Deals, Deals, Deals

Whew! What an end of the month! October came and went so quickly with so many new and exciting mortgages to complete for my clients. Overall I closed 7 loans last month, 5 Conventional Purchase, 1 Homepath Purchase, and 1 FHA Refinance. Not bad. Most of them were great.

I was able to help 2 couples upgrade from their current homes and into a bigger residences for their growing families, while qualifying them with both mortgage payments. Talk about win, win. Who says people can't get loans...

On the refinance, I saved a client over $100 per month and was able to get them a 30 YR fixed rate at 3.75%...unheard of.

On the other two purchases, I helped two great women buy the new place they are calling home. They were wonderful clients and I can't wait to help them for life.

The last deal is special. Imagine you are scheduled to sign your closing documents after waiting 3 months for the short sale approval and another month to get the financing in place and you get a call that says the seller is refusing to sign and is backing out of the deal. Thats' right. Game over. The end. It sure seemed that way for a while. In fact the entire night before the scheduled close we all thought for sure it wasn't going through. Well, lucky for me I was telling the story to another realtor friend who gave me some advice...I made a couple of calls...Let's just say at 8:30 PM on Friday night, I got a call from my client and she told me that the seller agreed to close. Lots of scrambling ensued on Saturday...thanks to Sheri Mays at Chicago Title and her assistant, we signed the seller, my client signed Monday morning and we recorded on the last day possible of the COE. It was a regular horror story that turned into a great story for my client. I couldn't have been happier for her as she deserved a better ending to the entire process than letting the seller just walk. Thanks goes out to all parties for working hard and never giving up, even when it would have been the easy thing to do.

That's been my month and we look forward to an even better and bigger November.

Do's and Dont's During the Loan Process

The title of the article should really by "Dont's During the Loan Process" but it felt so depressing to only have things that you shouldn't do...kind of like a kid that has a list of things he/she can't do from their parent(s). That really stinks. In an effort to stay positive and leave you feeling good, I will give you the "do's" at the end.

Here is definitely what not to do:

Rule #1) No applying for or obtaining any new credit! It could ruin your closing.

• Him: "We really should get a bigger TV for our new family room"



• Her: "I also want to have lots of room for food so could we get a new refrigerator?"



• Him: "Sounds great to me. Let's just go to Best Buy and get a new credit card with 0% interest. I am sure we will qualify...we just qualified for a new home."



• Her: "I am so excited."

2 weeks later --

• Loan Officer: "We pulled a limited review of your credit report and it came back with some new credit from Best Buy. What is that?"



• Him: "We bought a bigger fridge for all our food and you have to come over after we close and we can watch the game on our new Flat Screen...it's awesome!"



• Loan Officer: "What - did you finance those items?"



• Him: "Sure did. It's great, we qualified for the house so we figured we would qualify for a new credit card so that's what we did."



• Loan Officer: "You did PRE-qualify, but you hadn't closed and the new estimated payment on the debt is throwing the ratios off and so we can't close the loan."



• Him: "What...no way, it's interest free...you have to help, we have to have this house...we love it."



• Loan Officer: "Sorry, you shouldn't have extended yourself beyond your means...now we can't close on the new home. We will have to wait until you have those new items are paid off."

Okay, so the loan officer probably wouldn't be so dry when it came to their plight, but you can see the problem. They had tight ratios, extended more credit and the ratios went to high and the lender couldn't complete the loan. You can insert any form of credit extension or inquiry into the above scenario: Car loan, credit cards, and even applying for a new job, new bank account, or rental home (just in case the house falls through) could all result in inquiries on the credit report and those inquiries must be cleared prior to closing. The worse case would be above, where the borrower actually is extended credit and the situation changes on debt to income ratios thereby ruling the borrowers as ineligible for financing.

Rule #2) Don't quit your job.

I know what you are thinking...who would do that. Well, let me just tell you...it isn't always someone who just quits with no new job in mind. Some borrowers change jobs during the process, whether by choice or by necessity. Either way, any changes in employment will render the employment the lender used to qualify you as obsolete. They must re-qualify if there is a new job and it typically takes at least 2 pay-checks or 30 day's worth of earnings to be able to use any income. That could mean delays and potential loan denial.

Rule #3) Don't use funds from a different person at closing.

Some people have the funds for closing but "borrow" the money from family for closing. If you are going to do this, then they need to sign a gift letter saying they are giving the money. The money should come from the accounts that you used for underwriting so no person or underwriter can question the validity of the funds used for closing. Plus, it is illegal to falsify the use of funds for down payment and closing costs. Remember, the application is a binding legal document and so you must indicate correctly the assets to be used for closing.

If you can help it, don't change anything until the loan closes. How the file is underwritten is how the file should close...any changes could cause unneccesary delays and be a supreme hassle for all parties involved.

What to Do:

• Nothing - at least not financially. Be patient. Work with a solid loan officer or mortgage consultant that will communicate effectively throughout the process so you aren't concerned about the stages of the loan process or anything that may come up. Allow the process to work itself out. If you chose a great Mortgage Consultant (like me), then you shouldn't worry, cause if I start a loan process...best be sure that I am going to work to get it done.




• Anything the Loan Officer asks (as it pertains to the mortgage process) - With the difficulties inherent in qualifying for a home already prevelant...if the mortgage consultant asks you to jump...just ask how high. It's all about full disclosure and understanding that you are not innocent until proven guilty...you are guilty and not qualified for a home until you can prove otherwise. Assume it will be a Mount Everest climb and perhaps when it turns out to be Squaw Peak hike...it won't seem so bad. It's always a matter of perspective!

What is better than hearing that you don't need to do anything except what is asked of you. Do that and the process will work itself out nicely. Put up a fight or deviate from the path...well - let's just say it's your new home or refinance. I already have a home.

Luxury Home Market - AZ 2011

What does “Luxury Home” mean? Are we talking about home prices above $750K…above $1MM? Or are we talking somewhere between $250K - $750K? At the height of the market in 2006 the median home price rose to as high as $303,900 according to ARMLS, and the median home price hit a low of $120,475 in March of 2011. That is a staggering 61% drop in median price over the last 5 years. So how do we define “luxury home” in the ever changing market?

To start, luxury homes in the “lending” world would be considered any type of loan that exceeds the conventional loan limits set by Fannie Mae and Freddie Mac. Those conventional loan limits sit at $417K. This means that any loan that goes above $417K cannot be sold on the secondary market and are considered “jumbo” loans for the AZ marketplace. Though you can still get financing on Jumbo loans, it typically takes at least 20% down to secure a jumbo loan. In essence, the luxury home market could be defined as any home purchase price greater than $522,500 (20% down would be a loan amount of $418K and thus would exceed the conventional financing threshold).

Now that we have defined “luxury home” using the facts and hard numbers, let’s look at what the future holds for luxury homes. All indicators point to a “caution” while proceeding with the sale or purchase of a home in the luxury market. There needs to be a strong reason behind selling a home in the “luxury” market as well as a strong need to buy in the “luxury” market. But, if you are in the market to buy a home, the great news is there are an ever increasing number of options when it comes to financing. No longer is it a full requirement to put a minimum of 30% down. Now there are 25%, 20% and yes, even 10% down options depending on your price range. There are also excellent asset depletion programs for loans above $300K (use your asset reserves to increase your income numbers – a creative way to help self-employed borrowers that write off expenses for tax reporting purposes) and rates are so very low on the 5/1 and 7/1 ARMS that it is even cheaper to leverage your money. I say the future is bright as affordability increases on these “luxury” homes.

Regardless, of what price of home you are in the market for, the truth remains that financing is available, you just need to explore the options. Most importantly, the idea of what is “luxury” has changed a bit because what you would have paid $325 a square foot for in 2006, you may be able to get for $150 a square foot or less. Couple that with increase financing options it might just mean the opportunity of now may be knocking on your door.

September 2, 2011 Week in Review

Once again, another month has passed. Economically the numbers favor slightly better rates due to the news regarding the lag in job growth (there wasn’t any). Though rates are holding steady this week as the numbers show we had a bit of improvement at about .08%. The difficult aspect to gage on refinances is the length of the lock. With the increased volume, many companies are forcing longer lock periods in order to handle the volume. Don’t fear though, the rates are still very low and we are poised to see them stay in this range for another couple of weeks. If you or someone you know needs to refinance, don’t wait too long, because well, as I always say…you just never know.

Weekly Review:

• Stock Market drops after Bad Jobs Report – When one set goes up, the other tends to go down. Those “sets” are the stock market and the bond market. They tend to follow an inverse path, though through these recent economic times that isn’t always the case. As you can see above, today that holds true. As the stock market goes negative, the bond market improves. So rate are edging lower and these low rates may continue this trend if the economic news worsens. You can read a brief article here.

• Boom in Refinances – One of my favorite financial sites is Bloomberg.com as you can see by this article, the volume of loans has increased significantly and has swamped lenders. Outside of just purchase business, my refinance portfolio has seen this same increase, which means more work involved. Another interesting note, the number of “mortgage industry jobs fell to 239,100 from 259,700 (last year) and more than 500,000 in 2003”. All of this is good news as that means the mortgage industry is professionalizing itself in such a way that only dedicated professionals work the business. Keep those refinances coming, they are good for the homeowners and good for business.

• Labor Day Weekend – Be safe and remember, when Labor Day weekend is upon us it signals the start of the NFL and College Football. I couldn’t believe it when I turned the TV on yesterday and there was ASU, playing its first regular season game. They won, which they should against UC Davis. In the NFL, we are out of pre-season and with it comes the hopes that the team that you support will not let you down over the next 4 months. It will all be over in a flash, but here is to hoping that our home town team, those Cardinals, will be good enough to keep us entertained into early February.

As always, please let me know if you have any questions or if you know of any person that is considering a refinance. I would be happy to take a look at their financial picture to see if refinancing makes sense. I have helped a lot of newer clients recently with these low rates and would like to help those out who mean the most to you.

Week in Review - July 25 - 29

Rates were a bit better, then worse and now a bit better again. The volatility remains very high as the government continues to handle this debt ceiling like a monkey would handle your mom’s precious china…recklessly. It’s messing with our whole flow and because of that it keeps us from getting a solid handle on the actual market. Regardless of the above, we are ending July of 2011 very similar to where July of 2010 ended, which year over year isn’t too bad. Rates are still in the 4% range on the FHA and 30 YR fixed programs and the 3% range on ARM products. You can’t go wrong with those numbers.

Here is the rest of the week in review:

• Debt Crises Looming – Clearly we have an issue between the House, the Senate and our President within our country. There comes a point, where the truth is, compromise is needed as President Obama stated this morning. I do understand the stance on the Republican side (though most of it falls on the tea party – which I probably hate the name of the group so much that I subconsciously avert from any “allegiance” to their cause) as it seems getting the spending in order is a real priority. I also understand the point on the democratic side (notably President Obama) and their need to increase the debt ceiling for longer than six months or at least until after the reelection…I would do the same thing if I was in his position. The hard part to grasp is the continued decision to blame each other. Has there ever been a time where compromise was reached when both sides blamed the other…I don’t think so. We have to stop blaming and start talking and discussing. We will see if they figure it out.

• Mortgage Rates and Debt Crises – Just resolving the crisis isn’t enough…here are the potential two ways that this debt crisis could be resolved and how they both impact mortgage rates. If the debt ceiling is extended and the nation’s credit rating is downgraded – rates will inevitably increase across the board. If the spending is capped and we cut spending while keeping the credit rating high – then rates will hold steady to get fractionally better.

• Cost of Interest and the US Consumer – As a mortgage consultant, it is true that I often saddle people with the largest debt they may ever have. While I do make my living in this arena, it truly is in the hopes that the mortgage they choose is not a burden but a commitment they are ready to make. Click on the title to this section and see a blog that tells the truth about the cost of the Consumer debt – mostly slanted towards credit card debt. In reality though, all interest that is owed to anybody else is money you are losing every month. Those who control the money…control the stakes…perhaps our government could learn a few things about wanting others to owe you vs. you owing them.

Changing your Mindset

With the debt crisis in full swing and still unresolved, wait, let me check...yep, still unresolved, it has a lot of people talking about saving, spending, managing debt, and balancing budgets both on a national level and on a personal level. Interestingly enough, many Americans have already begun the process of saving more than they spend. In 2006, the savings rate was at the lowest levels of the past 30 years, <2%. We have now increased this savings rate to somewhere between 6 and 8%. In addition, we are also seeing the decline in consumer credit card debt. We are "down 8.2% from the peak in the 3rd quarter of 2008."

Though we are on the right track, the way to really make headway is to become the lender not the borrower. For many years, prior to this century, most loans were short term loans. The 30 Year mortgage became popular after the great depression to increase affodability for borrowers. While this does help people get into an "affordable" home and help them "own" the home, it usually saddles people with debts that will be far to difficult to ever remove.

Consider that on average, over half of the mortgage payment that the average person makes goes toward interest against their loan. This means it is direct money away from you and into someone else's pocket. It isn't logical. Consider credit card debt, some credit cards have APR's in the 25+ range. That means for every $100 you purchase, if you pay the minimum requirement for 12 months it will actually cost you $12.56. Doesn't seem like much..but check this out, using some statistical averages from creditcards.com and a credit card calculator:

• Average Consumer Credit Card debt: $14,687


• Average APR: 14.88%

To eliminate that debt in 1 year it would take monthly payments of $1318.37 and you will have paid close to $1,133.44 in interest when it's all said and done. Of course, that interest is not yours and additionally, who can budget what is essentially a mortgage or rent payment to rid themselves of this debt? So let's be more realistic, instead it takes you 4 years to pay it off with a monthly payment of $400, by the end you will have paid $4,560.52 in interest to someone else. Talk about head scratching.

Who is the sucker...you or the credit card company? I propose we work in a different manner. Let's work to find shorter term mortgages that are still affordable and let's eliminate the debt as quickly as possible. Then, become the lender yourself and now you begin to gain the windfall that once was not yours. Yes, it takes discipline and yes, it takes changing your mindset. But if we can just eliminate unnecessary interest paid to others, we will create a promising future with less financial worry and increased profitability for the work you do.

Perhaps the governement could learn from what Americans are apparently beginning to figure out. Save more, spend less, and provide a better future for everyone around you.

July 15th Week in Review

There was a bit of turmoil in the world of economic news and this typically bodes well for rates and in corresponding fashion that is how the week turned out. As the uneasiness continues in the market, we may see one more dip in rates, though no one can predict the actual rates day to day, we can say that there is the possibility they will hold for the near future (or until August 2nd). I would suggest that if you haven’t refinanced or looked into it…now may be the time.

• Cash Out Refinances – Less than 6 Months Ownership – Currently most investors still require a minimum of 6 months for the owner to be on title in order to complete a cash-out refinance. We sell directly to Fannie Mae and so we have the option of using their exception policy to this rule. We can now complete the cash-out refinance for borrowers that have owned the home less than 6 months and had previously purchased the home for cash or through a LOC. Who this helps?

o Investors – Buyers at an auction that plan to rent the home. Instead of dealing with financing up front, they can pay cash and then enact the financing after to recoup some of their investment.

o Auction Buyers – There are not a ton of people that do this, but some have the means to buy their home with cash and then just need to get the cash back after the purchase is complete.
If you have someone that might fit the above or even a different scenario not mentioned, have them contact me and I can see what we can do.

• FHA Concessions and Loan Limit Changes – Don’t forget that FHA does allow up to 6% seller concessions to go towards closing costs and pre-paid items. Plus Fannie Mae and Freddie Mac have incentives for Buyer’s agents and buyer’s with the properties they have on their books (Homepath and Homesteps). Take advantage of these opportunities! On October 1, 2011 the Maricopa County Loan limits will change and go from $346,250 to $271,050. This is a drop in purchasing power of $75,200 through FHA. Keep that in mind as you work with your clients.

• US Debt Ceiling, Causes Market Uneasiness – Here is a nice piece that offers a bit of explanation into what the debate is all about. At the end of it all is the horrifying realization (I know…strong language) that we, the U.S. can’t get its act together. I do know that I work to stay within the lines of my obligations with bills and make sure that what comes in doesn’t go below what is spent. Unfortunately, the government hasn’t held to that scenario and so here we stand. I don’t know how it will all end…who really does. But I can say that it should be an awakening and call to action for those in charge to better manage what we do. I am by no means an expert, but I do know that something needs to change. Apparently you can’t spend your way out of debt…sometimes I really wish you could. But unfortunately, the only way out is with sacrifice.

Cash-Out Refinances Less than 6 months

Fannie Mae unveiled an exception to their cash-out refinance seasoning requirements. Up until now, they have required the owners to have owned the home for 6 months prior to completing a cash-out refinance. For example, f the borrower paid 100% cash for the home, they would have needed to wait at least 6 months before considering a refinance to take cash out. With Fannie Mae releasing the information we now have an option for them so they don’t have to wait. I will give you a few bullet points to consider, but if you or a client has a need to do this, I would be happy to talk to them and see if they fit all the criteria.

Main Points:

• Loan Amount can’t be more than original purchase price

• Purchase must have been an Arms Length Transaction

• No Mortgage financing was used to obtain the property and that must be confirmed by HUD-1 from cash purchase

• Must document the source of funds used to purchase the property (bank statements, personal loan documents, etc.)

Call me with any questions.

Week in Review - July 5th - July 8th

Mortgage bond prices rebounded last week, which helped mortgage interest rates improve as the weaker than expected data resulted in positive rate movements. Factory orders and the employment report both failed to meet expectations. Factory orders rose 0.8% in contrast to the expected 1.0% increase. Unemployment came in at 9.2%, higher than the expected 9.1% mark. Payrolls increased 18k, considerably weaker than the expected 110k increase. Mortgage bonds ended the week better by about 5/8 of a discount point.

NOTE: The Treasury will auction 3Y notes on Tuesday, 10Y notes on Wednesday, and 30Y bonds on Thursday. If foreign demand falters rates may come under pressure.
Pressure eased on rates but it didn’t necessarily cause them to decrease, mostly because early in the week we had a strong upward pressure on rates. It’s all evened out this week and we are pretty much back to where we started…save for FHA and ARM loans that dropped about .125% in rate.

Week in Review

• Bank Fees – I feel like Bank’s can get mad like an angry hive of bees. Perhaps this time around they have a right to be…then on second thought…the government continues to cap other people and their pay structure (See: Loan Officers new compensation requirements), so why should they be any different. We continually strive to help the consumer, which makes complete sense, but aren’t Loan Officers consumers? Bank employees? If they, the banks, lose the revenue from fees they used to charge retailers, only in a perfect world do those savings actually pass to the consumer. More than likely the retailer pockets the difference and the consumer pays higher fees to the bank elsewhere. Either way, it’s just money switching hands with each player in between working to make a profit. Is that all bad? I say it’s not. It is just that some people go the extreme and take advantage of consumers…hence we are all made to suffer and have rules imposed on us that are “in the interest of consumers”. Perhaps transparency is the best solution.

• Foreclosures: Why they will never go away? – The answer is actually easy, because no one can ever predict what will happen in life. As long as there are 30 YR Mortgage loans there will be foreclosures. People get sick, pass away, lose their job, etc. in a good economy as well as in a bad economy. Either way, foreclosures will never completely go away. With that in mind…at least they, the banks, are getting their acts together. Doesn’t matter whether it is because they have to or choose to. At the very least, the sound practices should go a long way to proper communication in the event a foreclosure happens.

• QRM – Qualified Residential Mortgages - What are your thoughts?

Weekly Review - June 27 - July 1

It is always – Only a Matter of Time! The hardest part of my job is to give news that is not wanted. However, when faced with reality it is better to approach it head on then to stick your head in the sand so here goes:

• Since the MBS market opened on Monday the FNMA 4.0 security has lost over 1.5 points in price. A move of this size and speed is unlikely to be reversed quickly. It has happened before, but chances are it will be quite some time before we see rates and prices like we did last Friday.

In English, it means that rates are higher and that the trend to reverse them may prove to be difficult in the short term. This isn’t to say that rates aren’t still favorable, because they are…but intuitively the consumer is so spoiled because of the recent low trend in rates, that when they go up people act shocked as if it shouldn’t happen. The good news is that rates are still below 5% on a 30 YR Fixed, the bad news is that how long is really…Only a Matter of Time!

Some other links and News from this week:

• Paying off a Mortgage Early – Did you know that the evolution of the 30 YR Mortgage Term is relatively new. It actually started after the Great Depression (the original one not the one from 2008.) It was created because people were making less money and needed to “afford a home” on their small salaries. So Bankers (in all their glory) decided that if you just extend the term, the cost is less and voila – increased affordability. The bad news is that before then, they were often less than 10 year terms and the country was in a lot less debt. But you can always be one of the few to say that you actually “own your home” as opposed to leasing it from the bank until they take as much money from you as they possibly can. Check out the article on ways to pay-off your mortgage early and see if it might work for you. If nothing else, call 602-670-3272 for a free consultation and we can discuss your options.

• Electricity Costs High as Summer Heat Increases – Every year at this time, people remember why Arizona can be so much fun. Mostly it’s the 115 degree heat but it is also the electricity bills that come with it. It is Christmas time when you open the bill, except the gift goes to the electricity company because the Sun decided to bake your air conditioner into submission. This isn’t even just Arizona, it’s all over the nation (see 97 degrees in Minnesota). But again, we face reality and can make choices as to what we can do. First let’s be mindful and stop giving money to the electric companies. You can see that just a few simple ideas may help to lessen the gifts you give to the electric company. Unless of course you are a giving person, then by all means – be as wasteful as you want.

Have a Happy 4th of July and enjoy the time celebrating the Country and the time you have with your family. They are lasting memories and you will hopefully share in many more to come.

Weekly Review 5-13-2011

1. JUMBO RATES = PHENOMENAL --I don’t talk about it much but rates are phenomenal on JUMBO Loans. Here is a mini breakdown:

• 5/1 ARM at 3.125% - $600,000 mortgage is $2,570.26/mo (25% down payment)
• 5/1 ARM at 3.50% Interest Only - $600K mortgage = $1,750/mo (30% down payment)

You can also do 7/1 ARMS and there are even 20% down programs available. These are really great rates. To make it even better…an Interest Only loan on $600,000 at 5.250% = $2,625 per month. That’s a savings of $875 per month.

2. How bad is my Credit hurt if I…? – It is a question that many realtors face on a day to day basis because of the high amount of short sale and foreclosures that are still taking place in the market. On my ipad and through an APP called Flipboard – I found a blog site that talks about mortgage happenings. If you go to www.bargaineering.com you can find the article that discusses what the above situations can do to a person’s credit score and how long it takes to recover. You can find the actual article…here. Things to consider: Short sale will cause a point hit of 160 to a person in the 780+ range. Bankruptcy occurs and bam – mid 500’s and it takes anywhere from 7-10 years to recover your score.

3. Pumping Tires – Every now and again, I like to remind you of the great service that I am able to provide through working with 1st Advantage Mortgage. On 4/21/2011, a client called because they needed me to close a loan for them prior to the foreclosure auction date of 5/6/2011. It gave us 11 business days to get the transaction done…I can say without hesitation, we closed on 5/5/2011…the minimum amount of time to close after an application is started per federal regulations. Do I do these all the time? NO. Do I recommend that one try to close a deal this quickly? NO. But if the need is there, I will work diligently to ensure the successful closing…just saying.

04/29/2011 - Weekly Review

This week found rates improving slightly from the end of last week, mostly as a result of the economic data and Federal Reserve Boards’ meeting. The trend trajectory for rates is that they may continue to improve. Overall, the purchase market is continuing to improve and with these lower rates there may be some pick up again in the refinance market.

• 1st Advantage Mortgage a Draper and Kramer Company now has Facebook – Sometimes larger companies are a bit behind when it comes to technology. I wouldn’t say we are leading the charge, but a strong Social Network presence is essential for capturing the millions of young Americans that live attaché to their ipad, iphone, and computer. It’s a necessity to have that advantage. You can check us out on Facebook at the following link http://www.facebook.com/home.php#!/1stAdvantageMortgage . Don’t forget about my personal website either…www.1amllc.com/murrietta.

• Realtor Open House Season – It’s that time of year and has been for the past few weeks, but don’t think the looking for homes will stop just because it gets hot. Everyone who lives in Arizona knows that the summer here is hot…but we don’t have other inclement weather, which is what ultimately keeps us here. Either way, people are going to be searching for homes and the if you want to make an impression when they walk in, check out this article at bargaineering.com. http://www.bargaineering.com/articles/ideas-holding-kick-ass-open-house.html Simple ideas, but good reminders that you can pass on to the sellers. Oh, and don’t forget to let me know about your open houses so I can spread the word and stop by when I am in the area.

• OPEN HOUSE – May 5th, Cinco De Mayo Party – That’s right, don’t forget to stop by at our Open House on Thursday, May 5th from 4PM – 6PM. We are serving a bit of Mexican food and gathering at our new office. You will love the new digs. See you there.