions open for interpretation - yet the very people responsible for managing available funds don't know where the money is going!

The argument can be made that some banks and brokers abuse YSPs. However, there are preventative measures in place with lenders that prevent borrowers from issuing particularly high cost mortgage in this regard. The negative implications of the bill far outweigh the positive changes that may result. For example, about 80-85% of the borrowers I speak with on a daily basis request a "no points" mortgage. That will no longer be an option if HR 1728 passes. If you want to protect your rights as a borrower and retain the right to request the type of mortgage that suits you best, please contact your local Senator.

If this bill passes many small companies, like ours, could be out of business. That means no more Tuesdays Tip! Help me help you!

Make it a great day!

At least someone agrees with me...

2009-05-05T21:00:00.002-04:00

After my rant earlier today about the wasted governments spending it was nice to come home and see someone who agrees with me:

The majority of people in the mortgage industry, and Tom Vanderwell over at "Straight Talk about Mortgages and Real Estate". I like Tom. He's blunt, is among the few that understands the business, and the states he does business in do not overlap with mine!

I guess tomorrow will tell!

Mortgage Fraud Rising?

2009-05-05T16:49:00.006-04:00

Seems impossible doesn't it? But, fraud indexes show fraudulent mortgage activity in the first quarter of 2009 has doubled in the first quarter of 2009. And you thought the government was helping borrowers!

Indictments are up, the numbers of borrowers qualifying for mortgages are down, and the only person with a reputation worse than the mortgage industry is the Craigslist Killer! The bailouts are keeping rates low, but what good are low rates if borrowers cannot qualify. The new HVCC guidelines will make it even more complicated for current homeowners to refinace a home. And nothing seems to be changing!

Perhaps I am missing something. The regulations are in place, but there is so much focus on the regulations that we are forgetting about what really matters -- making it possible for borrowers to refinance and buy homes so we can get out of this economic disaster! Instead, we divert resources towards useless efforts such as the bank stress tests. Just a few days ago, Yahoo! posted an article indicating 3 of the 19 banks failed the stress test (article no longer available). Yesterday, Yahoo! reports that 10 of the 19 banks need to raise more capital. I do not want to know how many millions of taxpayer dollars were wasted, but I can sum up the results for free: Banks were not prepared for the current economic disaster. In case you were curious, the reports for the stress test are due for release tomorrow.

If fraud is up and it is becoming more difficult to qualify for a mortgage, are any of the governments actions working? You be the judge. Now would be the time when I would make a guiltless plug referencing how you need someone you trust in the industry! But I'll spare you!

Sorry for the rant, but I needed to get it off my chest and I know many readers will agree!

Make it a great day!

Tuesdays Tip: Updates!

2009-04-29T08:31:00.002-04:00

I apologize for the lack of posts recently but we just finished a big office move. Now that we are stable again I can dedicate more time to this blog. Also, we should be making the move to TuesdaysTip.com within the next couple of weeks. Stay tuned for more info...

5 Things to Avoid When Hunting for a Mortgage

2009-04-15T09:02:00.002-04:00

Few things frustrate me more than knowing a borrower did not get the best deal on the market. I do everything within my powers to assure a borrower is getting the best rate and terms for his or her specific scenario. But the past few weeks have shed a new light on some of the biggest problems borrowers face when handling a mortgage transaction. Here are the top 5 things you want to avoid when entering a mortgage transaction:

5. Base your decision on what you hear in the media:
Have you heard "rates in the 4's" or "rates as low as X"? I am sure you have. Just because a friend tells you, "I got a rate of 4.375", does not mean he or she didn't pay a high price. The majority of borrowers call looking for a rate with no points. You will never have the lowest rate on the market if you are not paying points. Your friend that got 4.375% may not be telling you that she paid 1.5 points to get the rate. It may be the ideal situation for her, but every scenario is different. A knowledgeable mortgage professional can determine if paying points is a viable option for your scenario.

4. Not having your information ready to submit:
Aside from frustrating your mortgage company, it poses a huge risk to yourself. The longer its takes to gather information increases the likelihood of jeopardizing a rate lock. Many loans are locked for 30 or 45 days. If you take a week or more to get your information back to your mortgage professional, you run the risk the rate lock expiring. In today's mortgage market, you can assume you will need to provide documentation of income (pay stubs, W2, and possibly tax returns), asset information (full statements covering 30 days), and information on your existing mortgage (if applicable) to demonstrate the new loan is in your best interests.

3. Accept terms without knowing your break even point:
Is it worthwhile to refinance from 4.75% down to 4.5%? It depends. A general rule of thumb is that a borrower should break even in under 3 years. Meaning, the borrower should recoup any closing costs within 3 years. The break even point is calculated by dividing the total closing costs by the monthly savings. You now know how many months it will take to break even. (Note: I spoke to a previous borrower of mine who was convinced by his local bank that paying $3,200 to reduce his rate .25%, saving $41/mo was worthwhile. You do the numbers. He admitted to me that it was a stupid move, even more so because he paid upfront, yet another item I will address here)

2. Assume your current lender will give you the best rate:
You may get a phone call from your current mortgage holder offering a "great opportunity" to easily save you money. The offer will not be the best. However, your lender will bank (no pun intended) on the fact that you want to keep the process simple. The lender will tell you, "because you're an existing customer we can give you a deal". The deal is you will pay a higher rate than anywhere else because it is assumed you are too lazy to search for a lower rate elsewhere.

1. Paying application fees:
What are you paying for? Someone to type up a bunch of numbers. A mortgage professional will tell you, "it allows us to start processing the file" or "there are upfront costs to produce the initial documents", but neither is the reason I am against application fees. Most application fees are nonrefundable. Once you pay an application there is less incentive for your mortgage professional to close your loan. The company has already made money. Granted there is more money to be made by closing the loan, but you understand the logic. The mortgage company knows if you pursue a better rate elsewhere then you are willing to give up the $300, $400, or maybe even $500+ you paid for an application fee. Unfortunately, I saw two of my past borrowers fall victim to this cardinal sin, only to realize I gave them a better offer after they had already paid the fee.

You will always make mistakes when it comes to household decisions. Staying informed is critical when it comes to the financials of your household. It's always good to have someone on your side. Feel free to give me a call if you have additional questions regarding mortgage mistakes.

Make it a great day!

Tuesdays Tip: Why You Can't Rely on Print Advertising

2009-04-07T20:46:00.004-04:00

There is nothing more frustrating than speaking with a borrower that latches on to a rate published in the newspaper or online. By the time a rate hits the papers or a website, it is old news.

I make it crystal clear to borrowers a rate quote may hold true for just a few hours, NOT days! It is nearly inevitable rates will change between the time I speak with you in the morning and when you call me on the ride home from work. Keeping this in mind, how reliable is the Boston Globe rate chart if the published rates are requested on the Thursday before? Yet, a large percentage of rate shoppers utilize the mortgage charts to search for a rate. Even worse, they call on Tuesday or Wednesday looking for the published rate that is nearly a week old!

Relying on print advertising, television, or even the internet to receive current rates is inefficient and archaic. Nearly every borrower I work with discusses a "target" rate, I keep their contact info, and when the rate is available I contact them immediately. There is no more efficient way to obtain the rate you are looking for. If you base your decisions off a published rate, you'll miss the boat.

Touch base if you have any questions or if you are curious about a target rate. It's good to have someone on your side, and that's why I'm here!

Make it a great day!

Confirming my beliefs on FHA loans...

2009-03-31T09:22:00.002-04:00

Around this time last year (maybe slightly earlier) FHA became the buzz. At the time, our company made a decision that the buzz would fizzle out and FHA is not a long term solution to the problems plaguing the mortgage industry. Today, our beliefs are confirmed by recent news that FHA loans are increasing in delinquencies with nearly 7.5% being "seriously delinquent" (90+ days). These loans are government backed, but at what point can the government no longer afford to back the losses? I am glad to see that other mortgage professionals are confirming our thoughts and we are ahead of the curve.

Let me clarify that I do not feel all FHA loans are bad. There are scenarios that fit the mold, maybe 1 out of 10 loans, but mortgage professionals are relying too much on selling "government backed loans". AIG is government backed as well, how are they doing?

The latest FHA news is another reason you should be working with a trusted mortgage professional who understands the industry. Countless numbers of real estate agents ask, "This loan is going FHA right?" And I respond, "Why should it?" "Oh, well I just heard that was the best way to get a loan these days." Sub prime loans are a fad and we all know how that worked out!

If I listened to what 75% of people told me in this industry I would be out of a job right now. Fortunately I don't. You shouldn't listen to what everyone tells you either, including the media.

Have a great day!

Tuesdays Tip: How to "Lock" a Rate

2009-03-24T08:58:00.005-04:00

The mortgage industry employs thieves, crooks, and scam artists. In the first three months of 2009 more borrowers are calling me with complaints about mortgage professionals than ever before. Part of me feels sympathy for those who are manipulated by these swindlers, while another part knows these borrowers are misinformed.

I always say that 95% of borrowers do not understand how to shop for a mortgage. The biggest problem is that people do not understand how a rate lock works. I receive at least a phone call a day from a borrower that says, "I have a quote for X rate with Y in closing costs". My first question is always the same "Is it a bank or a broker?" Most borrowers do not know the answer or the difference. I ask for two reasons: 1.) If it is a broker, we all have access to the same rates so I should be able to match or beat it, and 2.) If it is a bank, I want the borrower to get proof the rate is locked, otherwise the quote means nothing.

The American public is convinced that "written documentation", such as an email, letter, or initial loan document is hard evidence that cannot change. Unfortunately, in the mortgage industry this could not be more untrue. Very rarely, if ever, is the documentation I receive from a borrower with a mortgage application identical to the information relayed over the phone. In these cases, the information could completely change the loan terms agreed upon. Fortunately, this does not happen very often because I prepare my borrowers for any potential red flags that may affect the loan during our initial conversation. Other brokers and banks will keep those issues as a wild card to hedge against the mistake of not locking a rate or a blunder processing the loan. Here are just 4 tips that provide an "out" for the broker or bank:

A difference of 1 point on a FICO score (credit score) could affect the rate by .5% or more (I.E., You say your score is 720 and you score is 719 the rate could change)

A difference of $1 could affect the rate by .5% or more (I.E., You say the house is worth $500,000 and it is worth $499,999, your LTV (loan to value) changes and hence the rate may change)

A different of $50 per month in gross income could prevent you from qualifying for the loan (I.E., You say your gross income is "around $80,000" and it is $79,000, your DTI (debt to income) may be too high and prevent you from qualifying for the loan)

A difference of 1 month in your current employment could prevent you from qualifying for the loan (I.E., You say you've been working for your current employer for 2 years and a VOE (verification of employment) indicates you've been there 1 year and 11 months, the loan may be declined)

Your lock may completely change or be voided based on any of the above scenarios. My advice to borrowers is to obtain a lock sheet and a good faith estimate. These two documents are your best evidence the mortgage professional followed through with his or her obligation to lock the rate at your request. The GFE and lock sheet contain the terms of the lock which gives you something tangible to hold the broker or bank accountable if none of the information changes during the course of the loan. Furthermore, you must definitively ask for the rate to be locked. There is no such thing as "I implied..." in the mortgage industry. Following these steps will help eliminate potential discrepancies further into the loan process.

Shopping for a rate and the loan process are complicated. The top priority for a borrower should be finding a trusted mortgage professional who is willing to give the borrower the information he or she requests. Robert Frost says, “The woods are lovely, dark and deep. But I have promises to keep, and miles to go before I sleep." That being said, if you have any questions on the information above please feel free to contact me!

Make it a great day!

Are People Beginning to Realize What I've Been Saying All Along?

2009-03-20T12:41:00.003-04:00

For the past three days mortgage rates have been as stable as Lindsey Lohan's love life. Banks and lenders are quoting obsurd rates, "Rates as low as 4.25%" or "4.75% no point/no closing". Why didn't you hear about it? Because the window of opportunity was about 15 minutes (possibly an exaggeration, but really it was a matter of a couple hours at most). Rates shoppers must be going nuts in this market. Hoping to get the best rate via shopping in this market is like be a Detriot Lions fan and hoping for a Superbowl win next year. It won't happen!

There are several reasons rates have not come down, and may not at all. First, the dollar is falling faster than Chris Brown's career. In turn, the falling dollar will pull mortgage rates up. Mortgage companies cut staff (personally we eliminated 75% of our contacts in the industry) and now that business has picked up these companies cannot keep up. As a result, lenders and banks artificially increase rates to avoid new loans and "catch up". The end result: the consumer pays the price. You may be saying "well why can't they just hire more people?" Many people have left the industry altogether and there is a certain level of expertise involved, otherwise having extra bodies just slows an operation down even more!

I would love to see 4.5% rates more than anybody, but lenders can't keep up. Anticipate dramatic fluctuations over the next couple months, followed by a period of inflation. Rates will eventually reach 6.5-7.0% when inflation peaks in the next couple years. I heard a saying a few days ago, "Pigs get fat, but Hogs get slaughtered". Don't be hog, take the best you can get before you miss the boat and get slaughted by 6.5% rates!

Have a great weekend!

Check out this Boston.com article that explains why rates have not, and potential will not, drop much more than the current levels:
http://www.boston.com/business/articles/2009/03/20/swamped_lenders_hold_steady/

Tuesdays Tip: Stopping Trigger Leads

2009-03-17T10:05:00.005-04:00

Have you ever applied for a credit card, car loan or a mortgage only to get a call from a dozen other random companies trying to sell you their services? More than likely you became a trigger lead. A trigger lead is generated when the credit company turns around and sells your information to other businesses.

For example, two weeks ago I pulled a credit report and the borrower called me up two days later asking if I was affiliated with mortgage company X or mortgage company Y. Within 48 hours of pulling the report, two other mortgage companies contacted the borrower. It would be difficult for me to prove the information was sold to these other companies, but the borrower claims she hasn't filled out any other information so it is pretty easy to determine the source! Unfortunately, there is very little I can do to stop the action because of The Fair Credit Reporting Act. However, there are a few actions you can take to protect your credit and your privacy:

1. Register with the Direct Mail Association. For a fee of $1 this will get you off the quarterly lists that solicitors use. You should stop receiving those annoying "1.25% APR Home Equity Line!" print advertisements. But be careful, if you fill out information directly with a service provider you may be authorizing them to send you solicitations unless you specifically opt out. Usually you have to check the little box that says "Do no contact me!"

2. Sign up for the National Do Not Call Registry. You need to re-register every 5 years, but it should stop those harassing phone calls where the person on the other line can never pronounce your name correctly!

3. Sign up at Opt Out Prescreen. Opt Out Prescreen prevents 4 of the major credit bureaus from selling your information as a trigger lead -- Experian, Equifax, Transunion, and Innovis. Once again, this will buy you 5 years before you need to re-register. Rumor has it that your credit score may improve by up to 15 points, but I have yet to find any hard evidence! Your credit and your privacy are important, take the necessary steps to make sure you are protected! Feel free to leave additional tips, questions or comments.

Happy St. Patrick's Day! Make it a great day!

Tuesdays Tip: Flat Fee Mortgages

2009-03-10T14:59:00.006-04:00

Not all mortgages are created equal! Every borrower is not eligible for the same rate, closing costs, and terms on his or her mortgage. However, the media has led to you to believe that borrowers are entitled to the best rate and terms. Should a borrower with a 780 Fico score get the same rate as a borrower with a 640 Fico? If a borrower only has a 5% down payment on a purchase should he or she get the same rate as the person that has 25%?

Without getting into too much detail, I can tell you that the gross income every loan is not the same. A purchase is more complicated than a refinance, hence the gross income on a purchase is typically higher than a refinance. Furthermore, a 100k loan may be much easier than a 750k loan, so the size of the loan determines the income.

I read about "flat fee mortgages" a little over a month ago and I tried to think of the most applicable scenario. I determined if you currently have a mortgage under $150,000 and your scenario is a simple refinance or an uncomplicated purchase, then this is a viable option. I would be willing to work at the rate suggested by the author of the article. Fortunately, a mortgage under 150k is not unreasonable in many parts of the country. Unfortunately, where I live in the Northeast it is less common! Also, I am part of a small percentage of mortgage professionals that would accept that offer, in large part because the gross income on a loan is very different than the net after expenses!

To keep it in perspective, a real estate agent makes 2.5-3.0% of the purchase price as his or her gross commission on a sale. A mortgage professional makes .5-3.0% of the loan amount as gross commission. The industry average is 1-1.5%. Life would be grand if I could make 1.5% on every loan, but unfortunately that is not the case nor do I want it to be. But is the compensation fair? As I have always said "If I don't do my job I lose your business, your friend's business, and you lose the house and your deposit. The real estate agent keeps showing you properties until you find one you like!" (Disclaimer: This does not all real estate agents. If you need a referral for an agent to which this does not apply, please feel free to contact me)

I am very interested in feedback on this topic. What do you feel is reasonable compensation? Should a flat fee apply to all loan amounts and types? Let me know!

Make it a great day!

Tuesdays Tip: The 3 D's of Real Estate

2009-03-03T09:58:00.011-05:00

Readers of this post will fall into two distinct categories. Some of you will say, "Dan that is so harsh. People should not take advantage of the misfortune of others." Others will say, "That is so true, now I know what to look for!" As you may know, I am the eternal optimist, but I am also a Realist. Real estate and finance are industries where there will always be winners and losers, and you need to stay on your game to make sure you come out on the winning side. Did I mention I also hate losing?

When looking for a property, the easiest way to get a good deal is to look for the 3 D's of real estate: Debt, Death, and Divorce. In all 3 cases, a seller is looking to unload the property quickly, hence the term "distressed sale" came about.

DEBT - Owning a property is a liability. If you have a mortgage, car payment, children and other financial obligations, there is a lot of debt on your plate. The largest and most sensible chunk to get get rid of would be the mortgage. Unfortunately most people do not come to this realization until it is too late. At this point they are desperate to sell in order to pay off debts or avoid losing the home altogether, along with any equity. When the opportunity presents itself, there are huge rewards for timely buyers. I spoke to a woman 2 weeks ago that bought a 4 family property appraised at $375,000 for just $149,000. Here's the best part, after PITI there is a positive net cash flow of over $2,000 per month! That's a steal! All because the borrower couldn't afford the mortgage (debt).

DEATH - If you find a way to avoid it, let me know! Heck at the rate we're going with medical breakthroughs, we're all going to live to be 100 anyways! It's unfortunate, but most families do not want to be saddled with the burden of another property after a loved one passes. On the other hand, people are greedy and want to sell as quickly as possible to get their hands on any equity. Both scenarios present a great opportunity for opportunistic buyers! We just did a deal a few months back where the borrower was able to purchase a 600k home for over 100k below its value! All because it was an estate sale and the family wanted to get their hands on the money. It's unfortunate, but it was a great opportunity for the buyer!

DIVORCE - Much like death, divorce comes with a lot of emotions. Sellers that think, or don't think in this case, with their emotions are bound to get the short end of the stick. Divorce cases have become a bit of a niche for me, unfortunately there is certainly not a shortage of them! In nearly every case, I encounter a couple that is not thinking clearly. Many times, either ex cannot afford the property on his or her own, so it is a forced sale. When someone needs to sell quickly, they drop the price. Yet another winning scenario for opportune buyers.

None of the 3 D's are fun situations to deal with. However, any individual with a keen eye for seeking out these opportunities may reap huge rewards. Do your research. Find out why a seller has a property listed. In an era where information is readily available online, via the news, and via gossip, it is not difficult to obtain the necessary information that will give you an edge while looking at properties. If you would like more information on this topic, feel free to contact me.

Make it a great day!

Proooooooove it!

2009-02-27T14:20:00.004-05:00

The past couple weeks have been filled with controversial attempts by borrowers to retain foreclosed homes. The most bothersome is Acorn, infamous for lending to some of the riskiest borrowers, helping borrowers break into their foreclosed homes. I realize the foreclosure process is horrible, dramatic, and filled with emotion, but it does not give people the right to break the law. It is NOT their home anymore. The fact that Acorn is encouraging the behavior is even worse. Even more pathetic, Acorn has received over $3 billion in tax payer dollars since 1995.

On the other side, there are legal options borrowers can explore in an effort to keep a home. For example, ask the bank to prove you owe the money. The bank must provide a copy of the signed mortgage note that indicates you agree and understand you are obligated to repay the mortgage at the terms disclosed on the note. It is estimated that 30% of notes are either missing or not recorded properly. In this case, the borrower may not keep the house (although there is a slight chance the note may never be found), but at least the borrower buys time. With foreclosure attorneys busier than ever, they are more inclined to move on to the next file than spend hours trying to find the note. Hey, it's worth a shot!

For more information, feel free to email me. Have a great weekend!

Fannie/Freddie Set to Announce Changes

2009-02-26T09:00:00.004-05:00

President Obama recently signed the The American Recovery and Reinvestment Act of 2009. Between the new stimulus act and the Housing Affordability and Stability Plan that I broke down last week, there are some dramatic changes set to take place in the mortgage and housing markets.

Next Wednesday, March 4th, Fannie Mae is set to release details on the guideline changes as a result of both the Recovery Act and HASP.

Last night I attended a networking meeting sponsored by Peak Organic brewing (I must add that their Espresso Amber Ale is absolutely amazing!) and I received extensive feedback on the new stimulus and housing plan. There is a consensus: People are sick of bailing out other people and companies, not just banks. Some of the quotes I remember from the night (and no I didn't drink that much so I can stop you before you even start!)

"I'm sick of hearing how we're going to help everyone that overextended themselves, how about helping me save a couple hundred so I can put that money back into the economy and help generate some consumer spending."
"What people don't realize is the 2nd wave of 1.5 trillion in Alt-A and Option-Arm loans that have yet to adjust, the first wave was only 1 trillion (of subprime). There's no way they can adjust all the loans out there. It's going to get worse before it gets better."
"I don't understand why they can't just give us each a check for the 10k it's costing us in tax dollars and motivate people to spend. Consumer spending drives recessions and will get us out of this, but we just don't have any money to spend right now"

There seems to be a clear sentiment that people want more control of navigating our way through this financial crisis. Confidence in Congress appears nonexistent and our President has only been in office for a little over a month so it we'll reserve judgement there until a later date. One thing is for certain, borrowers are expecting help but remain skeptical about the success of recent legislature.

Stayed tuned for more information next week when the new guidelines are released! Until then, make it a great day!

Tuesdays Tip: The 5 Things I Love about Real Estate & Mortgages

2009-02-24T12:35:00.002-05:00

As much as there are things that drive me nuts in the fields of real estate and mortgages, my love for the business goes above and beyond those components. The most difficult part of this post was determining how to rank my favorites! After extensive internal debate, and possibly some talking to myself out loud, I came up with my list:

5. Everyone has an Opportunity to Own a Home:

Stop before you even start. I know you will argue that an individual making 25k per year cannot afford a home, but there are parts of the country where this is a possibility. Granted I am not taking into account cost of living (COL), but somewhere in the country, everyone has an opportunity to afford a home. The one brightside of the financial mess we are in would be that homeownership because more realistic for more families as values continue to drop. Which ties in very well with my next reason...

4. Ups and Down of Real Estate:

There will always be ups and downs. Some will be bigger than others. But with each upturn, borrowers have an opportunity to make money in the market. Likewise, with each downturn it creates opportunities for borrowers to buy properties they otherwise may not have been able to afford. Regardless of the market, there is always an upside. I know plenty of prospective firs-time homebuyers that are salivating and intensely saving their pennies so they may take advantage of the current market.

3. Helping someone Purchase his/her First Home:

My job can be very depressing at times when I have to be the bearer of bad news. However, my job is extremely rewarding when I have the opportunity to tell a borrower "You're approved" and "You're clear to close!". Part of me realizes that borrowers will never forget purchasing a first home, and the other part realizes that the borrower doesn't know how much his or her life just changed. In both parts, I know that I had a huge impact on helping the borrower purchase their first home.

2. Pressure:

I love the pressure. It's not a rush, but rather it is the mere thought of knowing that if I don't do my job I could destroy a person's financial stability. Fortunately, I've never had that problem, nor do I foresee that happening. If an agent does not do his or her job, chances are that someone will cover for them and it may make things a little more complicated, but everything should still get done. If an attorney does not do his or her job, there are plenty of other attorneys out there. We all know that! If I do not do my job the borrower may lose the house or a TON of money. Granted a borrower may go to another broker or bank, but if the deadline is upon us there is little that can be done. I LOVE that pressure. Regardless of the scenario, I would prefer to have the responsibility on my shoulders so if the outcome is less than desirable there is only one person to blame. At the same time, I determine the outcome. I would not want to have it any other way.

1. It is an Industry that Will Always Be Around:

Unless people start buying houses with only cash or start living in their cars, the mortgage and real estate industries will be around. Granted each may go through some dramatic changes, as they have the past 2 years, but they'll remain a sustainable providing jobs for plenty. That being said, my job security is pretty darn good! The only way to run yourself out of the industry is to repeatedly screw up, treat your clients like garbage, or not have a clue what you're doing. In all three cases, you deserve to be looking for a new job because there are no excuses.

There you have it, my Top 5 Things I Love about Real Estate and Mortgages. In case you missed it, check out last week's Top 5 Things I Hate About Real Estate and Mortgages. Think I'm missing something here? Post a comment and I'll tell you if it falls into the Love or Hate catagory!

Make it a great day!

My Analysis of the New Stimulus Plan

2009-02-23T10:15:00.006-05:00

It's been a pretty hectic week here, but I had some time mull over the Homeowner Affordability and Stability Plan (HASP) that everyone has been chattering about. I decided the best way to address the plan is to outline the different components.

31% of Income Guideline:

The HASP has a component that allows banks to reduce a borrower's mortgage payment to 38% of gross monthly income. The government will then subsidize the difference to reduce the payment down to 31% of the borrower's income.

I would estimate that maybe 25% of the borrowers we see have a debt to income (DTI) below 31%. A mortgage payment that is 31% of your income does not make it more affordable. I have borrowers with mortgages that are 40% of their income and they have no problem making timely payments. It is about responsibility.

Why not go with the Fannie/Freddie guidelines of 45% max DTI? Why subsidize the payments at all? Where did Congress come up with this 31% figure?

HASP helps borrowers with "income not sufficient to make their payments". Who is to say that the borrowers had income sufficient to make their payments when they took out the initial mortgage?

Changing the Bankruptcy Laws:

There is a push to change bankruptcy laws and allow judges to change mortgage terms.

I am completely opposed. Would you have a brain surgeon represent you in your murder case? Not likely. Allowing a judge manipulate the mortgage industry is irresponsible.

People will be lining up outside the courthouse looking for the "good judge" to tell them they are not going to be held accountable for their mortgage.

What good is a contract (a mortgage or lien) if the person is not going to be held responsible?

"If servicers embrace modifying loans, it will keep more people out of bankruptcy". No, borrowers being held accountable for their actions and spending responsibly will keep people out of BK. Allowing judges to change that eliminates even more responsibility from the financially irresponsible.

105% Refinance Clause:

This portion of the stimulus plan allows borrowers to refinance their existing 1st mortgage up to 105% of the value if the loan is already owned by Fannie/Freddie. The principle idea behind the clause is that if Fannie/Freddie are already assuming the risk, it is within their best interest to make the loan more affordable for the borrower through refinancing. The HASP bill uses the theory that the potential loses to Fannie/Freddie to refinance each of these loans is far less than the estimated losses each entity may incur through defaults. Details of the mortgage underwriting guidelines are set to be released March 4, 2009.

I am not completely opposed to this portion of the bill, but there are too many loopholes:

The value of the property will not be determined until a borrower has filled out a mortgage application. My guess is that 50% of borrowers think their home is worth more than its actual appraised value. What happens when the borrowers spend the money for the appraisal only to find out they are over the 105% guideline? Now you're costing borrowers money as opposed to helping them and open up the door for banks and brokers to charge borrowers application fees and appraisal fees before the borrower even knows whether or not he or she is eligible for the program.

The plan does not apply to 2nd mortgages. Hopefully, the underwriting guidelines will allow borrowers to combine 1st and 2nd mortgages that were used to purchase the property. Otherwise, the holder of the 2nd mortgage will never agree to subordinate the 1st mortgage unless they are receiving the same incentives as the 1st. Hence, the plan may never work.

"Borrowers with little equity can refinance to take advantage of low rates." If the borrower has missed payments or their credit is below 740, he or she will have a difficult time getting the best rates on the market. Plus, the higher the LTV the higher the rate. Therefore, what makes someone think that a borrower with 105% LTV is going to be eligible for the best rates on the market. Expect a rate approximately .5% higher than the market rate. I place the responsibility for making borrowers aware of this on the media. They constantly advertise "mortgage rates at historic lows". Please educate borrowers on how rates will vary depending on the scenario.

And my biggest problem...what happens to the mortgage insurance premiums? These borrowers are going to get smacked with ridiculous mortgage insurance premiums, possibly upwards of $300-$400 per month. Is Congress considering these higher mortgage insurance premiums when they say 'we're going to reduce your mortgage payment' or are they just reducing the mortgage payment then leaving the borrower to figure out they will have a massive mortgage insurance premium? If the later is the case, the stimulus plan is a joke.

The plan is not great, but it is not a total loss. I like the idea of allowing borrowers who have lost some value in their homes to refinance at a decent rate while rates are low. However, the truth is in the details. In two weeks we will see if the underwriting guidelines give borrowers an opportunity or just another false hope. Feel free to comment with your questions on the HASP housing stimulus plan and I will do my best to respond given the information that has been made available.

Meanwhile, make it a great day and check back tomorrow for Tuesdays Tip!

- Dan

Tuesdays Tip: 5 Things I Hate about Real Estate

2009-02-17T11:28:00.017-05:00

It is not a secret that I love real estate and finance. I read at least 10 different real estate and finance blogs daily and have at least 5 real estate and finance websites that I check on regular basis. What's not to like? The more you learn, the more you realize what bothers you about this industry. Here are my top 5 pet peeves about the industry:

5. Get rich quick schemes -
It doesn't happen in real estate. You cannot wake up in the morning and decide, "I am going to buy a $500,000 property with no money, no experience, no credentials, and no plan", all because you saw an infomercial at 2 AM. Making money in real estate is a skill, and it CAN be done. Take the time to learn the skills necessary to be successful, practice the habits of those who precede you, and you have a good chance of making a decent living. Donald Trump did not become a billionaire overnight. In fact, he even has his troubles at times. Realize that it does not happen over night, but there is a great opportunity to those who are willing to put in the work.

4. Homeowners that are unrealistic about the value of their property -
In case you've been hiding in a cave with Osama bin Laden, the real estate bubble collapsed. At least 9 out of 10 borrowers I speak with underestimate the value of their home. If they say it's worth 700k, I know it's probably worth 650k. If they say its worth 500k, I guess about 450k. This doesn't make me a pessimist, it's just the reality of the real estate market. I am doing both myself and the borrower a favor. The borrower doesn't have to pay for an appraisal and saves money, I save my time and effort. There are several websites that can give you a ballpark (notice I say 'ballpark') value of your property. The most popular is probably www.zillow.com.

3. Real Estate and Mortgage Professionals that say, "I've been doing this for ___ years, and..." -
With everything going on in the market, your experience doesn't get you too far these days. Don't get me wrong, I respect my elders and those who have experience, however it is not a means of justifying why someone should give you their business. The market and landscape continues to change so rapidly that experience means very little when it comes to trusting someone with one of the biggest decisions of your life. If a professional hasn't kept up to date with the changes in the last few weeks, let alone months, their experience does them little justice. I will grant leniency for those using the quote to express the rarity of a situation. For example, "I have never seen that happen my 5 years in the business". I've heard a lot of those lately...I guess it comes with the times.

2. Anyone who becomes an media expert -

I speak to a lot of media experts. I define a media expert as: Anyone who reads a few articles and/or books and tries to teach me the real estate or mortgage industry. These people are EVERYWHERE! People have asked me, "Are you nervous they may know more than you?" The answer to that is an obnoxious, "NO!". I love to meet people that can teach me a few things or have experience in topics that I may not. However, I do not have patience for people who read an article on Yahoo finance, watch the Today Show, or pick up a newspaper and then try to tell me how to do my job or what the problem is with the real estate market.

I appreciate when past customers, friends, or colleagues send information that discusses real estate and finance. It is a great way to learn the business and have some understanding of what is going on in the world around you. But, sometimes it is better to trust an expert. Keep in mind, the media is designed to entertain you. The articles are for entertainment, and content is secondary. I understand that people are afraid to ask for help, but if you were an expert then you would be a colleague of mine! If you need a recommendation for a trusted professional, email me and I have a very close network of trusted contacts that I am willing to recommend. And now for the #1 Thing I Hate about Real Estate....

1. Lazy Real Estate Agents -

Ahhhh there is nothing more annoying. Sadly, there are tons of them! There is nothing more frustrating than signing a purchase & sales agreement and then having to hunt down the agent any time you need something after that point. Agents need to realize: You don't get paid unless the deal closes! However, many agents I've had dealings with in the past tend to fall off the radar a bit after the property is under agreement. Little do they realize, if I don't do my job, NO SOUP FOR YOU! Sometimes we make the least amount of money on the transaction and do the most amount of work. If I don't do my job, nobody gets paid. If the agent doesn't do his or her job, they know that someone else will step in and do it for them because we all want to get paid too!

The National Associate of Realtors (NAR) estimates that 70% of agents close less than 4 transactions per year. That is crazy! If you were only closing 4 transactions for the year, you should be a bit more proactive working to get the deals closed! My problems with agents in the past is the number one reason I am very particular about who I choose to work with. I only have 2 agents that I feel comfortable recommending, based on feedback from clients, word of mouth in the industry, and my personal meetings with the clients. Neither of them are lazy!

Despite the problems with the real estate and mortgage industries, there are many times more positives that I see on a daily basis. And you guessed it, next week you'll hear the positives! If you have positive or negative experiences with the industry, please feel free to leave a comment below!

Meanwhile, make it a great day!

Dan

Building Momentum and Our Mission Statement

2009-02-17T11:16:00.000-05:00

As my official Tuesdays Tip website is building momentum, I have noticed a few things about the community:

It's very secretive. I'm noticing that people are coming out of the woodwork to admit they're slightly interested in learning more about real estate.
I am addicted to developing content for the site and making it more informative and entertaining. Little do you realize, there is A LOT more to talk about as it relates to real estate and financing. Likewise, I am always open to suggestions regarding what you want to hear. Feel free to leave a comment on a particular post if you want me to add information in the future!
There are limited sites that pertain strictly to home loans that are not oriented to real estate and mortgage professionals! A quick search found that everybody wants to talk about personal finance, but few discuss mortgage finance and real estate on a regular basis. We are going to change that!
Lastly, we appear to have a very intelligent reader base! Our first "Tuesdays Tip Question" demonstrated that people seem to have a firm grasp on what they may be able to afford. I hope your knowledge grows as you come back and visit.

Tuesdays Tip's mission is to empower borrowers and educate the public to make home ownership and the mortgage process a less stressful and opaque experience. At the same time, we can only hope that you realize it can be a little fun as well!

Make it a great day!

Dan

Mortgage Rates Headed to 4.5%

2009-02-09T16:21:00.006-05:00

I have heard a lot of speculation on this topic for months now, but finally it seems that someone is agreeing with me! For months, I've been saying that mortgage rates SHOULD be in the mid to low 4's given the evidence shown by all economic indicators.

It appears that I may get my wish, although not for the right reasons. If, and that's a big IF, the government utilizes the TARP funds properly (you know that other stimulus package we passed back in the Fall), we could see mortgage rates among the lowest they've ever been.

This is a great opportunity, however the government needs to set realistic expectations as well. For example, if your property is a condo, it is unlikely you will get the best rate on the market. The same applies for multi-unit properties and second homes. Many of the guidelines have changed since borrowers last refinanced or purchased a home. This news may come as a huge surprise to borrowers. Likewise, some individuals who once qualified quite easily will be shocked to find they can no longer qualify for a mortgage. If the government is going to take responsibility for lowering mortgage rates, they should take responsibility for setting expectations for homeowners. Otherwise, they are left with the option of easing up on certain guidelines to help "good" borrowers qualify for the the best rates.

Either way, tomorrow's announcement could be monumental for the mortgage industry. Keep your eyes and ears open because we don't know how long the opportunity will last! If you have any questions as the news is released, please feel free to contact me.

Make it a great day!

Tuesdays Tip: When Realtors Speak Nonsense

2009-02-06T13:27:00.013-05:00

I admit it: I watch the Today show every morning. Not because I enjoy Matt, Meredith, and Al, but rather because there is limited stimulating television at 7am. It also gives me an opportunity to start my day off realizing how many stupid people there are in the world. Not just the screaming lunatics behind Al Roker as he does the weather, although I do wish they knew how ridiculous they look. I am refering to some of the "experts" they bring on the show, along with the non-celebrities present to get their 30 seconds of fame.

In recent months, one such "expert" has really started to annoy me: Barbara Corcoran. Yes, the woman you hear them say "And next we'll hear from our real estate expert, Barbara Corcoran, on what to do if you're having trouble making your mortgage payments." Rule #1: Do not go to a real estate expert for mortgage advice. Would you speak to a plumber if your electricty was out? Well maybe, if you would then you need more help than I can give you.

Barbara has made such ridiculous claims as:

"Take deed and keys to your front door and go to your mortgage company and hand them over. That will get their attention" -- Yeah, and they'll probably think you're a moron.

"Sleeping well is worth at least half a point (.5%), maybe even more" -- So you're telling me that you'd accept a mortgage rate .5% higher just so you can sleep at night, know that it is locked, and it won't go higher? You really may be nuts. Here's an idea: Call someone in the mortgage company that knows what they're talking about and discuss a float-down or a re-lock. Great advice Barb!

"If you should happen to have a lot of equity in your house and don't need your cash out, you can advertise seller financing at below-market rate. Offering a 4.75% mortgage for five years." -- No, you are not a mortgage expert. Do not encourage the average homeowner to think they understand writing mortgages. A fraction of the population may be able to do this. I'm talking Donald Trump and a few of his friends. The only way to make this idea work would be to pay a mortgage professional to help you structure the seller financing. It's worth it to pay a couple thousand dollars to save you 10's of thousands.

The moral of the story is to be careful where you get your advice. Watching this woman on the television is more tedious than watching Barney marathons with a bunch of screaming 4 year olds! Nonetheless, there is a lot of great advice out there. First-time buyer seminars are loaded with information, and there are dozens of free seminars offered to homeowners and individuals seeking financial assistance. As I mentioned last week, you need to know your situation and the help you need. As always, if you have any questions please feel free to contact me!

Make it a great day!

Tuesday's Tip: Know Your Situation and the Help You Need!

2009-02-05T16:02:00.006-05:00

How are you be ready to buy a house if you don't have a plan in place? How do you know how much you can afford if you haven't sat down and really looked at the numbers?

Three out of four people I speak to do not have a firm grasp on their financial situation. This includes the large number of people I speak with that claim, "I'll never be able to afford a house". Often times people who think they cannot afford a house are in a position to do so but just need a plan. Likewise, people who want to purchase a home rarely have a plan to do so, but they have the desire. Both cases need help.

The first step is you need to understand your situation. Some people can do that on their own while others need someone to sit down and show them the reality of their financial situation. Speaking to an expert gives you an objective view of your scenario. Some don't need the mortgage help right away, rather they need someone to help them manage their financial situation so they can set a goal for when they want to purchase. Meanwhile, others have a financial plan but do not understand how to prepare for an impending mortgage application.

The lesson learned is that most people need help. Nobody expects you to know how to prepare for homeownership or be a master of the financial world. Realize there are professionals out there who can help you manage your situation. Feel free to forward questions on your specific situation or if you're in need of professional referrals that can help your scenario. Make it a great day!

- Dan Leavitt

Mortgage Consultant