Mortgage Journal

Mortgage Rates

2012-12-21T20:32:00.000-08:00

I came across a funny article and just had to laugh at it. It's title: "Mortgage Rates Rise Despite Fed Intent". What made me laugh was the comment that rates "jumped" up in the latest week 10 basis points from a national average from 3.52% to 3.62%.

I mean this is hysterical; we're seeing sub 4% interest rates and it's crazy busy in this business right now and a fraction of a percent raise is considered a "jump". This kind of talk is just nonsense. The problem is that rates have been so low for so long that people are just immune to it like they are to advertising messages. Ever notice how many messages are thrown into our face everyday through several media modalities and outlets? You have some that catch you eye every now and then but for the most part, we ignore them.

Same philosophy here; people are immune to the low rate environment but a 10 basis point increase is no where near a jump. To give you a perspective on how much of an increase that is; 1 basis point is 1/100th of a percent. So we're talking 10/100ths of a percent increase in rate. On $165,000 loan you're talking $9 a month.

That's not exactly breaking the bank here folks. The article you can find here.. I don't care what they say, and of course I could be wrong, but artificial low rates are here to stay. They can't lower them. I think the FED has done so much for so long; they're all in now baby...We'll be riding this wave for a while.

If you're in the market to buy or refinance it a good time but keep in mind that lenders are slammed right now and loans are taking longer to close and documentation requirements are still heavy so make sure you see both of my posts on Today's Mortgage Environment and Mortgage Application Tips...

These will help get your mindset right, explain a little bit about what's been transpiring on the back end and how to be full prepared at application to help improve the processing, underwriting, and closing of your loan.

D...out..

Today's Mortgage Environment

2012-12-21T20:13:00.001-08:00

This will be a quick post but wanted to just give you a little insight on today's mortgage enviornment. It's NOT the same as it was 3 and 4 years ago. Loans are harder to get done; they are taking longer; and quite frankly we have a shortage of experienced people in the industry right now which complicates things.

We have people who have left the business for other jobs during the downturn and really don't want to come back for something that could be temporary. Or you had people leave who won't come back no matter what..

The problem we find ourselves in now is the heavy regulatory compliance environment coupled with low rates and massive refinance and purchase activity... the lenders just can't keep up.

One crazy statistic I came across was Wells Fargo actually employs I think 60% of the underwriters in the industry in the US. Just think about that for a moment..

Wells holds about 30% plus market share and 60% of the underwriters roughly..that doesn't leave a whole lot for the rest of the market.

The point I'm trying to make is these days we have last minute changes; last minute closings; and frustrated borrowers and realtors because deals are taking too long and the amount of documentation needed. I understand completely and borrowers and realtors are not the only ones frustrated with that process.

What people fail to realize is on the back end, lenders are being heavily scrutinized on paperwork and are experiencing high levels of buybacks. I've even heard some deficiencies (paperwork, etc, missing from the file) can carry fines as much as $15,000.

That's insane! But as you can see, this is why you see some of the documentation requests being made; it's not to be a pain in the neck, it's to make sure no deficiencies are found that carry huge fines.

There are even some lenders raising rates to price themselves out of the market because they can't keep up with volume.

Now you'll have some people screaming they are not having issues or can just slam your loan through no problems; make every closing with no last minute clitches and I would argue they are full of it. With this market the way it is right now problems are bound to happen.

That doesn't mean I'm being negative - it just means I set the right expectation with people upfront as we all have the same goals - close on time, make the customer happy, and get referrals. Our business grows from referrals and we want the experience to be the best for the borrowers and referral partners.

I think the most important thing to remember, regardless of the issues we face, is communication..
Communication, communication, communication - I think this would eliminate a lot of frustration if people would just communicate property, quickly, and be solution oriented.

Remaining calm and cool is crucial. Anybody can be calm and cool under good times; but under pressure and stress it's important to remain professional and solution oriented.

See my post here regarding mortgage application tips for consumers to make sure you are prepared at application to improve the processing and underwriting of your loan..

The more prepared you are at application the smoother the process will go.

Just rest assured your loan officer is very motivated to get your loan done quickly, smoothly, so you can move in or get your refinance done and have a great experience.

If you find that you're in a situation where multiple requests for documentation or extra time is needed just remember what I've said in this post regarding the back end and regulators because the ultimate goal is not to upset the customer or realtor; it's to make it a great experience so you come back, send friends and family, and deepen your relationship with the lender (purchasing other products and services)

To your success,

D..out..

More Fiscal Cliff Talks

2012-12-15T08:14:00.000-08:00

My Quick Rant On This Topic

You know...this crap of fear mongering by the media is so elementary and obvious it's sickening. This whole show about the Fiscal Cliff and taxes, and the wealthiest Americans paying more, and blah blah blah, is such a racket that is designed to divide us all.

When really looking at the numbers the top earners don't pay as much in taxes as you think they do folks. Warren Buffet even said openly that he pays less in taxes in terms of percentage of income, than the average person does.

The very top earners pay people to find ways to reduce their taxes. Don't get me wrong I'm not against being wealthy and making money and living a very good life - who doesn't want to live a rich and fulfilling life? Everyone does that's a no brainer.. My point is this is a sneaky way to divide people through social stratification.

If you have money and ran a business or several businesses your goal would be to reduce your tax expense..duh.. Who likes to pay taxes? Nobody does. The real people who pay taxes are the ones in the middle. They carry the load which is why the soundbites are always targeted to "middle class" Americans which again the labels create a huge problem as it divides people into groups which leads to warfare...which is what they want!

If we're too distracted fighting a false paradigm, we can't actually come together as a nation and figure out a way to fix the problem. "Class warfare" they label it ensues only worsening the problem. It's trickery and is designed to keep us distracted, fighting, and living in fear and confusion.

What you fail to realize is that inflation is a silent tax and is way worse than what we're dealing with here on income taxes. Have you noticed your food bill lately?

Oh but they want you to think that's a good thing because if prices are going up then that means your incomes will go up to match and plus the stock market is doing good and home prices are rising so just shut up and "feel" more wealthy when in reality you're income is not going up and the only ones profiting from the rising prices are the ones that control the lever...

If it's not a war on drugs, it's terrorism or taxes, or a bad economy, or murders, shootings, rapes, car wrecks, environmental calamities...It's a constant stream of bad news designed to keep people distracted, scared, confused, and worried all the time..

Jesse Ventura says it best when he describes our Congress as the world federation of wrestling as in front of the camera's they hate each other we have division, they're fighting it out but behind closed doors they're all buddies.

What you need to do is educate yourself and don't be fooled by what's going on around you.

This economy isn't going to get any better any time soon. You need to decide how you are going to utilize your skills, talents, and brains to create extra income you can convert to stores of value like gold and silver and protect your family from the worst case scenario.

There are many ways to get started now in creating additional streams of income in your part time and start protecting yourself now - create your own economy and don't let this trash talk distract you or rob you of joy, happiness, and peace in your life. Spend time with loved ones and cherish the special memories.

God Bless,

D...out...

Secretary Donovan Questioned By Senate Banking Committee

2012-12-15T07:40:00.000-08:00

Earlier this month Secretary Donovan was questioned by the Senate Banking Committee on the financial health of the FHA Mortgage Insurance Fund. A report released in November showed the agency was in the red $16.3 Billion dollars and it appears will need a bailout..

When Donovan was questioned, he could not promise FHA would not need a bailout but rather said we'll know more when the President's budget is released...

So in others words..like I said in my previous post HERE FHA is in deep doo doo..

Donovan however cautioned the committee not to make too drastic of changes to how the fund insures mortgage's as to not stall the recovery. "We are seeing a recovery, but it is still fragile," Donovan told the Senate Banking Committee. "We don’t want to hurt the market and in turn the FHA fund by going too far and stopping that recovery."

The agency's capital reserve account has dropped significantly since 2006 to -1.44% ending fiscal year 2012. Under law the ratio needs to stay at 2%. If that's not insolvency folks, I don't know what is... and clearly I don't know anything..

Sen. Richard Shelby (R-Ala.). "It is time for serious reform of the FHA before it needs a taxpayer bailout, if it isn’t too late already."

What types of changes need to be made? "A determination would not be made until the end of the 2013 fiscal year", Donovan said.

Haha...that means kicking the can down the road a bit and worrying about it later. This seems to be the answer to all the issues we face is...let's just kick it down the road a bit and "see what happens".

Donovan said Congress could help the FHA by making some changes that the agency is unable to do on its own such as lowering max loan amounts (which Donovan is in favor of) as he noted, loan limits were reduced for Fannie and Freddie but not FHA which is putting more pressure on the fund in higher costs areas.

What's interesting is nobody really thinks there is a problem but Wharton School of Finance Real Estate Professor Joseph Gyourko, thinks otherwise... "FHA is currently leveraged 41-to-1 -- which is higher than either Lehman Brothers (31-to-1) or Bear Stearns (38-to-1) when they collapsed"

Not to mention FHA is backing a proposal from the President to have Congress open up the Streamline Refinance to borrowers with non GSE and FHA mortgages and allow them to refinance into FHA insurance.. The min credit score? 580..

So not only is the fund in trouble but we're planning on expanding the refinance program that will further deplete funds, open up to more riskier borrowers, and then what? None of it makes any sense it will only allow the banks to make even more money hand over fist which is what they've done since this whole thing began..

Yes - we've had a lot of banks collapse but those were competitors to the big mega banks and is the same thing that happened in the 1907 Panic; thousands of bank failures occurred but all that really happened was consolidation into bigger banks. At that time private capital was taking profits away from the banks so something had to be done about so a widespread panic was induced which eventually led to the passing of the Federal Reserve Act (further consolidating power into the hands of the mega banks in New York) just a short 7 years later..

The name of the game is power folks..We as consumers pay more to keep FHA afloat so banks can continue to make money hand over fist. They are purging the system of all its life until nothing is left bankrupting it all.

Just keep that in mind..

You want real truth..visit here.. Stop living in the matrix..

D...out..

New Housing Market

2012-11-30T09:29:00.001-08:00

The days of fast money and anybody and their mama getting into the real estate business and hitting it big is over obi one kenobi...

And you know what I say?

Thank God! The reason is we need a marketplace of professionals; leaders; trend setters; and customer service oriented champions who know what they are doing and can take their business to the next level.

Don't mean to be so harsh here (actually I do and I hope the wannabe's feelings are hurt) but this industry suffered greatly by people being able to get in so easily, and do to all the fast money, booming economic conditions, title companies, brokers, realtors, everybody was just jumping in for the quick buck, ran around and caused a muck.

See my post on building a brand or chasing a check because I dig into this by talking about what kind of value you bring to the marketplace and pose the question are you just in it for the money or are you in it to build a brand and a presence or chasing a check?

The new housing market; the new economy; the new way of doing things will be far different than what it was before. We'll be in a wet, sloshy, and muddy waters for some time to come. Call this cycle the "cleansing"...

Because while the wannabe's are going to be stuck in the mud, trying to figure out why the same things; the same talk; marketing schemes, advertising; and using old tricks that work in a booming economy where EVERYONE gets a piece... ~~are not working anymore~~.

The Champions are flying above looking down for just a second then back up focused on achieving their next level. See there are walkers and talkers ladies and gentlemen and their are people who talk a lot of "stuff" but are not getting the results.

What are you going to do in this new housing market? Are you going be those stuck in the mud or are you going to build your brand and following, and create your own economy out of the ashes and prosper for the next year?

Ignore the governments numbers - people will always need housing. Ignore the FED and the news talking about interest rates - interest rates can't and won't go anywhere for a while. Stop focusing on where the market is everyday - unless you're a stock broker; investment adviser or something because that's just a distraction...

What you need to do are these simple steps:

Have a clear vision
Decide on a strategy
Simplify and implement the strategy at the same time building value
Take MASSIVE freaking action.

Want to know the secret?....

That's it, there is no secret... YOU are the secret...

Clock's ticking....every second you let pass by with indecision is another second lost that you could be working on becoming the person you want to be.

So in conclusion; we are in a new housing market, a new economy, but the best part is WE make our own economy.. so lets get to it.

Are You Building a Brand Or Chasing a Check?

2012-11-29T07:14:00.000-08:00

Building Your Brand

Are you working toward building a brand and a following OR are you just chasing your next commission check?

The truth is if your focus is on the money and not building your brand or following; you'll always be chasing the money. What do I mean? I mean you'll be the hunter ALL the time...

The goal is not to be the hunter but the hunted.. You want people that are coming to you practically begging to do business with you because they are "know" you; have heard of you; when people talk about real estate; condo's, houses over a million, whatever your niche is --- when you have a brand you'll be the hunted.

Stop focusing on the check because this is where your emotions start to get the best of you. When things pop up or go wrong; you become upset easily because the only goal you have is the check at the finish line. When you have a brand; the money takes care of itself because money then chases you and not the other way around.

See this is hard for us to understand because we know we need money to buy things. We need money to pay bills, take vacations, and quite frankly having money in your bank account makes life a whole lot easier.

The truth of the matter is when that's your focus people can see that and you seem desperate. Focus on building your brand and following, creating value to your marketplace and.....

....... you'll have all the business you'll ever need or can even handle.

You can't be everything to everybody; you need a laser sharp focus on what you want.

Steps To Building Your Brand

These 4 simple steps I swear, if you follow them, will change your business and bank account like magic. You just have to decide and take action.

That decision can be tough; I know because I was there. I struggled a lot deciding because I thought "oh, well what if this doesn't work"; "what if I waste all this time and effort going for this and it doesn't pan out."

You absolutely ~~CANNOT~~ think like this because you've already punched a hole in your boat and as soon as you set sail, shortly after you'll sink...

Your mind has to be convinced in your decision that you will make it work no matter what it takes.

Who says it won't work?

Who gives you permission to live your life and chase your dreams?

Stop looking for permission; just decide and do it. Build your brand and following and trust in the process you've laid out for yourself...

And Then...

Take MASSIVE freaking action. So here's the steps:

1. Decide and pick your focus and intention and see it clearly.
2. Pick a strategy or two, or combination, or whatever the case may be but pick one
3. Simply and break down to actionable steps
4. Take MASSIVE freaking action

That's it. When you do this the magic will happen.

So are you going to build your brand and following or chase checks the rest of your life? Decide; pick your strategy, simplify, and then ACT...

Let the magic happen baby...

Strong Warning From CFPB On Misleading Mortgage Advertisments

2012-11-26T13:22:00.002-08:00

CFPB- Consumer Financial Protection Bureau

Just last week a warning was sent out regarding misleading mortgage advertisements. You can read full release here.. What this is saying is they've found some recent advertisements are misleading to consumers and not disclosing all the information about true costs and terms of the loan agreements.

I actually think this is a good thing. All the ads out there that show 1% interest rate or super low fees or whatever the case may be is very misleading and I can't tell you how many times customers tell me about these deals and I let them know that those are just bait and switch ads but you won't find out until deep into the process or it's too late and by that time you're pissed off.

Sometimes it works and sometimes it doesn't and they have to go and find out for themselves the truth. The problem is...now they don't trust anyone and that makes it hard to do business in the future...

...and we wonder why consumer confidence is low with lenders and loan officers in general.

Now all companies don't do this type of activity but you do see some "creative" advertising to get people to pick up the phone and call.

I take a different approach because what I have found is people just want you to be real with them.

They will do business with and buy from people they like and trust and if I can develop a relationship with them; they will not only do business with me but will send referrals.

Most companies are just in it for the quick buck and that should not be the approach.

You'll make money and get some business in the short run, but this isn't how champions and professionals do business and it surely will kill you in the long run.

Anyway...that's my two cents on it.

I aim to build value and confidence so that customer has a great experience. And truthfully, if you just explain things to people in plain English; all the terms, go over the benefits of how the loan will solve their problems and have a solution based presentation, people will come chasing you to do business with you.

I don't really have to prospect anymore I just get referrals from clients, agents, and other sources because they know I'm for real; I don't sugar coat, I know what I'm doing, and I give realistic expectations.

It's not rocket science here folks...

Just a little warning...for those of you who buy leads from these crap companies, I would stop because they have ads on the web for all kinds of ridiculous things that are misleading to get people to click and give up their information.

So as the CFPB comes cracking down if you're buying from them ---guild by association.

Plus their sold to multiple people and companies. The best way is to build your business organic which takes time.

Check out the release above on the CFPB site and look out for more announcements like this as the CFPB gets up and running on all cylinders inspecting the practices of the all the lenders and brokers out there.

Get ready we're headed for more changes in the future.

Who will win in this environment? The Champions will... all the weanies will be pushed out and quite frankly...can't wait to see ya go...

How Can Realtors Sell Renovation

2012-11-23T17:27:00.001-08:00

Selling Renovation

This is becoming so hot right now with all the foreclosures on the market but you have very few lenders who know how to originate, process, and close these. Aside from that, you have few loan officers who are specialists in this area (and by the way you want to be working with a specialist) which creates issues because loan officers not familiar with the process on these are "winging it" and this is where your horror stories come from.

So work with a specialist!

Anyway...the topic for today is how can Realtors sell this in the marketplace. Part of my continuing education class curriculum is going over how to sell this and quite frankly it's really easy. You're doing it right now and you don't even know it. Here's how..

When you're taking a client through a property do you ever make suggestions on carpet, paint color, or possible improvements they can make to the home to "make it theirs"? Use phrases such as "add your own personal touch"?

Sure you do. What you're doing is selling renovation financing already it's just you're not connecting the dots with the client which is letting them know they have a way to do this now instead of later and over time (this is where you direct them to the specialist you've teamed up with to explain further, just leave it at that)

Let's face it...

They may say they are going to do it but over time that intent diminishes because life is busy, they will get distracted with other things and it will never get done; so by letting them know that this is an option now and that they can finance the cost of repairs into the loan along with their purchase - and they can move into the property and quickly begin and finish their desired improvements, is really really powerful and motivating.

Why? This creates the vision in their mind what the home will look like completed and we all know visuals are extremely powerful and will move people to action. You're selling feelings here. Besides, I would rather make the home my own then rely on the seller making improvements or "settling"on a house that was newly renovated that isn't just right but "will do" paying a premium for that house... and heck maybe over time even redoing those renovations to satisfy my own liking...

What a waste of time, money, and effort. I would utilize the opportunity to do it now and turn the home I "just like" into the one "I really love" now.

More Ways To Sell Renovation

That's just one way. Another way is to overcome property condition objections. Ever have somebody walk in and before they even see the rest of the house, and say "nope, no way, carpet is ugly, cabinets gotta go, I'm done here"?

Yea, you've been there before. Use this as a tool to again, describe in short, what they can do. Find out if that's really the objection.

If the area is great, price is great, school district is good (if applicable) just ask this simple question to intrigue them and get them thinking... If I could show you a way where you could replace all of these ______ (whatever it was they had a problem with) brand new roll it into your loan and have it done the way you want, and have it done right after closing, would you be interested in knowing more and would you want to move forward on this home?

Spark interest; find out what is really bothering them about the house. Will this always work? Will this be the answer for everybody? No, of course not but just like in baseball, can't hit the ball unless you take the bat off the shoulder and swing. Same goes here, you won't know unless you ask...it's just another tool in your toolbox you can use to sell more homes.

Properties in need of repairs

Renovation financing is perfect for those "ugly properties" that need repairs just to get the financing done because standards, lets face it, have tightened up.

Instead of avoiding these, if you have a client interested in one of these properties, you should be smiling from ear to ear as they are already sold on this property and plan to make improvements as they want "the good deal" since it needs repairs.

This is where you sell renovation financing and let them know they are creating additional equity through the improvements and they are able to obtain the financing with a low down payment solving two problems - purchasing the property and renovating it - all in one loan.

Example:

Purchase price - $50k

Estimated repairs - $40k

As is value - $50K due to condition

After-improved value - $120k once fixed up (which by the way is how we base their maximum financing off of, after-improved value which is why this option is so appealing)

Options to buy - cash as financing it with a regular loan will not fly due to repairs needed

Money needed for repairs - $40k

Total cash out of pocket - $90k

Now Using Renovation Financing See the Difference

Same as above for price and repairs so total NEW purchase price- $90k

After-improved value - $120k

Down payment on loan (depending on program) - either 3.5% or 5% (investor loans 20 and 25%) based on the $90k

Total cash needed - 3.5% of $90k = $3,150 5% of $90k = $4,500 + any closing costs that are not covered by the seller.

Difference $90k in cash OR

Put down $3,150 to $4,500 and use renovation financing to get this property.

Total equity - $30k
Total money out of pocket saved = $THOUSANDS

Not too shabby huh?

Either pay $90k out of pocket to pay cash and fix up or use renovation financing with minimal cash out of pocket and use banks money at low interest rates. Fully amortized loan over 30yrs

Option 2 is definitely the smarter one. This is an easy sell.

Some More Options

Now you can use this loan to sell updates to a badly outdated property as well. Needs completely updated to modern standards - no problem - you can do anything from light to moderate (painting, carpet, cabinets, to plumbing, electrical) all the way up to tearing the house down and rebuilding on same foundation. Has mold or lead based paint? No problem there either - done!

More complex properties such as mixed use or manufactured - done!

Conclusion

So you see, there are many ways to sell this and we are in a very wet, muddy, crazy marketplace right now but there is a way for you rise above the competition and dominate this piece of the market and do very well because I'll tell ya...

Nobody else is focusing on this at ALL. They are scared of it. That's because of the stories that they've heard and been told but then again were they working with a specialist and what was the whole story, would be two questions I'd be asking.

Don't be scared of it - learn it, sell it, dominate, and have a monster successful 2013 because again, this will be the next real estate trend...

You can read When To Use Renovation Financing post as well here.. http://swigartsmortgagejournal.blogspot.com/2012/10/when-to-use-renovation-financing.html

Dustin

FHA Fund In Deep Doodoo

2012-11-20T08:32:00.001-08:00

FHA's Finances

You're probably laughing at the title but it's true folks...FHA is in DEEP doodoo (my spelling I don't care) and has been for a long time.

Rueters released an article recently stating that unless FHA does something soon it will be drawing money from the Treasury...

So what's new in Washington? More taxes, more bailouts, more losses being covered up and now FHA will increase fees yet again to try to shore up the balance sheet and avoid a so called bailout. However what's the difference right? All of us as consumers are bailing them out by paying higher fees for the mortgages.

The fund is a total disaster and the program is so outdated it's had little changes since it's inception in the 30's. They know it needs restructured but choose to kick the can down the road. (just like everthing else, ha)

FHA now insures 1.2M mortgages and their share of the market has increased to 15% from 5% in 2006. The article went on to say that it missed needing to draw from the Treasury due to $1B in settlements from servicers...hmmm.. could that be why Wells was the next target?

Estimation is the fund will not be back to it's 2% capital ratio requirement until sometime in 2017...this just strengthens my prediction we're not going to see rates go anywhere upward - they just can't - anytime soon; they're relying too much on new activity and higher fees to keep the ponzi going.

Plus with the lawsuits they're hoping to generate some more revenue for the fund.

We're playing a dangerous game of Russian roulette here. Just see this quote from Maxine Waters below

"At a time when the private market constricted, the FHA stepped up, providing crucial liquidity and access to the mortgage market," said Representative Maxine Waters, a senior Democrat on the House Financial Services Committee.

She warned against taking any actions that would "precipitously" choke off loan availability.

Oh yea...they know what's up. If we choke off credit - crash and burn baby...

So What Mindset Should You Have About All of This?

So what does this mean for those in the industry? Consumers? Well folks you can't change it; it's happening and you're not personally going to do anything about it so if you're shopping for a loan and all you qualify for is FHA, you're just going to have to take it from behind...and you'll be forced to like it.

If you're in the business like I am I know what's going on and I understand it. For the consumer I know it's hard as you don't go through it every day like we do.

The good news, because I try to focus on the good because you'll cause nothing but anxiety and stress if you don't, is that there is a real opportunity to utilize a program FHA offers and to take advantage of it.

What is it? It's the 203k renovation program. I've said in earlier posts that this will be the new real estate trend, and it already is beginning to be, for some time to come. Without going into full detail as my blog post will explain, you can buy a fixer upper and finance the cost of the improvements into the loan...
and your maximum financing is based on after improved value of the property...This is an awesome program but it does suck that it will be more expensive now...

However - if you find a property that is priced well below market value and put the right improvements into it, you CAN create instant equity. Go here for details and read my blog post on it.

Again folks, please keep in mind it's not your loan officer or realtor who caused all this mess...(see below)

Yeah Buddy!

It's these guys...they know, knew it, and let it happen because there buddy lobbyists were filling their pockets full of cashish.

Stayed tuned and lets see what happens now that the election is over and we'll get to hear some nice juicy stories like we've been like the General Petraeus's little affair and whatever else they want to release now that Obama is back in for 4 more years.

Hold your hats...

Mortgage Application Tips

2012-10-25T07:13:00.000-07:00

Mortgage Application Tips You Can Use

Plan on buying a home soon or in the near future? You will need to be prepared when you go apply so keep these helpful tips handy when visiting your bank, credit union, or mortgage broker. It's very important in this lending environment we find ourselves in to be properly prepared at application to avoid delays in closing your loan on time.

The documentation and accuracy of information is key right now. Lenders are seeing many loans being audited and being found deficient of the proper supporting documentation by the time it makes to post closing review. This causes significant fines and penalties and can lead to buybacks (this is when the investor such as FHA or Fannie Mae forces the lender to buy back the loan due to deficiencies found)

So here are some helpful tips to make sure your application process is smooth.

Provide complete and accurate information on current residence, employment history, any other mailing address you might use, and banking account information including full account numbers.

Have all the proper documentation as it relates to your situation, ie if you're employed make sure you have two years of w2's; if you're self employed make sure you have personal and business tax returns with ALL schedules and signed for the last 2 years. Be prepared to answer questions regarding decrease in income if applicable.

If you own rental property make sure you have complete addresses with estimated values and correct rental amounts and expenses like taxes and insurance information for EACH property

Have the most recent paystubs available covering the most recent 30 days and make sure they are consecutive in pay periods. Example: you get paid weekly - just check your stubs to make sure all the checks are for the last 4 week period

Be prepared for more requests for additional documentation or explanation of information you submit to underwriting. Now more than ever scrutiny is being placed on lenders so when underwriters request this documentation they are only trying to make sure they have no material findings in the file when audited.

Stay calm during the process. If delays occur know that this is common these days as lenders are running short staffed and are having difficulty finding qualified people to hire. During the housing bust many people left the industry to seek employment elsewhere and do not want to leave the new place of employment for a position that may not be permanent.

When asked submit documentation as quickly as possible to avoid further delays

Be patient. There is a lot of activity going on right now in the housing market with purchases and a refinance boom so it's best to remain calm, patient, and do not make significant concrete plans just in case a delay occurs. This will onlly frustrate you more.

By following these simple tips you can avoid alot of frustration and emotional hills and valley's during the process.

Mastering Credit Scores

2012-10-25T06:45:00.000-07:00

Mastering Credit Scores

We all know how important credit as become. In this day in age where all that is used by lenders is credit score, an accompanying story and relationship has become a thing of the past. With the new instruments on Wall Street such as credit default swaps and other derivatives make it nearly a necessity to have a high credit score in order to even look at you as a candidate for financing.

The most frustrating part about this is that it takes years to build credit and just minutes to destroy it. Then after something happens it can take years to rebuild it. In many instances there are situations where credit inaccuracies, which are highly common, can prevent you from getting the financing you need whether it be for a business or personal usage. There have been laws put in place to help consumers like the FACT act and the FCRA act but without detailed knowledge of these acts, which most consumers don’t, trying to remove inaccuracies is time consuming, frustrating, and result in consumers just giving up.

The FACT Act stands for the Fair and Accurate Credit Transaction Act and FCRA stands for the Fair Credit Reporting Act, the FACT act was passed in 2003 and amended the FCRA act in order to provide more regulation that consumers can get one free copy of their credit report each year. With hundreds of provisions in each act it’s a stretch to require consumers to know these statutes inside and out. So how does a consumer become educated in this? With the internet you can find out just about anything but sometimes this comes with a price, some expensive some not.

You could always hire and attorney but this can be expensive as well. I know you’ve seen it, the many “credit repair companies” out there promising they can remove negative remarks some can help some not at all. Some of these companies are very expensive others are fairly cheap. The most important thing to remember, when dealing with credit, is to monitor your credit report and pay your bills on time.

I’m going to give you some resources that I’ve found online to be helpful in helping me “Master” my knowledge in the area of credit scores. The credit reporting companies provide you with information and also offer credit monitoring every month for a low fee and offer unlimited credit reports to help you take control of your credit.

The one thing that is frustrating is not KNOWING the algorithm at which they calculate your score. I’m going to give you a guide below as to what your score is comprised of and what information the credit scoring companies use in order to calculate your score. However this does not give you the concrete formula to which they use. Really to maintain great credit keep revolving balances low, don’t get into too much debt, and pay things off as fast as possible.

We are all bombarded everyday with “specials” and “once in a lifetime offers”, this is just targeted marketing designed to make you believe you can’t live without it or you are lesser of a person if you don’t buy it NOW. Please don’t fall for this. Now that is not to say some of the books and products that are marketed to you are not valuable, I’m merely saying don’t run to “every” special once in a lifetime offer that is presented to you, use your better judgment. The key is to spend less than you make and I know sometimes this can hard when we “justify” it in our minds by thinking we can handle the payments. But when you have this payment and that payment and then you have to borrower money to make this payment, you know where I’m going with this.

We are in the age of “automated underwriting systems” that help expedite credit decisions for lenders to improve time efficiency and lower costs. The problem with these systems is they are driven by score and your credit history, they cannot read your story. So for an example banks didn’t use these systems, they would evaluate your score based you and what you have to say. Keep in mind that underwriters looking at your application do not see you or know you therefore all they go by is what’s on paper. This is a huge disadvantage for the consumer but there are some advantages as well, including speed, efficiency, which improve customer service and the overall experience. KNOW your credit score and become educated in this area because its only going to get more complicated especially with the growing financial problems in the economy surrounding credit.

So lets get to some of information I have for you and resources you can use to help you with the “Mastery of Your Credit Score”.

BCS Alliance offers a credit kit that is 101 pages total and gives you some of the information I’m going to share with you now. I paid $14.99 for it; a small price to pay for information that could save you tens of thousands of dollars in the future.

Credit Scores

750 or higher – considered excellent credit

660-749 – considered good credit

620-659 – considered fair credit

350-619 – considered poor credit

How Credit Scores are Determined?

35% - Past payment history - Late payments, charge offs, bankruptcies, etc.
30% - Outstanding debt – amounts owed on all accounts, number of accounts with balances, debt-to-credit limit ratio, etc.
15% - Length of credit history – Time since accounts were opened, time since last activity, time since last delinquency.
10% - Recent credit applications – Types of new accounts, recent inquiries, and how many inquiries.
10% - Account mix – Types of various accounts (car loans, credit cards, mortgages, etc.)

Factors that are NOT used are demographic information, salary, type of job, etc.

To purchase this credit kit go to www.bcsalliance.com

Remember if you keep you expenses low and keep more than you spend, you can gradually increase your credit score overtime and when a need arises you will have no problem obtaining credit and you will pay substantially less in interest and finance charges because of your good credit history.

Thanks again!

“The key to life is accepting challenges. Once someone stops doing this, he’s dead.”

Bette Davis

When To Use Renovation Financing

2012-10-15T17:26:00.000-07:00

When To Use Renovation Financing

People often associate renovation financing with dumps; foreclosures and bank owned properties; but that's entirely true. You can also use Renovation Financing for outdated properties as well or even in situations where you would like to build onto your existing home with improvements such as a room addition or second story. Anything light to moderate from kitchen updates, flooring, electrical to a complete tear down and rebuild on the existing foundation....you really do have many options available.

The most popular renovation loan is the FHA 203k loan. This loan has been around since the early 80's and was designed to help revitalize communities and renovate the aging housing stock. This in of itself a stimulus package. It creates economic activity on many fronts from the purchase of the home (or refinancing) to hiring of contractor(s), purchasing of the materials, and keeping money flowing through the economy.

Even though this loan has been around for many years, very few lenders know how to originate them or even offer them. I think you'll see this change as more foreclosures hit the market to which renovation financing is the only way to get loans on these properties because in the as is condition...they don't meet minimum property or appraisal standards for financing.

I'm calling it right now that renovation financing will be the next real estate trend. See my previous post on this here ====> http://swigartsmortgagejournal.blogspot.com/2012/09/the-new-real-estate-trend.html

The key to completing these loans in a timely manner is:

Going to a lender that specializes in these and speaking a renovation specialist. Not all loan officers are trained properly to originate these and it could get ugly if they don't know what they are doing.
Having your plans for renovations decided on early. If you're purchasing a home make sure have the walk through with the contractor to determine needed and/or desired repairs. Also if your doing a 203k it's advisable to have a HUD Consultant inspect upfront so that you know what minimum repairs are needed early in the process.
Do not make multiple changes to the scope of work after beginning the process because each time you change the scope of work, this triggers needed paperwork changes that delays the process.
Turn your documents in as quickly as possible. Read my blog post on being prepared at application here ====> http://swigartsmortgagejournal.blogspot.com/2012/09/how-to-be-prepared-at-application.html
Again - work with a specialist, work with a specialist, work with a specialist. They have the experience and training to advise you and lead you down the path to closing as quickly as possible.

Now I can give you many more tips but just follow these above and you'll be just fine. Using renovation financing is an awesome tool to help turn a home you just like...into one you really love. Not only that but your getting the financing at low interest rates and spreading the cost over 30 yrs....and...you're increasing or even building equity with the improvements so that in the future when you sell; you can get top dollar and have money left over for a bigger down payment on the next one.

I've had people purchase foreclosures at $40 and $50k and putting $20-$30k into them and walking away with 20% equity to build on for the future. You just can't go wrong with these loans.

Until next time..

If you like this blog check out my other one www.livingwithnolimits.net.

Thanks,

Homeowners Suing Banks Over Fixing Libor

2012-10-15T16:54:00.000-07:00

Boy it's starting to get thick out there in the financial world. Just when we thought all the juicy news has been released on activities that the big banks were doing before the crisis we now have the next big story..
http://www.businessweek.com/news/2012-10-15/banks-sued-by-u-dot-s-dot-homeowners-over-rigging-of-libor-benchmark

Businessweek is now reporting 12 banks including Chase, Barclays, RBS, and Royal Bank of Canada, to name a few "unjustly enriched themselves" by manipulated the LIBOR rate which impacted thousands of homeowners on adjustable rate mortgages. LIBOR is an index used when determining the rate changes on ARM products. Not only that but is the benchmark for some 300 Trillion dollars in loans and securities.

Barclay's is the only bank to date that has settled and this will seem as if the trend will continue. Just seems like the only recourse for activity and behavior like this is settling out the claim with a fraction of the money they made by perpetrating the fraud. Nobody goes to jail; not even the traders involved. It's amazing how they just get away with it.

Gotta love the American justice system...

Stay tuned.

FHFA Releases Plan on Fannie and Freddie

2012-10-10T21:53:00.000-07:00

Yesterday the FHFA (Federal Housing Finance Agency) released it's plans for the ailing government sponsored enterprises, aka GSE's, and it's no surprise the whole report is blah, blah, blah. Its the same ole crap we've been hearing - they are going to stabilize markets and increase fees to shore up the GSE's portfolios. Yea, while they still suck money from the Treasury as they hemorrhage cash, still losing money, while the housing market just muddles along.

So basically they have no long term plan just alot of lip service. The execs will still keep getting paid the big bucks to run the mortgage market into the ground. Next month Fannie is raising it's delivery fees yet again. This cost is spread to the consumer making it even more expensive to get a mortgage loan. FHFA says it's "market risked-based" pricing but really it's nickel and dime everyone to death because we're bankrupt.

No wonder they keep coming out with these refinance programs so they can keep churning the books with the refi's and yielding higher delivery fees. The FED keeps pumping the cash into the system helping fuel the refinance frenzy we have going on. Obama wants to yet again modify the refinance program to allow all non GSE owned mortgages to qualify.

Read my previous post http://swigartsmortgagejournal.blogspot.com/2012/09/obamas-refinance-plan-take-four.html on the Obamafi program(s) for details. The market is a mess right now. We still have lending tightening up more; problems with appraisals; lenders are short staffed and for the sake of profit do not want to hire more people. I know people in the business working like a slave just banging their heads against a wall with all the hoops you have to jump through to get loans done these days. It's a struggle from beginning to end.

You can find the story regarding the "strategic plan", if you want to call it that here to read for yourself and formulate your own opinion. I don't think much will be accomplished until after the November election with regards to Obama's proposal for the new refinance program; or legislation on FHA with changes to mortgage insurance premiums yet again. Too many distractions right now and the smear campaigns are heating up as we near November election time.

Government Files Suit Against Wells Fargo Alleging Mortgage Fraud

2012-10-10T21:37:00.002-07:00

Yet another bank, Wells Fargo, is getting sued by the government with allegiations that thousands, yes folks that right, THOUSANDS of loans were concealed from the government as being seriously deficient.

It comes to no surprise Wells Fargo denies the allegations but this is yet again, another bank in the news with a lawsuit alleging poor loan quality during the height of the real estate boom. Did Wells know this was coming? One might ask since they abruptely left the wholesale business not too long ago and earlier this year decided to exit Reverse Mortgages (another government backed program) which they were the #1 lender in the country in that segment.

Nobody really can say but the story can be found here on Huffington Posts website along with other sites as well http://www.huffingtonpost.com/2012/10/09/wells-fargo-lawsuit_n_1952216.html Wells denies the allegations and plans to fight it. I think this will end in yet another settlement for damages the FHA fund inccured for losses on claims to these mortgages. The article puts the number at nearly 6,400 loans were deemed "seriously deficient" and should have not been insured.

Strong language included "lied" to the government were used. Wells Fargo is the nations largest mortgage lender by market share and has maintained this status for quite some time. As the market continues to change and shift I wouldn't be surprised to see more banks under the microscope, with more stories of alleged fraud and concealment because FHA is hurting right now. The Mortgage Insurance Fund is way below Congressional mandated levels and with foreclosures still occuring and unemployment still high, I think we'll see more of this to come in the months ahead.

Stay Tuned on this one. It will be interesting to see how it plays out.

Election Distractions

2012-09-30T16:15:00.003-07:00

Election Distractions

Romney's Home

So I was looking at yahoo.com today and ran across and article showing Romney and Obama's house. What a waste of webspace right? I mean let's look at the real issues here. WHO cares about what kind of house they live in?

Every company has a CEO and the CEO of America is the Presidency. The real deal is we really have no choice. I mean each election season we're forced to choose between candidates from two party's. You're either on the left or you're on the right. Well my question is who the hell said I was either?

I can think for myself and I can make my own choices....I don't need someone telling me I have to choose left or right. What if I came to a fork in the road and I wanted to go straight?

Obama's House

The fact that this is becoming an issue is a one of many election distractions and really does nothing but invoke anger. Do you agree? Life is so short that, in my opinion, we need to be focused on our relationships; our families, our children, our friends. All we see now on tv (which by the way I don't watch much tv for this reason) is attack ads and straight crap about this and that related to the 47% comment; Obama's wealth distribution comment; whatever it is they decide to let out (which by the way they've had this stuff just sitting there waiting for the right moment to release it, I mean come on should we believe they "just" found this out?) which is responsible for the swaying of public opinion. It's like a big roller coaster ride until election time.

Now I know you're thinking what in the world does this have to do with mortgage? It really doesn't but the fact that this article focused on Romney and Obama's house is real estate related so I thought I'd share my thoughts on this.

Okay back to my rant....lol.... You can check out the article HERE and develop your own thoughts. I'm not here to judge about what others think...honestly I encourage people to give their opinions. Why? Because that's what makes us a great country and people in general. We're able to express our opinions about topics, ideas, and issues, and really when it boils down to it we stand together strong when circumstances call for it. With that said all this does is try to divide the country into labels...left vs right. It's bull if you ask me.

I don't know about you but I'm sick of this mess. Who doesn't want to live in a nice home; make money; live a life of financial freedom to travel the world and spend time with loved ones and create memorable moments? That's a no brainer. So that day when you reach your death bed and your loved ones are around you; you'll pass with a smile on your face knowing you had meaningful relationships throughout your life and great experiences that bring tears to your eyes just by thinking of them.

So to have negative feelings around success makes no sense. We all have goals, dreams and aspirations in life so why not be happy for the people that do make it. Hell for me..that's an inspiration to want more out of my life; to motivate me towards my goal; not walk around pissed off about it. Let's get to the real issues shall we.

Real Issues

We live in a country of opportunity where if you apply yourself, create value for others, and put in the work, you can be successful. Success doesn't have to be material success. Everyone has their own definition of success but to show these properties and try to invoke anger and division among people I think is ridiculous.

Lets here about the real issues facing the country and the plans to fix it. We have debt issues, health issues, ecomonic issues, all kinds of things. What's the house or even the cars have to do with it?

Also the tax return issue; that's another one of those election distractions that irks me to no end. Who cares? The only taxes I'm worried about paying are my own...I mean get real. Who gives a hoot how much taxes Obama or Romney pays? If you think you pay too much in taxes go to an accountant, instead of HR block or Jackson and Hewitt or whoever, and find ways to reduce your tax liability.

Do me a favor please..turn off the tv go grab your wife, kids - if you don't have that - then girlfriend, boyfriend, grandma, grandpa, whoever, and hug them; tell them you love them and smile... go outside, take a walk and enjoy the day and quit worrying about who lives in what house and how much in taxes someone is paying.

Watch this video and be inspired.

God Bless,

Obama's Refinance Plan (Take Four)

2012-09-29T15:43:00.000-07:00

Obama's First Refinance Program

Are you ready for another one of my rants? lol, I promise it will be a good one.

Well here we are folks...first we had the Obamafi 1 (aka HARP 1.0), this come out in 2009 where people with mortgages backed by Fannie and Freddie could refinance into new lower rate mortgages to help
reduce monthly payments and prevent more foreclosures. The program was launched initially letting
homeowners refinance up to 105% of the homes value with NO add ons.

In the mortgage industry we have lingo - just like any industry - and the lingo related to add ons is loan level pricing adjustments; rate adjusters; bumps in pricing; and several other names. But the gist of it is - based on certain "risk" criteria - the rate would be higher or lower depending on this information and would be built
into the pricing of the rate to derive at a finalized price.

Well it was well intended at first until the Fannie and Freddie added a bunch of adjusters and people who
needed it most couldn't benefit as they had the lowest scores and highest loan to value (loan amount divided
by value of the home). So they were hit with massive bumps to the rate and it didn't even make sense to refinance. Well duh.....that's who it was for (the people who could benefit most) but what it ended up being is a cash cow fee generation system for Fannie and Freddie by putting these bumps into the rate and initializing an all out mini refi boom to extract needed cash to help the failing entities.

Obama's Refinance Plan Take Two

At any rate...time went by and we had it adjusted to 125% loan to value. Now we have HARP 2.0 or
Obamafi retake numero deuce where now the loan to value is unlimited! That means your loan amount divided by the value can be 200% or more...doesn't matter, it's unlimited. This again was another shot in the arm for the mortgage industry and banks are making money hand over fist on this program. Mini refinance boom two.

This was designed to help all the people who couldn't get in the first time under HARP 1.0 and who were under water more than 125%. A few programs exist; One was set up for loans serviced by your current lender (which had less restrictive guidelines since they already owned the mortgage) or you could switch lenders. Now that this plan has been out for a little bit and because the risk is a little higher (actually it should be better because if they would make it beneficial for all everybody's payments would be much lower), some lenders are making it a requirement that the loan being refinanced is serviced by them.

You can find the differences here below: See the vid.

NOTE: (Video is from youtube and posted by Kenney66)

Obama's Refinance Plan Take Three

The next plan involved changes to FHA's refinance programs. You can find this HERE This allowed the homeowner with an FHA backed loan who qualified for the streamline refinance, AND, who's mortgage was originated prior to a certain date, could revert back to the old mortgage insurance annual premium calculation allowing them to take advantage of low interest rates.

As you know FHA loans have been modified significantly over the past few years to help the ailing, failing, mortgage insurance fund as it is now WAY, WAY below Congressional mandated levels so the monthly premiums (also known as MIP and in the Conventional mortgage world PMI) have gone up and up and up so even if you could get a lower rate, the increase in the mortgage insurance didn't make it worth the money to refinance. So the new program has spawned yet another mini boom.

Obama's Refinance Plan (Take Four)

Obama's proposed new refinance program (you can find this HERE on the press release from the White House) is targeting all non GSE owned loans (Fannie/Freddie) to be eligible to refinance into lower rate mortgages. The proposed minimum credit score is 580 but will this be the same thing? High loan adjusters to the rate making it too pricey for people who really need it to take advantage? Time will tell if it's implemented.

They keep creating new mini refi booms coupled with Ben Bernanke's QE infinity program pretty much guaranteeing interest rates to stay low, we're seeing massive refinance volume.

The volume has spike so high, lenders can't keep up and they won't hire new people to deal with the volume so you have horror stories of loans taking 90-120 days or longer to close!

Again, this creating HUGE profits for the banks as they are selling these loans to Fannie/Freddie/and FHA and in turn the agencies are extracting more cash from the system to funnel it into the coffers because they're all BROKE as hell and bankrupt. Just like this country is but nobody wants to realize or admit it.

So What Next?

We're rolling into election time; we're starting to see reports of home prices increasing (I don't listen to a thing the government tells me) and the only people I see benefiting are the banks in this situation as people are refinancing which requires closing costs to be rolled back into their loans increasing your balance and stretching your term back out another 30 yrs.

True, this scenario does help some and true this will benefit some people but if they really wanted to help people out then get rid of ALL adjustments; do it with no limited costs so that the people with the lower scores can benefit like they did when the HARP first came out but was quickly....and I mean QUICKLY changed to requiring all kinds of adjustments to the reates preventing alot of people from saving money on their payments.

So my question is: Where is the cookie for all the people who actually need it?!

That's my two cents on the matter.

P.S. if you like this blog check out my other one http://www.livingwithnolimits.net

God Bless,

Famous Celebrity Foreclosures

2012-09-26T22:07:00.002-07:00

Holy Cow! I was surfing the web today (like I usually do everyday) searching for some news and came across this article on Yahoo (posting it from Forbes.com) regarding celebrity foreclosures and I was blown away at some of the stories.

You've got to check it out it HERE and see what I'm talking about. To think that these people are making millions and millions of dollars and are letting homes go back is asinine! Rhianna was on this list.

She's one of the hottest celeb singers out there right now. Article goes on to say she did a short sale. Now I have a big problem with that. She was more than able to pay for that mortgage on the property but yet was allowed to take a short sale on it. I don't know about you but I think that's horse sh^!. Excuse my french but she's worth millions and is just walking away.

Other big names include were Burt Reynolds and even comedian Chris Tucker! Wow, I was stunned. Makes you think what is really going on out there huh?

This is a short post but wanted to share. Check it out.

Don't forget my other blog - http://www.livingwithnolimits.net

Renovation Financing FHA and Conventional

2012-09-19T09:28:00.000-07:00

As I mentioned in a previous post - see The New Real Estate Trend - this will be the next trend as we have a market flooded with foreclosures, short sales, and dated inventory. I went into a little bit on how this works but lets dive in some more about some options on this and how you can use it to purchase your first or next home.

The common, well known renovation loan is the FHA 203k loan. This loan has been around for a long time, since the early 80's actually. In 2005 it was modified to include a "streamline" limited repair program which is for light to moderate improvements such as, but not limited to, carpet, paint, electrical, plumbing, common updates like kitchen's and bathrooms, etc. You can find that information HERE.

In recent years lenders have teamed up with big home improvement giants like Home Depot and Lowe's to come out with programs that help streamline the process even more for borrowers who work with lenders who offer this. You can see one of those programs HERE. Now each lender may have a different process or name or list of documents needed for these programs, this is only one source.

The other type's of Renovation Financing are Conventional options. Fannie Mae has the HomeStyle and Homepath renovation options. You can check Fannie's out HERE and Freddie Mac's HERE.

With the Conventional options you can use these for not only owner occupied, ie primary residences, but it's open to investors and second homes. You can also use this program for luxury repairs whereas on FHA's 203k you cannot. You will be able to finance at higher loan amounts going up to Fannie and Freddie Mac's loan limits; plus if you're in a High Balance area (temporary increases in loan limits for certain geographical areas) are eligble as well. FHA still will follow current loan limits based on your county and you can search this online very easily on Google or Yahoo. For your convenience, I've included the link here.

Each lender again will have certain credit overlays - which is guidelines or policies put into place that are more restrictive than the published guidelines from Fannie Mae and Freddie Mac - so I will opt out of including guideline in this post and refer you to inquire more with your lender of choice.

NOTE: one thing I will caution on; when calling a lender you need to deal with a Renovation Specialist. What is this? This is a loan officer that only originates renovation loans. The reason for this is most loan officers do not specialize in these and due to the complexity and additional paperwork required and they do not have enough experience to guide you through it. When dealing with a specialist, you are dealing with someone who is originating renovation loans on a daily basis.

With all the changes in the marketplace right now, and guidelines and qualifications changing, and tighter requirements when purchasing lender owned, foreclosed properties, you cannot afford - let me repeat - you CANNOT afford to work with someone who doesn't know how to guide you through the process because this could cause you expensive extension fees and/or your contract being cancelled.

Don't be a guinea pig for someone to learn.

If you're looking for a good deal; properties that are foreclosed on and can be purchased cheap but need repairs; or even an outdated property that just needs some modern updates - this could be the loan option for you.

Some of the property types you can finance (and depends on your program) are single family, multi-family, condo's, mixed-use, and manufactured housing to name a few. Each lender may have it's only credit overlays on the properties they will lend on as well. Some will still lend on manufactured housing, and some will not. You just need to check with your lender when you call. There are not many players in the game and many, who see this as the next trend, are getting in so it's important to deal with lenders and loan officers who are experienced in renovation. This will make all the difference.

Here are some photos of what is actually possible with renovation financing.

Kitchen Remodel

Kitchen Update

Bathroom Remodel

Bathroom Update

Next post I'll discuss dealing with your contractor and working with your HUD Consultant on the FHA option.

God Bless,

Fed Unleashes More Liquidity

2012-09-13T15:57:00.004-07:00

Just as I mentioned a couple of days ago in my post Mortgage Rates Updated, I said the Fed will keep the faucet flowing baby and with the news hitting today just a few hours ago, this has been confirmed. The Fed will continue to purchase mortgage bonds to keep rates low and even try to get them lower to fuel demand.

This isn't going to stop ladies and gentlemen. It's too late to take the foot off the gas now. The excuse is the Fed will continue, "as expected" to stimulate the economy due to job numbers and economic indicators. If you haven't seen the article check it out - http://finance.yahoo.com/blogs/daily-ticker/bernanke-bazooka-open-ended-qe3-very-aggressive-says-173314037.html.

As you can see from the article, now, as different in other announcements, this QE is "open ended" meaning no deadline to stop it. As I mentioned before - call it QE infinite baby!

We're going to continue seeing this as now it's too late to stop it because they won't let the market liquidate all the bad debt and mal investment as this would uncover just how vulnerable alot of corporations really are and how unhealthy the financial system really is.

If they would just let the system liquidate, it would be really bad for awhile, but would quickly bounce back stronger than before; however this strategy of pumping more and more cash into the system, is just going to lead to an even bigger collapse later on.

Ole Ben Bernanke doesn't care. All he's concerned with is keeping his special interests and banker buddies happy. Who benefits from all this? Yea, we have lower mortgage rates (which is good for lower payments but our dollar continues to decline) that are causing a frenzy right now with refinances and new purchases but lenders are not properly staffed which is causing a tremendous amount of backlog and issues getting loans to closing on time for purchases and in a reasonable amount of time for refinances. Some loans are taking 90 days sometimes or longer to close because so many people are refinancing right now under the HARP 2.0 and new FHA streamline refi programs.

According to some reports the Fed is saying they are going to keep rates low until mid 2015! Wow! First it was only a year then 2012, then 2013, now mid 2015. Take a look at the chart below regarding the purchasing power of the dollar since the Fed took over in 1913; the dollar has lost over 96% of the purchasing power it used to have. This isn't going to stop and countries all across the world are following suit of the Fed pumping massive liquidity into their economies to spur demand. The only people really benefiting is the corporations and mega banks of the world as they profit hugely from this.

The stock market sky rocketed today on the news continuting to fuel asset prices. When will it ever stop? Never baby - hold on to your hats and enjoy the ride becasue you ain't seen nothing yet!

The big boys are making all the money and average saver is losing their purchasing power day by day by day while the Fed helps their bank buddies, big boy corporations, and special interests profit hugely by these moves as they are contrived and planned before the announcement to the public is ever made.

We'll definitely get to see some rhetoric from Mitt and strutting peacock Barack I'm sure regarding this which continues to fuel the real life soap opera we call the 2012 Presidential Campaign. The false sense of choice we have between the two candidates is not real choice - it's controlled opposition. But that is another story for another day.

Mortgage Rates Updated

2012-09-10T15:07:00.000-07:00

I submitted a post in 2009 regarding mortgage rates and I'm updating it again now. You'll hear all kinds of different perspectives from financial advisors; mortgage gurus; industry groups, etc, but in my opinion rates may have some ebbs and flows as major institutions involved in the MBS market modify their portfolios, but but we've gone past the point of no return.

The Fed is stuck in QE infinite. In other words.... rates are on lockdown and they can't let up on the gas now baby. How can they?

Can you see what would happen if they do let rates rise? Ummm - market chaos. Some are going to read this and say I'm crazy; I'm a conspiracy theorist; I say bull and open your eyes to what is going on.

$16 Trillion in debt; foreign governments defaulting on sovereign debt obligations; war all over; they can't stop the pumping the cash now baby it's all in, all or nothing. Trillions have been spent and trillions more will continue to be spent.

The housing market is a huge part of our economy and they keep stimulating it through controlling the interest rates and driving demand. Stimulus galore!

You want a stimulus package, in my opinion, I would use renovation financing as this is a viable way to keep goods and services flowing through the economy. See my previous post - The New Real Estate Trend. I'm going to do a series of posts on this subject but in short; you can finance the cost of the purchase of the home and the cost of upgrades and/or needed or desired improvements to the property all in one loan with one payment.

You'll hire a contractor to do the work after closing and you can include (depending on the program) anything from light to moderate repairs to major renovations such as additions and foundational work; and even luxury improvements like swimming pools.

Through this loan you're purchasing materials, improving the property you're buying (not to mention turning the home into one you love and not just one you like) and putting people to work, ie contractor and their subs. This is a stimulus package with a private sector approach that really isn't rate sensitive.

Think about it; most improvement loans you get are tied to high interest credit cards or you already own the home and you secure a second mortgage fixed rate loan or what is called a HELOC (home equity line of credit). The difference is these options look at current equity while the renovation loan uses post-renovation value (future equity). More on these differences in my series of posts to come.

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Does that mean you should buy now or wait? I can't answer that, only you can assess your financial situation and make that decision. They call owning a home the American Dream but the American Dream is what your make it. Not everyone is ready, equipped, or can afford to buy right now and that's okay. When the time is right for you you'll know it.

For right now I think the low rate environment isn't going away. Aside for some market adjustments I don't think interest rates are going anywhere - I don't see how they can. The Fed knows this and you can tell when every time ole Benny Bernanke gets in front of Congress and testifies, this guy will not say the pump will stop. He always makes some comment regarding more tools at their disposal and are ready to provide more stimulus if the need is warranted.

Yeah buddy! That means it isn't stopping any time soon.

Until next time, God Bless

How To Be Prepared At Application

2012-09-08T20:42:00.000-07:00

The mortgage industry has changed quite a bit from a few years and months ago...heck sometimes even just days ago. Changes are the norm so I'm writing this to help you with the application process as this day in age it's documentation, documentation, documentation and for some people this can become annoying and upsetting at times.

Do not get upset or frustrated as the industry, one loan at a time, is trying to restore confidence in the marketplace and to investors. The key to making the process smooth is several fold but the most important thing is your initial file quality at submission on your application for financing.

The more prepared you are upfront...... the better!

When your loan officer asks for something - get it turned in as quickly as possible so there isn't any delays in the process.

There is an extreme amount of pressure put on them to turn things around when documentation is delayed being turned in and will, and does, cause for the need of extensions to your closing. This can be unnerving and complicate things for you.

Stressed!

Everyone's situation is different and sometimes additional documentation is requested.

Realize that there are some issues, concerns, and compliance requirements on the back end that we as consumers don't see or always here about, so underwriters are checking, double checking, and sometimes over conditioning the loan files; but this is an attempt to make sure all compliance rules and regulations, file quality, and documentation requirements are being met.

When making application make sure you have all of your income and bank account information (to all accounts) available. Since each loan is different more documentation maybe requested and this is not all inclusive, so in preparation have ready:

The last three years of income tax returns (make sure page 2 is signed and include business returns if self-employed), w2's (all w2's for all jobs) and a full months of paystubs.

Be prepared to explain any changes in income or if you've had multiple jobs in the last 2 years

Bank statements should be all pages even if one says "intentionally left blank"

Be prepared to explain any credit inquiries you've had recently and if any new debt was acquired from this inquiries. People ask about this all the time but the idea is if more debt it out there that is unknown, this has an impact on your debt-to-income ratios and your ability to repay the mortgage

Be ready to explain any large and unusual deposits into your account (untraceable cash deposits are not acceptable) to prove they are from an acceptable source.

Explain any derogatory or late payments on other credit accounts and collections

Again, this is by no means all inclusive but is a short list of items you'll need and other things to be prepared for when meeting with your loan officer. The better quality your loan file is at submission, the smoother your process will be.

Remember - there are many parts of the process that are not under the control of the lender so communication is key as everyone is working toward the same goal - closing.

God Bless,

The New Real Estate Trend

2012-09-08T15:53:00.000-07:00

What is the next real estate trend? You can ask many and you'll get many answers. As a professional in the business I can tell you that I see renovation as the next trend for the coming years. Why?

Aged inventory - many houses are old, have not been updated which includes kitchens, bathrooms, plumbing, HVAC, and could really use a face lift.
Foreclosures galore! The market is saturated with foreclosed REO properties that need repairs.
Older homes with outdated floor plans or are too small compared to other homes in the area (by the way part of the renovation process can include adding square footage to the property through an addition to home)
Can add a personal touch to make it yours - turn a home you just like into one you love
Many homes with health or safety violations or hazards which can be remedied through renovation
Many many more reasons.

So what can be done about it? Well you can call it a secret (not really) but a program that has been around since the 80's - the 203k (no this isn't like your 401k) - allows the for the purchase of the property plus the cost for repairs to be rolled into one loan, one payment, and your maximum mortgage is based on the post-renovation value. This is a little known loan through FHA and 203k is simply just the section of the act (the National Housing Act) for the program just like the 203B is the "regular" or "normal" FHA loan we've all grown to know very well.

Especially since the housing debacle and Conventional financing has tightened up; more people are getting FHA insured loans.

So you can literally turn this

and even this

into this

and even this

Now you're probably thinking..."yea right, that looks nothing like the other houses." But yes you can do this (turn ugly into stunning).

You can do anything from light to moderate repairs (kitchen and bathroom updates) to more major renovations like foundation work, and even tearing the house down and rebuilding on the same foundation.

With the 203k you just can't do anything consdered "luxury" repairs in nature like a gazebo, hot tub, or install a swimming pool. The key to this is after-improved value - which is the home will be comparable in it's renovated state to other properties in the area.

This doesn't mean build a 6 bedroom home in a 3-4 bedroom market, however if you wanted to change the design and floor plan of the property and make a major renovation you can.

There are so many things you can do with this type of financing. By the way FHA isn't the only one that has this program available. Very close versions of this are available in the Conventional world through Fannie Mae and Freddie Mac but most lenders do not offer this type of financing.

I think you'll see that change as this piece of the market explodes over the next few years.

One word of advice that I caution people looking to obtain this financing:

MAKE SURE you are working with a specialist. The reason is they work with these loans daily and a specialist only originates these loans. You'll have many originators that "dabble" with these loans and only do a few a year vs a specialist who originates these on a daily basis so they are knowledgeable of the intricacies of the program and have a system in place to take you from application to closing with very few, if any, hiccups.

Don't be a guinea pig and search out a specialist. This should be your first question to the loan officer. If they are not a specialist ask if their company has one and if not - move on and don't waste anymore time.

Not all lenders have the same guidelines; some will have what is called credit overlays, meaning they have tighter guidelines than the published FHA guidelines on the program.

I will do a series of blog posts on this, since it will, and already is becoming, a hot topic. There is much to talk about, so you can be prepared and armed with information when approaching your lender for a renovation loan request.

God Bless

P.S. if you like this blog check out my other blog http://www.livingwithnolimits.net

Looking at 2010 for Housing

2009-10-18T22:27:00.000-07:00

As we get closer to the end of the first time homebuyer tax credit which has helped get first timers back into the market, we ask will it be extended. I'll agree this was badly needed (the first time homebuyers buying that is) because they are the first domino that leads to all the others falling into place. As sellers list properties for sale - they need the first time buyer to come in and buy their homes - which will lead to them buying someone else's, and so on and so forth. It's a domino effect that needs to begin with the first time buyer.

Will the government extend? I'm really not sure. As the residential market begins to stabilize Congress may not extend the credit as it would, yet again, add to the ballooning deficit which ended 2009 fiscal year at 1.42 trillion dollars. Wow! That's an amazing number; but since trillions and billions has been thrown around like a frisbee in the media lately, when you think of the concept of that much money, it just goes in one ear and out the other. This is boat load of money and its being projected by economists, the deficit will continue to rise unless either spending is lowered or taxes are raised or a combination of both. If you ask me I"m tired of taxes.

But any rate - Congress has a tough decision as we reach the final stretch here and we approach the November 30th deadline. Interest rates have been low all year except for a few weeks in May and beginning of June when we saw massive government auctions that took the market by surprise. Record debt flooded the market and buying just couldn't mop up the access - almost like dipping a sponge in a bucket full of water - the market just couldn't absorb it all so selling forced prices downward and yields up (making interest rates rise).

Now that we've enjoyed almost the whole year with low interest rates; what will happen in 2010? Well inevitably rates will have to go up as the FED exits stage left, and the market adapts to a major buyer disappearing, forcing it to stand on its own. With 1.25 trillion in MBS (mortgage-backed securities) the FED will eventually look to unload those securities which will cause even more downward pressure on bond prices equalling higher mortgage rates as a result. All year it seems as if investors have been trading on policy and not spreads. Will the FED hold its positions? Will it sell most or all of its securities? Who knows but the FED.

If you're in the market - now is the time to jump in and buy while historically low rates still remain. But that's not the only reason you should buy right now. As you know home prices have retracted since their highs of 2006 and owning home has many benefits of which building equity is only one. You have tax advantages along with knowing you've made a long term investment that pays dividends for years to come. Not everyone deserves a home and its something that is earned, and in my opinion, not guaranteed.

Make it a wonderful end to 2009

God Bless!

Inflation Manipulation?

2009-10-14T20:51:00.000-07:00

Inflation numbers are due out tomorrow for the prior month. Expectations are .2% increase but one interesting thing to note. The Bureau of Labor Statistics is going to include the subsidized Cash for Clunkers program $4500 dollar rebate as a way to reduce auto prices by the same amount. Hmmmmm.... now isn't that aggressive use of accounting techniques? Keep in mind the government is the one releasing these numbers and we are in a severe recession that many are calling over, but I just don't see how that's possible. So with a 1.8 trillion dollar deficit due to heavy borrowing, who would benefit from lower interest rates? Bingo! The government would.

See bonds are sensitive to inflation since bonds tie up investor money for long periods of time; but bonds can be resold on the secondary market and if prices are dropping due to inflation fears, investors lose money. The way bonds are calculated for their value is by using simple time value of money calculations. Its quite simple. A dollar today is worth more than a dollar tomorrow. So if an investor is going tie up their money for a longer time, they want a good return - or at least a return that is suitable for current market conditions. In times like this, investors flee to safety - in the form of bonds - which are usually safe investments. If inflation is higher than expected this is not good for bond holders because now their return - inflation adjusted - is much less than originally anticipated. So by the inflation numbers coming out in line or lower, its to much of the benefit of the government who still has to borrow very heavily in order to service the existing debt payments (interest) and the barrage of entitlement and social programs and wasteful stimulus programs.

But how does all this affect mortgage rates? Quite simple actually. MBS (mortgage-backed securities) compete with other bonds for investor cash and are susceptible to inflation worries just as other bonds are. What happens is MBS bonds are priced over treasuries in order to attract dollars and be competitive. Bonds have risk factors that investors have to take into consideration and credit default is just one such risk. MBS add another risk factor - early payoff. Mortgage loans in a low interest rate environment have a high propensity to pay off early. This eats into the returns of investors and therefore they need to be compensated for that risk. So what happens is MBS bonds are priced at a fixed spread over treasury yields in order to attract investors to assume that extra risk.

With gold hitting yet another high of $1,080 an ounce; the dollar is weak, and oil is up, this spells inflation. There are few schools of thought out there with respect to the definition of inflation but I side with the Austrian view of the vast expansion of the money supply that we've seen from the FED over the last 18 months IS inflation. I just don't see an argument here. When you expand the money supply and aggregate demand does not rise equally, and wages do not rise with this, you have inflation and rising prices - period. The price level has to rise in order to balance the increase of money in the system. Back when we were on the gold standard, massive expansion of the money supply could not be done like this because you could exchange your dollars for a fixed weight of gold keeping the FED and our law makers honest.

The first time homebuyer tax credit will likely be extended and maybe inclusive of all homebuyers not just first time. While I've enjoyed the short term benefit of the increase in volume, I know that we are just prolonging the pain that will eventually come. Housing isn't out of the water yet, however if you are in the market to purchase I suggest doing it now. Rates can't stay this low for long. Just one year ago before the FED intervened, interest rates were at almost 7% on a 30 yr and then plummeted to below 5% making the investment into a new home very attractive at this point.

God Bless, until next time.

Mortgage Journal

Mortgage Rates

Today's Mortgage Environment

More Fiscal Cliff Talks

My Quick Rant On This Topic

Secretary Donovan Questioned By Senate Banking Committee

New Housing Market

Are You Building a Brand Or Chasing a Check?

Building Your Brand

Steps To Building Your Brand

Strong Warning From CFPB On Misleading Mortgage Advertisments

CFPB- Consumer Financial Protection Bureau

How Can Realtors Sell Renovation

Selling Renovation

More Ways To Sell Renovation

Properties in need of repairs

Now Using Renovation Financing See the Difference

Some More Options

Conclusion

FHA Fund In Deep Doodoo

FHA's Finances﻿

So What Mindset Should You Have About All of This?﻿

Mortgage Application Tips

Mortgage Application Tips You Can Use

Mastering Credit Scores

Mastering Credit Scores

Credit Scores

How Credit Scores are Determined?

When To Use Renovation Financing

When To Use Renovation Financing

Homeowners Suing Banks Over Fixing Libor

FHFA Releases Plan on Fannie and Freddie

Government Files Suit Against Wells Fargo Alleging Mortgage Fraud

Election Distractions

Election Distractions

Real Issues

Obama's Refinance Plan (Take Four)

Obama's First Refinance Program

Obama's Refinance Plan Take Two

Obama's Refinance Plan Take Three

Obama's Refinance Plan (Take Four)

So What Next?

Famous Celebrity Foreclosures

Renovation Financing FHA and Conventional

Fed Unleashes More Liquidity

Mortgage Rates Updated

How To Be Prepared At Application

The New Real Estate Trend

Looking at 2010 for Housing

Inflation Manipulation?

FHA's Finances

So What Mindset Should You Have About All of This?