Saturday, May 7, 2011
I am easily managed - you must merely be firm with me. Show me exactly how you want something done and after a few lessons I will do it automatically.
I am the servant of all great people and, alas, of all failures, as well. Those who are great, I have made great. Those who are failures, I have made failures.
I am not a machine, though I work with all the precision of a machine plus the intelligence of a person. You may run me for ruin - it makes no difference to me.
Take me, train me, be firm with me, and I will place the world at your feet. Be easy with me and I will destroy you! What am I? A habit.
Tuesday, April 19, 2011
The Qualified Residential Mortgage
By Greg Parrish
The Federal government is in the process of changing the guidelines of purchasing residential real estate. The FHFA (Federal Housing Finance Authority) and a group of real estate industry organizations have produced white papers that speak to QRM. The Qualified Residential Mortgage has emerged from the Dodd-Frank Act like ketchup does when stepping on the packet. It’s all about “risk retention”. It will affect a broad range of asset types, but has gained the most notoriety by requiring mortgage lenders to have some “skin in the game” after the mortgage loan has closed and funded. The proposal would establish a definition for QRMs, which will incorporate such criteria as borrower credit history, payment terms, down payment for purchase mortgages, loan-to-value ratios, and debt to income ratios. All this is designed to ensure mortgage loans are of the high credit quality. QRM will affect the real estate industry in a big way. There are three aspects that warrant additional scrutiny.
1. It will require that lenders retain 5% of the purchase price if the borrower places less than 20% down
2. To obtain the best market interest rates, debt to income ratios will be kept at a mandatory cap of 28/36
3. To obtain the best market interest rates when refinancing you must have at least 25% equity in your property. If you want a cash/out refinance you must have 30% equity position.
The big exception is mortgage loans with a Federal guarantee as FHA, VA, and Fannie Mae & Freddie Mac (until they emerge from conservatorship). In today’s market, government guaranteed loans comprise virtually the entire mortgage market. So, the silver lining is that, right now, the effect will be minimal. But, when it does take effect, most likely sometime in 2012, it will impact your ability and the way you purchase real estate.
By requiring mortgage lenders to retain 5% of the loan amount after the loan closes and funds, interest rates will necessarily increase to off-set the “loss” of capital available to earn interest. Higher interest rates will make it more expensive to get a mortgage.
Capping the borrower’s debt-to-income ratios at 28/36 to obtain the best interest rate will have the effect of closing many potential homebuyers out of the market. While most would be homebuyers would love to have a debt-to-income ratio as prescribed, the reality is that most are somewhat higher. Forcing a higher interest rate on homebuyers with a debt-to-income ratio of say 29/39 is preposterous! These caps will needlessly increase the monthly mortgage costs of millions of homebuyers and make it more difficult to qualify for their mortgage, even if they had they requisite 20% down payment.
Considering just these two aspects of the Dodd/Frank Act (we haven’t even discussed how this affects refinancing or what is expected of a person’s credit report) would due such damage to our industry and the economy as a whole that to say it would screw tight the lid on coffin of the real estate industry, in my opinion, would be a massive understatement.
The conundrum is that the groups of borrowers who will be hit the hardest are the first time homebuyers and those with moderate incomes. These are precisely the groups that the Feds wanted to help purchase a home in the first place! The pendulum has swung about as far in the opposite direction as it can.
Public comments are being accepted by the Federal Reserve until June 10th, 2011.
Have you found that the value of your home has decreased—but your property taxes have not?
When property values increased, the assessor’s office was quick to raise your taxes, right?
So why are they reluctant to decrease your taxes? Because they need the money, too!
That’s why it’s not going to be easy. But there are usually laws in place when it comes to how property is valued and what steps you need to take to dispute the assessed value of your home and get your property taxes reduced.
1. Timing is Everything – After you receive your assessment notice OR tax bill, you have a certain length of time to appeal and state your case. If your taxes are paid thru your mortgage escrow account (and you don’t get a copy), call and ask for one.
2. Learn the Rules – Is there a “percentage or dollar” limit (set by law) that your tax assessor has to follow before you can appeal? What is the length of time, after you receive your notice, to dispute your taxes? What documentation do they require from you?
3. Check for Accurate Property Descriptions – Is the square footage correct? How about the number of bedrooms, baths or lot size? This alone will get your property taxes decreased.
4. Gather Information – Call your Realtor® and find out what homes have been selling for within the last 3 or 4 months. Get at least 5 comparable sales, the sales prices and when they sold. However, forget about including short sales or foreclosures—they’ll just ignore them when it comes time for your appeal. Check and see what your neighbors are paying for taxes! Yes, it’s public information.
5. Set up the Appointment—Most assessors require you to present your case in person—and will usually set up a date and time to meet. But, be prepared to WAIT for your turn to appeal.
6. Present Your Case – Practice what you’re going to say ahead of time—clearly mark the documents you are going to present. Circle the sales prices of the other sold properties. You may even want to create a separate comparison, listing all the info on one piece of paper, with the supporting documents attached.
Even if you lose, you can “appeal your appeal”! You can file a complaint with
your state’s property tax court. However, it’s easier and cheaper to find a
“Property Tax Consultant” (Google it with the name of your city or county).
They usually work on a “contingency” basis—where they will ask for ½ of your
property tax savings (for one year) if they win.
Hang in there: There is a story about a guy who had a 9pm appointment with
the local tax review board, but did not get to plead his case until 2 am.
He won a substantial decrease—because the assessor was just plain tired!
Albert Einstein has long been considered a genius by the masses. He was a theoretical physicist, philosopher, author, and is perhaps the most influential scientists to ever live.
Einstein has made great contributions to the scientific world, including the theory of relativity, the founding of relativistic cosmology, the prediction of the deflection of light by gravity, the quantum theory of atomic motion in solids, the zero-point energy concept, and the quantum theory of a monatomic gas which predicted Bose–Einstein condensation, to name a few of his scientific contributions.
Einstein received the 1921 Nobel Prize in Physics “for his services to Theoretical Physics, and especially for his discovery of the law of the photoelectric effect.”
He’s published more than 300 scientific works and over 150 non-scientific works. Einstein is considered the father of modern physics and is probably the most successful scientist there ever was.
1. Follow Your Curiosity
“I have no special talent. I am only passionately curious.”
What piques your curiosity? I am curious as to what causes one person to succeed while another person fails; this is why I’ve spent years studying success. What are you most curious about? The pursuit of your curiosity is the secret to your success.
2. Perseverance is Priceless
“It's not that I'm so smart; it's just that I stay with problems longer.”
Through perseverance the turtle reached the ark. Are you willing to persevere until you get to your intended destination? They say the entire value of the postage stamp consist in its ability to stick to something until it gets there. Be like the postage stamp; finish the race that you’ve started!
3. Focus on the Present
“Any man who can drive safely while kissing a pretty girl is simply not giving the kiss the attention it deserves.”
My father always says you cannot ride two horses at the same time. I like to say, you can do anything, but not everything. Learn to be present where you are; give your all to whatever you’re currently doing.
Focused energy is power, and it’s the difference between success and failure.
4. The Imagination is Powerful
“Imagination is everything. It is the preview of life's coming attractions. Imagination is more important than knowledge.”
Are you using your imagination daily? Einstein said the imagination is more important than knowledge! Your imagination pre-plays your future. Einstein went on to say, “The true sign of intelligence is not knowledge, but imagination.” Are you exercising your “imagination muscles” daily, don’t let something as powerful as your imagination lie dormant.
5. Make Mistakes
“A person who never made a mistake never tried anything new.”
Never be afraid of making a mistake. A mistake is not a failure. Mistakes can make you better, smarter and faster, if you utilize them properly. Discover the power of making mistakes. I’ve said this before, and I’ll say it again, if you want to succeed, triple the amount of mistakes that you make.
6. Live in the Moment
“I never think of the future - it comes soon enough.”
The only way to properly address your future is to be as present as possible “in the present.”
You cannot “presently” change yesterday or tomorrow, so it’s of supreme importance that you dedicate all of your efforts to “right now.” It’s the only time that matters, it’s the only time there is.
7. Create Value
“Strive not to be a success, but rather to be of value."
Don’t waste your time trying to be successful, spend your time creating value. If you’re valuable, then you will attract success.
Discover the talents and gifts that you possess, learn how to offer those talents and gifts in a way that most benefits others.
Labor to be valuable and success will chase you down.
8. Don’t Expect Different Results
“Insanity: doing the same thing over and over again and expecting different results.”
You can’t keep doing the same thing everyday and expect different results. In other words, you can’t keep doing the same workout routine and expect to look differently. In order for your life to change, you must change, to the degree that you change your actions and your thinking is to the degree that your life will change.
9. Knowledge Comes From Experience
“Information is not knowledge. The only source of knowledge is experience.”
Knowledge comes from experience. You can discuss a task, but discussion will only give you a philosophical understanding of it; you must experience the task first hand to “know it.” What’s the lesson? Get experience! Don’t spend your time hiding behind speculative information, go out there and do it, and you will have gained priceless knowledge.
10. Learn the Rules and Then Play Better
“You have to learn the rules of the game. And then you have to play better than anyone else.”
To put it all in simple terms, there are two things that you must do. The first thing you must do is to learn the rules of the game that you’re playing. It doesn’t sound exciting, but it’s vital.
Secondly, you must commit to play the game better than anyone else. If you can do these two things, success will be yours!
When purchasing or refinancing, getting the lowest interest rate is one important piece of the puzzle. There are three main elements that go into quoting an interest rate. 1. Your credit score. 2. Your Loan-to-Value. 3. Your Debt-to-Income Ratio. This is not a one size fits all deal. Each person has their own unique financial profile. Working with a qualified mortgage loan officer, you’ll be able to determine how each aspect impacts what interest rate you’re able to get.
Credit Score - Most borrowers have three credit scores. Equifax, Experian, and Trans Union (FICO). When your credit report is pulled, mortgage lenders will use the middle score of these three to assign your “file” credit score. If there will be a co-borrowers on the application, the same rule applies to them. The lender will compare the two middle credit scores, taking the lower of the two as your “file” credit score. The higher your credit score the better.
Loan-to-Value – This ratio is expressed as a percentage. It is determined by how much money you place as a down payment. For example: With a purchase price of $100,000 if you put $25,000 as a down payment, the Loan-to-Value would be 75%. The lower your LTV is the better.
Debt-to-Income Ratio – This ratio is also expressed as a percentage. It identifies the amount of consumer debt you carry each month as compared to your gross income. For example: If your income is $3,000 per month, and the monthly payments for your credit cards, auto loans or leases, alimony/child support total $1,000 per month, your Debt-to-Income Ratio would be read as 33%. All things being equal, a Debt-to-Income Ratio of 36% is considered average. For mortgage loan approvals, Debt-to-Income Ratio’s can as high as 55% depending on other factors of your financial profile. The lower the Debt-to-Income Ratio, the better.
Saturday, March 26, 2011
This applies to everyone—mortgage companies, auto dealerships, credit card companies, landlords, insurance agents, utilities—basically anyone who uses a credit score.
In addition to letting you know your credit score, you will receive an explanation of the range of the score and a graph on how your score compares to other consumer scores.
Here are some tips if you are not happy about your score:
1. Contact the creditor who sent you your score and ask how many points are needed to get the best rates. If they tell you 15 or 20, it’s fairly easy to get it increased. If it’s 100, you’ve got your work cut out for you.
2. If you’re planning on requesting credit in the future, order a credit report ahead of time and see what’s on it. The law allows you one free credit report every year. www.AnnualCreditReport.com . However, a credit score is NOT included so consider buying your credit score ahead of time - www.MyFico.com.
3. Learn what goes into a credit score and www.scoreinfo.org has an educational website with great explanations on what influences credit scores.
If you decide to buy your credit score, be careful NOT to accidently sign up for a credit monitoring service which would be billed to you on a monthly basis. You don’t need that right now—you just need to know your score.
Over 2/3 of consumers haven’t ordered their free credit report in the last 12 months. Even if you aren’t applying for credit—you need to know what’s on your report!
Luck may have a little chance in getting your house sell fast, but there is a good chance for quick selling when a house is prepared to sell. Pricing could be very important factor, anyhow there are other important factors that will have a great deal of effect on where your house is ready for quick sale or not.
1. Prepare yourself first to sell your house. You need to do your best to see the house as no longer your home, but just as a product to be marketed. This may take some work, particularly if you have been having that home for a number of years and has many good memories, but this is required if you want to maximize your potential.
2. Consider a qualified whole house inspection. An inspection would presumably expose any huge defects before they could cause future trouble with a potential buyer. It also is a signal to your buyers that you are a responsible and good seller.
3. Prepare the house. Stand back and look at your own house as impartially as possible. Would you purchase this home? Ask your friends and neighbors to do the same, asking them to be completely honest. Overlooking faults may cost you money! Get them fixed before you put the house on the real estate market.
4. Do what is essential to make your house be notable from the competition. Make sure that your house is fresher, cleaner, and much better maintained than other. Familiarize yourself with successful marketing and advertising techniques.
5. Remove most of the "impression", which you have crated on the house. Having just a few family pictures around is good, but if your house is a "place of worship" for your family, then walls full of personal pictures you need to take some steps to depersonalize it. Buyers must be able to imagine themselves in the house that is just impossible if everywhere they turn they stare at you!
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Start with reading the operations manual that comes with your vehicle. In it you’ll find all the manufacturers information on how to care for your vehicle. They built it. They know how it should run. Follow their recommendations.
The important systems within your vehicle that you’ll need to keep an eye on are the engine, drivetrain, cooling and ignition systems and the emissions control system. Each of these, if not cared for, will affect not only the fuel efficiency of your vehicle, but also the general health of your ride.
• Oil changes are necessary. Oil for your vehicles engine is the substance that allows the engine to work. It wears out and occasionally, needs to be changed. The general rule is to change it every 3,000 miles or 90 days. Which ever comes first. Neglect this aspect of maintenance at your own peril.
• Most vehicles today are fuel-injected. Be sure to change the air filter on these vehicles as a dirty filter will impede acceleration thus causing you to press the pedal harder and use more fuel. That said, many of us still drive vehicles with the “old time” carburetor attached to the top of the engine. In addition to keeping the air filter clean, you’ll need to keep an eye on the fuel filter. These need to be replaced occasionally.
• Keep your tires inflated at the prescribed level. The amount of gas that can be wasted (not to mention wear and tear on the tires) with under inflated tires is astonishing. In my Expedition, if I don’t keep the tires inflated to the correct PSI, I can almost watch my gas gauge drop just by driving to the store! Check the tire pressure monthly and keep them filled at the correct level.
A well maintained vehicle will save you money and provide you with years of dependable service. A poorly maintained vehicle will break down more often and can increase your maintenance costs by 15% or more. Just considering fuel mileage, that translates into an extra $10 per fill up if you have a 20 gallon fuel tank. That adds up to a lot of money!
Take care of your ride and it will take care of you!
Wednesday, March 9, 2011
A home is not just an investment; it’s a place to live. Does the location fit your lifestyle? Buying a home is a “social statement”. When you buy a big home, you are making a statement to family, friends, and neighbors. Ask yourself how big of a “social statement” can you afford? If you have a steady job, matching your income with your mortgage payment and expenses is a good thing. But if you are an entrepreneur or work on commission, it pays to be more conservative.
Do you see yourself living there? Sit in the dining & living room. Imagine yourself and your family gathering in the kitchen. Picture YOUR furniture in the rooms.
Is there room for all of your stuff? Check out the closets, storage space, garages, basement or sheds—or will you have to hold a garage sale before you move?
How big is the yard? While it looks good on paper that the yard is huge, ask yourself if you really want to maintain it on a regular basis?
Will someone else like it? While this is going to be your home, and you might live there forever, at some point in time, you (or your family) will probably sell it.
Some of the things you can ignore? Paint, carpeting, and kitchen appliances. These are items that can be easily replaced. Unless you see major problems with the electrical, plumbing, heating or structure, rely on the home inspection to find the problems.
Happy house hunting!
Dr. Kathleen Gurney, CEO Financial Psychology Corporation, says that not only do we have a physical self, and emotional self and a social self, we also have a “money/financial” self. In fact, she describes 9 distinct money personality types! Which one are you?
Achiever – Usually a college graduate—mostly married! They feel work and effort will pay off in the long run. They tend to distrust others’ honesty when it comes to money. Being the “take-charge” type, they have a strong need to control their money.
Entrepreneurs – Usually rank as the higher income earners, they tend to be workaholics who are not motivated by money alone. They use it as a scorecard to measure their success. They reward themselves with the best cars, homes, wines, and investing in the stock market is their favored strategy.
High Rollers – Money brings them instant power and recognition. They are creative, competitive, and extroverted—they work hard and play harder and money for them is an emotional release. They prefer to risk their assets rather than sit back and be bored by financial security.
Hunters – Usually highly educated, average to above-average income earners who make purchase decisions with their hearts rather than their heads. They have a strong work ethic, but attribute their success to “luck” versus ability and judgment. They lack confidence when it comes to making good decisions about money.
Money Masters – They are the number one wealth accumulators—even though they don’t earn the most money. They enjoy being involved in investing their money and enjoy what money brings them. They trust the recommendations of others and make sound investments.
Perfectionists – They are afraid of making a mistake—so they also avoid making decisions with their money. They consider every angle and find fault with almost all investment decisions. They do TRY to save, but often lack self-esteem when it comes to investing.
Producers – They work hard, desire more money, but they feel that they have difficulty in “getting ahead”. They don’t understand how the money system works and lack the confidence to make financial decisions—because they don’t take the time to understand them.
Optimists – They are often near retirement age—and the money they have saved has brought them peace of mind. Their money decisions may be impulsive, but not high risk. However, they are not highly involved with investments or taxes—which could cause stress later on.
Safety Players – They are average earners and most of their money goes into safe and secure investments. They miss opportunities for more financial growth by not taking calculated risks. They feel they are doing just fine—and are resistant to making any changes to their investment strategies.
Want to take a quiz? Google “Money Personality Quiz” and you’ll find several of them online.
Saturday, March 5, 2011
People are talking about the 30 year fixed mortgage "going away." Pundits like to imply that with the exit of Fannie/Freddie that mortgage term will disappear. First, IF Fannie/Freddie do go away they will be replaced with some other gov. entity. Second, the 30 year fixed fits extremely well with the American consumer AND mortgage lenders.
The Straight Up Answer: No need to worry. The 30 year fixed isn't going anywhere any time soon. This loan product is the number one asked for mortgage loan in America. It's here to stay.
Sunday, February 27, 2011
Currently, one may take a deduction for mortgage interest paid on their primary residence and second home, first mortgage and second mortgage/HELOC. The loan amount must be $1 million or less on the 1st mortgage and $100,000.00 or less on the second mortgage/HELOC.
President Obama wants to change the deduction to a maximum credit of up to $5,000.00. The loan limits would be lowered to $500,000.00 on first mortgage loans and be eliminated for second mortgage/HELOC loans.
The straight up explanation is - this will put more negative pressure on a real estate market which does not need any more negative pressure. With values dropping across the country and underwriting guidelines becoming stiffer, the American home buyer has lost a lot of incentive to purchase a house. This proposal, aimed at higher priced homes, does nothing to encourage somebody to buy in this price range, thereby inhibiting the market further.
Wednesday, February 9, 2011
Location, Location, Location – This famous mantra has always been, and will always be, the single best piece of advice one can receive when buying real estate. How close is the house to your work? What are the road conditions? What are the developer’s plans for improvement? What are the long-range plans for the area? Answers to these questions are very important factors when you decide to put an offer on a home.
Demographics - If your family has young children, you’re going to be looking for a “kid friendly” neighborhood. On the other hand, if you’re empty-nesters, are there other couples around your age? It’s vital to identify the demographics of your future neighborhood.
Night and Day Difference - The feel of a neighborhood and can change significantly after the sun goes down. Drive by at night to see what type of activity is going on. Check it out on different days of the week, especially Friday and Saturday nights. You may not want to move into a neighborhood that turns into a disco after dark.
Proximity to Services – How close and convenient are the businesses you patronize? How easy is it to get to these companies? Will you have to cross busy streets and intersections or make U-turns to get to them? Find out what the walk score is. This will give you a great amount of information on the area surrounding your next home.
Talk to Neighbors – Meeting your prospective new neighbors will allow you to evaluate and judge whether you’ll want to live next door to them. I once lived next door to a guy who turned out to be a weekend motorcycle warrior. Every Saturday morning, spring through fall, he’d start his Harley at 7:30 a.m. and let it “warm up” for about 10 minutes before blasting off. Talking to neighbors may help you avoid a situation like this.
Crime Statistics – It’s always a good idea to check with the Police to get an idea of the criminal activity in the neighborhood and surrounding area. Most municipalities and/or local newspapers have websites you can search for information on “undesirables” who reside in the neighborhood you’re considering. It’s prudent to get as much info as possible on this topic
You’ll be pleased you took the time to look at these important, but often overlooked aspects of buying a home. These tips may save you from getting into a disastrous housing situation, and keep you happy in your home for many years to come.
Greg Parrish is a Mortgage Loan Officer with WR Starkey Mortgage, LLP(CO LMB #100032297 NMLS #304686) located in the Denver Tech Center in Denver, Colorado. He specializes in FHA, VA, and Conventional home loans. For more information, call 303.808.3407
The views expressed here are those of the author and do not necessarily reflect the views of WRSM. WR Starkey Mortgage CO LMB #2146 6025 S Quebec Street Suite 110, Centennial CO 80111. To check the status of a Mortgage Loan Originators Colorado State License, please go to: http://www.dora.state.co.us/real-estate/mortgagebrokerregistration.htm