Over the past two weeks, I have had so much I have wanted to say that I can't seem to say anything at all. So instead of doing a blog post on a specific mortgage/real estate related topic, I thought I would have some fun today.
There are a lot of bullet points to read, a lot of links to follow (All in blue), and if you're not careful, you might learn something before it's done.
*A tea house, way up high: Someone forwarded me these photos of this pretty tea house waaaay up high on a mountaintop somewhere in China. You know the one, scaling mountains, gondolas and wood planks not to mention adverse weather for a free cup of tea. I had to find out if it was really a restaurant. I found Mt Huashan Hiking Trail.
*Stake Your Life On Your Home - The buyer of this home will be the named beneficiary to a 10-year, $500,000 term life insurance policy. If the home owner dies in the next 10 years, the price of the home ($498,900) is covered. In case you are a betting person and wondering about odds, the owner is 69.
*Your personal loan officer may have left the business: Loan officers like to stay in touch with their clients so if you haven't been contacted by your loan officer in a while, it's possible you've been "orphaned". Get yourself adopted. When rates fall, you'll find out about it in advance instead of finding out too late. The adoption process is easy – just send me an email.
*Life happens: (Trust me, this is talking from true experience) Personal injury and illness is 7 times more likely to lead to a foreclosure than adjusting mortgage payments. This is why disability insurance is a must for every homeowner. Yes, it can be expensive and confusing, but that doesn't mean you shouldn't have it. I'm happy to refer a reputable insurance advisor to talk with you -- just email me about it.
*Shameless plug: Websites of friends I frequent and recommend: Liquid Discount; Olive Branch Papery; Passion Travel; We-Care;
*401(k) loans as down payments: A growing number of Americans are using 401(k) loans to fund a down payment. Sure, you're paying interest on the money you borrow, but your dollars are taxed twice and you damage your compounding interest. It's not the no-brainer most people think. I'm happy to refer a reputable financial planner to talk with you -- just email me about it.
*Condos are the other shoe: Mortgage guidelines are about to get very tough for condo owners. If you live in a condo, or want to buy one, it won't be as easy or cheap to get financing as it is right now.
*An idea for when gas prices fall: By my math, high gas prices are adding $50 per month to a household's budget. That's $600 per a year or about the cost of a $1,000,000 term life insurance policy for a healthy person. If you can make room in your budget for gasoline today, you can make room for life insurance later.
*Appraisal challenges: Because of "down" markets, lenders want appraisers to find comparable homes that have sold within 30 days. No comps, no mortgage approval. Strangely, the very definition of a "down" market is that homes aren't selling. As a result, a lot of applications have "died" in appraisal review.
*Shameless Anti-Plug: I still don’t like Starbucks. *Passing the buck to FHA: Fannie and Freddie's risk-based fees are making conforming mortgages super-expensive for all but the lowest-risk mortgage applicants. For high-risk borrowers, the cheaper alternative is FHA. I don't have to tell you how this story's going to end.
*Appraisal challenges (Part II): It's a bad time to buy the nicest home in the neighborhood. Not for investment reasons, but because an appraiser won't be able to find comparable homes for sale. No recent comps, no mortgage approval. *Spending money to make money: The current cost of making a penny and a nickel are 1.26 cents and 7.7 cents, respectively. The Treasury "lost" $100 million minting them last year.
*Building a referral Business: Sometimes you just have to ask for what you want. Many clients will be willing to refer you to friends or colleagues, but they may not even think about it unless you bring it up. Remind customers that referrals are a big part of your business, and ask them if they know of anyone that could benefit from your services. If you have done an exceptional job for them, chances are they will make an effort to help you in this way. So if you know anybody – please send me an email.
Should I Use a Credit-Counseling Service???
When you use a credit-counseling service to structure a debt-management plan, the accounts included in that plan are usually noted on your credit report as "not being paid as agreed." These creditors may also report that the payments are being received through a credit-counseling service.
Credit-counseling services make the point that being in a debt-management plan shows that you're dedicated to repaying your debts, and that can be considered positive when creditors review your report. While that's true, it will be an uphill battle to qualify for new credit until you get a couple of years of solid repayment history on your credit report. In fact, most lenders view credit counseling as the inability to manage your own finances.
In general, credit-counseling agencies expect you to not take on new revolving credit while in a debt-management plan. Most plans are scheduled to last from three to five years. While you are in the plan your existing revolving credit accounts will be suspended or closed to new charges.
Credit-counseling services help consumers by negotiating with your creditors to agree on a repayment plan, and they may be able to reduce the interest rate on your outstanding balances for accounts in the plan.
In the end, you'll have a lot of the same credit problems that someone that filed for bankruptcy goes through. The differences between a debt-management plan and a Chapter 13 bankruptcy repayment plan aren't as big as you might think, so keep that option in your back pocket as you discuss your debt problems with a credit counselor.
Your credit score is more important now than ever. What used to be 680 is now 740. It is more important now than ever before to have good credit. Not only do you need good rates to qualify for a mortgage, but your credit score will also be a big determining factor in what rate you get.
Over the next couple months I will do a series of blogs devoted to credit scores. I spend a lot of time these days advising people on their credit. Whether you intend to buy/refinance in a month or 3 years from now it's never too soon to get started. 20 minutes now can save you $100's later. Just give me a call, there's no charge!!
It happens a lot. After feeling overwhelmed with credit card debt, a person finally pays their accounts down to a $0 balance in hopes of improving their credit and their cash flow.
Then, they call their creditor and cancel the credit card account. This is a fatal credit scoring mistake.
In our Culture of Consumption, it may seem strange that to cancel a credit card could send your credit score plummeting; it's pretty well known that many people live beyond their means using credit cards.
For as many people that use credit cards for consumption, there are many more that use credit cards for emergencies. These types of debtors maintain a very low balances and have large available credit lines upon which to draw in the event of emergency.
Emergencies come in many forms:
And having a "cushion" in the case of an emergency can help a person stay solvent in a time of crisis.
Let's think like a mortgage lender for a moment. The relative size of a cushion like this is pretty important to lenders because if things hit the fan, a homeowner with a lot of available credit can still stay current on his mortgage.
You can bet the lenders care that credit lines are big! Is it any wonder that 30 percent of your credit score is tied to the cushion?
Utilization of credit is measured by the ratio of (total credit used) to (total credit available). If a person has 5 credit cards, each with $5,000 in available credit, the total credit available is $25,000.
Now, if that person carries a $1,000 on each of the five card, the total credit used is $5,000 and the total credit utilization is ($5,000)/($25,000), or 20%. This is considered to be a strong ratio for credit scoring purposes. An ideal ratio is 35% or less.
For every card canceled, though, the available credit decreases, pushing the utilization ratio higher. Closing one card changes the math to ($5,000)/($20,000), or 25%. Closing two pushes it to 33 percent. Closing three makes is 50 percent.
When you're done with a credit card, don't close it out. Instead, use it sparingly. Maybe buy a tank of gas once a month, or a pack of gum or something. That way, the credit card company will continue to report that you're active, and your utilization ratio can remain as low as possible.
I know we have discussed this topic in the past, but someone sent me the following link to an excellent article from cnnmoney.com explaining why this is the case.
http://biz.yahoo.com/cnnm/080318/031408_ratecut_mortgages.html
What does a mortgage advisor do??? Most people would answer that a mortgage advisor is someone you call when you want to buy or refinance a house. In most cases that answer would be correct as most mortgage advisors do not realize there is and should be much more to the job description.
A good mortgage advisor starts working with a client long before they are ready to buy or refinance. Reviewing and building credit. Discussing mortgage benefits and the benefits (or disadvantages) of refinancing. Just like a financial planner, understanding the dynamics of the client can help save a client a lot of money.
The reason most mortgage advisors do not take this approach is quite simple, they do not get paid for the advising, only on the sale. I am not saying this is a smart approach, it's just the reality. Some may call it the flaw in the system. Good, it gives me a leg up on the competition. Building long term relationships is what builds long term success in this business.
If you don't have a mortgage advisor give me a call today. It doesn't matter if you are intending on buying or refinancing in the near future. For those who are considering buying sometime down the road, meeting now can save you time, money and headaches a couple years from now. Those who are currently in a home and want someone to look at their current mortgage, keep an eye out for falling rates, or look at the best way to pay off there mortgage, take advantage of a mortgage advisor...it's free!
If you know of anyone that can use a mortgage ADVISOR please pass this along.
Thanks,
Bob
973-495-8925
The Federal Reserve is a hot topic in the news these days, as every month we hear new discussions of "The Fed. cutting rates". Most people immediately assume that this means mortgage rates are being cut. The only direct correlation between what the Fed. does and mortgage rates is for those who have a Home equity Line or 2nd mortgage that is based on prime. Other than that, what happens to mortgage rates is mostly dependant upon market reaction to the Fed. moves.
I read a blog by Matthew Graham, a mortgage professional from Oregon, that best explains everything:
"First of all, IN GENERAL, what is stimulative to the "economy" is bad for mortgage rates. Reason: if the economy is happy, stocks are going up. If stocks are going up, traders and investors must be buying them. If they are buying stocks, they aren't buying bonds. If they aren't buying bonds, bond issuers lower the price to attract buyers. If bond prices (mortgage backed securities), go lower, then yields are higher. Higher yields on MBS's equate in exactly direct proportion to higher mortgage rates. Whew...."
This is not to say that mortgage rates will go up after the Feds moves. Just to show that rates have nothing to do with what the move is, but how the move is perceived...
I could go on for hours on this topic. Feel free to email or call with comments or questions.
The Mortgage Source
Launches HomeBenefitIQ
To Provide an Innovative New Employee Benefit
Rochelle Park, NJ December 2007— Companies of all sizes and kinds are looking for ways to improve their employee benefit packages. Now, The Mortgage Source can help.
The Mortgage Source announces the launch of HomeBenefitIQ, a new program that offers local companies access to an innovative new employee benefit — customized mortgage and real estate programs available specifically for employees of the company.
It’s a great way for companies to improve their employee benefits package without incurring a great deal of cost, while offering employees a service that can benefit them by helping them finance or refinance their homes. HomeBenefitIQ allows the company’s employees to access information and even apply for mortgages online with special rates and privileges not available to the general public.
“We’re excited to be able to offer this innovative new employee benefit to companies in this area,” said Mr. Snyder of The Mortgage Source. “This is a great way for these organizations to help their employees by offering a benefit that is particularly valuable — access to customized real estate programs. It’s something that can help employees and their families invest their money wisely, and it comes at no cost to the employer.”
The Mortgage Source provides the employees with a wide spectrum of loan products. As well as access to their great customer service, making it easy for employees in the program to achieve their mortgage and financing goals.
The HomeBenefitIQ program provides companies with all the tools they need to offer the mortgage program to employees, including:
• A CD-ROM presentation outlining how HomeBenefitIQ works.
• Membership cards for employees.
• Employee benefit flyers, new hire enrollment packages, break room posters and other informational materials.
• And a customized web site with information on the specific loan products being offered as part of the HomeBenefitIQ program.
• Informative on-site or off-site homebuyer or credit education courses.
For more information on the program, please call Robert Snyder, Group Real Estate Benefit Director with The Mortgage Source at 973-495-8925.
Is everyone tired of hearing about it. It seems to be everywhere we turn. Of course now the Bush administration is involved...
For those who don't fully understand the governments attempt at bailing out subprime borrowers I am posting an excellent article below.
By Alton Gary Simpson
In the wake of the subprime mortgage market meltdown and the subsequent credit crunch, the Bush administration plan to limit foreclosures by working with mortgage lenders and firms to freeze interest rates for five years on certain subprime mortgage loans has opened to mixed reviews. While the plan has been lauded for being "a positive first step," as noted in a statement from the Center for Responsible Lending, it has received a lot of criticism because it doesn't deal with the root causes of the foreclosure crisis or reach enough distressed borrowers. The administration's plan has also received criticism for being a reward for reckless and irresponsible behavior on the part of investors, lenders and borrowers.
The proposal made by the Treasury Department last week would freeze the interest rates on select subprime ARMs at their starter rate for five years. Only owner-occupant households are eligible and need to meet a number of criteria such as being on time with their mortgage loan payments and their FICO score must be between 575 and 660. Furthermore, the modification must be for a first-lien mortgage that was initiated between Jan. 1, 2005 and July 31, 2007, and scheduled to reset between Jan. 1, 2008 and July 31, 2010. Also, participation in the program is voluntary by lenders and servicers.
According to an estimate by CRL, only 7% of subprime borrowers will be helped by this initiative. The number of homeowners in danger of foreclosure is estimated to climb as high as two million. The consumer advocacy group also noted that the plan does not remove the financial and legal incentives for servicers to foreclose on loans rather than modify them, especially since it relies on voluntary decisions by individual mortgage servicers.
"Recent experience shows that the likelihood of widespread modifications is small under this 'business as usual' approach," said a statement from CRL. The statement cited a study by Moody's Investors Services that found only 1% of resetting loans had been modified through July 2007, despite claims from major lenders and servicers that they were committed to modifying loan terms to help borrowers avoid foreclosure.
Greg Marcus, managing director of Somerset Mortgage Bankers based in Melville, N.Y., stated that thousands of mortgage borrowers have been overlooked by the relief plan. He noted that the plan does nothing for those who have refinanced during the past two years, adding that the Treasury plan should include all borrowers who refinanced their rates during the housing boom. "What about those who bought their home before 2005, but refinanced in the past two years," asked Mr. Marcus? "Why are they not eligible for the Bush plan? They are not speculators. They still live in the same house. This makes no sense."
On the other hand, the Shadow Financial Regulatory Committee of the American Enterprise Institute believes that the Bush administration's plan goes too far in the direction of government interference in the marketplace. "To the extent that the mitigation program can be viewed as a 'bailout' of selected borrowers, it reinforces incentives for subprime borrowers to engage in moral hazard," said a statement released by the group. In other words, the Treasury initiative rewards irresponsible behavior. A poll conducted on behalf of the National Taxpayers Union taken before the administration unveiled its plan found that Americans are skeptical about proposals to bail out the subprime mortgage market.
"When it comes to rescuing the subprime mortgage market, Americans are skeptical not only of who will benefit, but who will be left holding the bag," said Pete Sapp, vice president for policy and communications, NTU. "While other surveys have shown serious public concerns over rising mortgage defaults, this poll demonstrates Americans have equally serious reservations over government involvement in the situation." He also noted that the administration's plan could quickly grow out of its control, especially with upcoming presidential and congressional elections.
Yes it is true. If you are a qualified borrower interest rates are low, and have continued to go down over the last three months. It's a great time to be a borrower, as well as a buyer. Yes, we hear and read negative news about the mortgage/real estate industry daily. This news is not geared toward the entire population. For the most part what has happened is that people that do not deserve mortgages, are no longer getting mortgages.
If you are a qualified borrower in an adjustable rate mortgage, now would be the time to talk to your mortgage broker and look into a 30 year fixed rate.
If you are considering buying a home, what are you waiting for. In most markets, when housing prices come down...rates tend to go up. Sellers have begun lowering there prices and rates are still low. You have the best of both worlds.
All it takes is a phone call and you could save a lot of money or find out that you really can afford that dream house!!
Now more than ever it is important to establish good credit if you are considering being a homeowner. With everything that has gone on in the mortgage industry over the past year, getting a mortgage with bad or no credit is much more difficult. Even worse are the rates for these borrowers. My advice, meet with a qualified mortgage planner well in advance to map out a plan of attack to best position yourself to purchase your dream home.
If you’ve never had credit in your own name, it can be difficult to get a car loan or credit card. Having no credit history can be as much of a problem as having a bad credit history. Students, other young people, and newly divorced or widowed women who have always obtained credit jointly with their husbands often find themselves in this situation.It seems like a vicious circle: you can’t get credit because you’ve never had credit, but you’ve never had credit because you can’t get credit. What’s a person to do?Don’t despair. Here are a few tips to help you establish credit in your own name.
~ The best way to establish a credit history is to apply for a small loan or line of credit from your local bank or a credit card from a local department store. Ask whether they report to a credit bureau. If they don’t, having the card or loan won’t help you establish credit.
~ To get a credit card without a cosigner, you must be at least 18 years old and have a source of steady income. Gas cards are relatively easy to get. Apply for one and use it to establish credit, but pay it off every month to show that you can pay your bills responsibly.
~ If you can’t get a small loan or gas card or department credit card on your own, try to find someone to co-sign for you. Again, make payments regularly and on time.
~ Increase your chances of getting the loan you’re applying for by coming up with a large down payment. If you don’t have the cash, consider borrowing from a family member.
~ If you don’t have a checking account, open one. You have very little credibility with lenders if you don’t have at least a checking account and preferably a savings account as well.
~ Just as importantly, be sure not to overdraw your bank account. Bouncing checks sends a signal to potential lenders that you can’t manage your daily finances and are therefore not a good credit risk.
~ Know what lenders and credit card issuers look for when issuing credit. There are other factors that affect credit approval besides just your payment history, such as how often you move and how often you change jobs. It also helps if you’ve had an apartment or utility in your own name. If you don’t have a telephone number in your own name, you may find it more difficult to get credit.
~ If worse comes to worst, you may find it necessary to get a secured credit card. These cards require you to deposit money in an account to secure the loan or credit limit, and they often have fees and higher interest rates. If you default on your payments, the lender takes the money from your account. After a few months of making payments on time on the secured credit card, you may be able to obtain a regular credit card. Remember to make sure the company reports to a credit bureau before applying for a secured card, or the card won’t help you establish a credit history.Before you apply for a credit card or car loan, get your ducks all lined up. Think like a lender. Applying to a number of credit cards in a short period of time can decrease your chances of getting approved. Lenders see this activity on your credit report and steer clear because they think you’re getting in over your head, so pick and choose carefully and have a plan of action.Being rejected for credit can also look bad. Apply only to cards whose requirements you are likely to meet. Read the small print and call the company to make sure your income and other factors qualify you for the card. Just because you get an offer in the mail doesn’t mean you qualify.With careful planning and a little knowledge of how lenders issue credit, you CAN establish a credit history fairly painlessly. There are many businesses waiting in line to take advantage of you by charging exorbitant fees or interest rates, so be careful out there.
For a Free Copy of your credit report visit www.annualcreditreport.com. This site is provided by the three major bureaus; Experian, Equifax, and Transunion. You can get your free report once a year from each of the three bureaus. The only problem with this website is that you will not get your FICO scores, just what is on your report.
If you would like a Free Analysis of your credit situation for the purposes of obtaining a home loan, please feel free to contact me. I will be more than happy to counsel you and to help you put together a plan to develop good credit or restore bad credit.
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