Think Outside the Box

After enduring a year of fluctuating interest rates and mortgage industry trends, current and potential homeowners are opting to think outside the box, the 'big box' that is. They are relying on their local lending agent, instead of online big box lenders, to provide the best mortgage products and interest rates to fit their needs.

Over the next year, industry experts predict that each home purchase and mortgage arrangement will be as unique as the people purchasing the home. Home buyers are seeking out their local mortgage brokers in order to ensure they obtain a variety of lending options that will fit their lifestyle and budget. These unique buying and lending options not only allow home buyers to take advantage of the rates and products that match their current and future financial situations, but it also provides a level of flexibility that might not be available through an online-only lender.

Below are a few advantages to consider when purchasing loans from your local lending agent:

Competitive Rates
A couple of years ago interest rates were at an all time low, meaning home buyers could receive the best loan rates from just about anyone in the mortgage business. Now that local and big box lending agents share the same pool of wholesale lenders, both are able to offer the same mortgage products and rates. But, unlike big box brokers, local brokers have the ability to offer an additional set of geographic specific lending options which may better fit a borrower's niche market.

Easy Access
In order to ensure a speedy lending process, it is important to work with a broker who is accessible. By using a local mortgage broker instead of an online big box lending agent you can ensure you have personal first-hand access to the people underwriting your loan. Having the ability to phone or meet your broker and underwriter will help keep your loan on track towards quick approval.

Customer Service
Home buyers often find it comforting to know that their broker can meet with them in person as they guide them through one of the largest and most important purchases of their lives. This level of personalization allows the local broker to accurately evaluate the borrower's financial situation and provide superior loan options and customer service. A local mortgage broker's knowledge of the surrounding real estate and their dedication to offering flexible, innovative loan and payment options ensure you receive a loan that fits your specific needs.

Understand the Market –Shop With Confidence

Rates go up rates go down. In case you haven't been paying attention, the market has been very volatile lately. Every day it seems as if it's an absolute crapshoot as to where rates will be for that day. The good news is that rates are still low by historical standards.

Over time, small changes can add up to thousands of dollars so it's important to have at least a basic understanding of what drives interest rates and how the market works. My goal for my clients is that they know the answers to some basic questions so that they can understand how the market works and they can be armed with the right questions when they go shop for a loan. Unlike a lot of my competition I actually encourage shopping.

Here are some of the questions we give our clients:

1) What are mortgage interest rates based on?
The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.

2) What is the next Economic Report or event that could cause interest rate movement?
A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, visit www.suewoodard.com and hit the green MMG Weekly banner - this is a copy of our weekly newsletter, let us know if you want to be added to my weekly distribution list.

3) When Bernanke and the Fed "change rates", what does this mean. and what impact does this have on mortgage interest rates?
The answer may surprise you. When the Fed makes a move, they can change a rate called the "Fed Funds Rate" or "Discount Rate". These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us a call.

4) Do you have access to live, real time, mortgage bond quotes?
If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday's newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!

Be smart... Ask questions. Get answers!
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life. but we do this every single day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest. www.jeffnunley.com    

America's Balance Sheet Moving Again as House Equity Falls – Todd Ballenger

The net worth of U.S. households hit a record high $58.6 trillion in the third quarter of 2007 according to the Fed's Flow of Funds report. This is surprising, when you consider that net equity in homes declined in the third quarter for the first time in 16 years. Growth is at further risk in the current quarter. We often speak about managing assets and liabilities and how they tend to move in different uncorrelated cycles.  As house prices drop, growth in stock and mutual fund holdings drove the gain in wealth this past quarter for most Americans.

Net Wealth

Borrowing grew 7.9% from last year - the slowest growth in borrowing since the start of 2001.

Asset grew 7.4% last year. While borrowing is growing faster than assets, the level of assets is larger than borrowing, so there was still a balance sheet increase in wealth.

Household assets continued to grow at a rate of about $5 trillion per year.  Growth in the total value of stock and mutual fund holdings by consumers increased by more than the net equity in real estate for the fourth consecutive quarter and by the largest amount since the first quarter of 2004.

Shifting Demand For Money

Consumers are shifting the nature of their borrowing. As standards have tightend for mortgages, overall borrowing by consumers using credit grew by over a percentage point over the last year to 5.3%. If consumer continue this trend of moving to harder money, they'll increase their debt and lose tax benefits associated with most mortgage borrowing, further creating their own version of the current credit crunch.

Real Wealth May Drop

Housing wealth is likely to decline further. Many believe that the OFHEO 1.8% growth for the year through the third quarter is off, as they use lower priced homes and exclude jumbo properties, which according to NAR and Case-Shiller studies were much lower in the same quarter.

Time To Think Different

Equities are expected to slow in the shorter term, and a decrease in real house values will continue to put pressure on cash flow and spending habits as loan reset to higher interest rates.  A shift is possible as people see housing stall, investment slow, and find the only way to really impact their savings may be to actually save more (meaning spend less).  While this isn't appealing to most, it may be a simple fact of the forces that are lining up... and as we say the timing for good financial education of spending and savings habits around the consumer assets and liabilities will be more valuable than ever.

 

Annual Mortgage Reviews Bring Borrowers Closer to Achieving Financial Goals

 

Yearly reviews are a great way to keep on track with your financial goals. You're probably already meeting with your financial advisor and other asset manager for quarterly or annual reviews, and you should do the same with your Mortgage Planner as well. An annual mortgage check-up is an ideal way to make sure your mortgage is still having the maximum positive impact on your overall financial plan.

 

A lot can happen in one year. The market can take turns that can open up new opportunities, such as reduced interest rates, new loan products or changes in home values. Furthermore, your personal and financial situation could be mildly to radically different than it was just 12 months prior. Perhaps one or more of the income earners got a raise or lost a job. Maybe you received an inheritance. Even a minor, one-year change in one of your kids' college plans could impact your financial situation in a way that would benefit from an adjustment in your mortgage strategy.

 

Periodic reviews serve several purposes. First, they establish a consistent path toward achieving your financial goals. Secondly, they ensure that you stay on track with your goals. Sometimes plans need minor adjustments, but without the knowledge that comes from a thorough evaluation, those minor adjustments may go unnoticed. Often, by the time an adjustment becomes apparent, you may have already lost valuable time and/or resources that could have been spared with a few minor modifications along the way. Finally, periodic reviews help to keep you accountable toward your commitment to achieve your objectives. Without accountability, it's very easy to let your savings and investment actions fall by the wayside, especially when unexpected expenses arise. Knowing that you'll be discussing your action steps will help to keep you committed to your goals.

 

Consider scheduling a periodic review with your Mortgage Planner in conjunction with your asset manager's review. In addition to saving time, you'll also gain the advantage of your own personal management team for your financial asset-building program.

 

Remember that getting clarity on your financial situation is never a waste of time. If you find that your current financing is more desirable than the financing that is available in today's market, you'll know that your Mortgage Planner did a great job advising you last time. If you find that your changing circumstances have dictated that a new loan will better suit your new situation, your Mortgage Planner can bring you one step closer to achieving your financial goals. Call us for a free mortgage planning review.

 

 

Know Thy Credit Score

 

Benjamin Franklin once said "credit is

money". Although he was referring to actually

having credit with a store to purchase things, his

quote still rings true today. Whether renting a new

apartment, applying for a credit card, a mortgage

or even homeowners insurance (yes, homeowner's

insurance), your credit score will determine the

particular interest rate or premium you are

quoted. In essence it has become the filter many

industries use to decide if they want to do

business with you and at what price. This article

explains what a credit score is, what it is based

on, and how it should be maintained.

The most common credit score is the FICO

score, created by the Fair Isaac Corporation. It is

the standard for the mortgage industry as well as

many others, and it can range from a low of 350

to a high of 850. The higher the score, the lower

the interest rate you will be offered, potentially

saving you hundreds if not thousands of dollars a

year. You want to remain above 720. About half of

the country maintains a score above this magic

number. As you begin to move below this number,

interest rates may begin to rise. Fall below 500

and you may not be able to take out a mortgage

even if you currently have one. How the score is

determined is one of the most common questions

we get from clients trying to improve their credit

score? While we do not know the exact formulas

used by the three biggest credit agencies using

FICO's standard of scoring, here is what we do

know.

There are five key elements that make

up your score

Your payment history, or how you pay your

bills, makes up 35% of your score. How much you

owe is 30% and how long you have had credit is

another 15%. The type of credit you have and any

new credit issued make up 10% each. Factors that

are NOT considered in this formula are your

income, savings, age, race, geographic location or

marital status. Basically the score indicates your

track record of making payments to companies

you owe money to including your utility bills.

Although it seems it should be an exact formula it

is more of an art form in knowing what affects

each component.

The largest factor is "do you pay your bills on

time". While it is best to always pay your bills on

or before the date that they are due, paying a bill

a few days late and incurring a late charge will not

necessarily go on your credit report. Having a

"late" on your credit report means that the bill is

30 days or more past its due date. The more

"lates" you have, the lower your score will go. If

you have a bill that is 60, 90 or even 120 days

late your score will rapidly decrease. But even if

you already have a "late" on your report, the

more time you gain between that date and the

current date the more your score will improve.

The mortgage industry has two major thresholds

when looking at any late payments on your

report: Are they older than 12 months and older

than 24 months. Each milestone will provide you

with better financing solutions as your late

payments fade with time. In addition, a mortgage

© 2007 Forgotten Equity. All rights reserved.

"late" is much more serious than a credit card

"late". So if it comes down to a choice "which bill

should I pay?" always choose your mortgage

payment and never miss paying this one. The

consequences are far too great.

How much you owe combined with what types

of credit you have available, make up the "art"

side of the calculation. You might think that if you

owe less you will have a better score.

Unfortunately that is not always true. This portion

of your score is determined by a delicate 3-way

dance between the types (mortgage, car loans

and credit cards), how much you owe, and how

much you have available to you. Having too many

credit cards can be a negative and so can having

only one. Having a credit card with a large limit

can be a good thing, as long as you are not near

that limit. Same with a second mortgage or a

home equity line of credit. When you have lots of

credit available you want to make sure you "use"

that credit but do not maintain a high balance.

The closer your balance is to the maximum credit

available to you, the lower your score will go.

The last two components of your score are the

length of your history and new accounts. Of

course the longer you have a credit history the

longer your track record will be, but another

important factor is how long you have had a

particular account. The longer an account is open

and active the better your score will be. Opening

up a bunch of new accounts and playing the credit

card-switching balances game does not look good.

So now you know what a FICO score is and how it

is calculated. The big question is now: how do you

maintain it?

As the saying goes, most people don't plan to

fail, they simply fail to plan. It happens all too

often in our business, but if clients regularly

monitored their credit scores we would be able to

save them thousands of dollars on their

mortgages. What this means is, if you are

planning to buy a home, don't just go look at

houses, make an offer and then get a mortgage.

You may not like what you are offered as a result

of your FICO score. Our suggestion is to plan for

this event. The same holds true if you are thinking

about refinancing.

Improving your credit score is kind of

like getting ready to run a marathon

You can't just sign up today and expect to run

tomorrow. If you have a poor credit history or if

there is inaccurate information on your report it

can take months to repair and correct. We have a

saying that we have been using years, Make Life

Happen! Don't sit back and let it happen to you.

Being proactive with your credit scores (like many

other areas of your life) will improve the results

and your experiences. Some of you reading this

will be thinking you don't have to worry about this

because you have never missed a payment and

have excellent credit. Well, so thought a client

when we were in the process of obtaining a loan

for him.

This client, we will call Mark, was referred to us

by an attorney and was only 30 days away from

his purchase closing date. Mark advised us that

his credit was perfect. However, when we ran it as

part of his application, it turned out that it was

not. One of the student loans that Mark co-signed

on behalf of his daughter indicated several missed

payments despite the fact she was still in school

and the first payment was not due for another 2

years. We still got the mortgage approved at a

rate and payment Mark could live with but had

Mark proactively monitored his credit scores he

would have had a better interest rate. Mark did

contact the student loan provider and they agreed

that it was a mistake but the damage was done. It

took three months to reflect the corrected

information on his report, too late to affect that

mortgage.

In that example "life happened to Mark" and

had he been proactive about his credit score he

would have been better off. This is not a hard

thing to do – it is just like going to the gym, you

have to do it regularly. While we are not

suggesting that you monitor your scores daily or

even weekly, we are suggesting that you institute

a bi-annual credit review to ensure your credit is

the best it can be so you are not caught off guard

like Mark.

If you would like to read more in-depth

information about what you need to know to take

control of your finances simply go to

www.MyFICO.com and download a FREE 20-page

booklet entitled "Understanding Your FICO Score".

They also have a paid service to alert you anytime

there is a change to your score and/or credit

history. In today's world of stolen identity this

could prove to be a prudent investment. Not only

will you save money by ensuring you have good

credit but you may be able to prevent any

fraudulent charges against your name as well as

the accruing interest and legal fees should you be

an unfortunate victim. You can also obtain free

credit report by visiting

www.annualcreditreport.com. At the very least,

monitor your credit twice a year and you will be

happy you did. Make Life Happen!

“Buy When There’s Blood in the Streets”—Baron Rothchild

Over the next 2 years there will be great opportunities to invest in real estate for those people positioned to take advantage of this down turn. The time to buy is when everyone is wants to or is "forced" to sell. Here are two great opportunities to learn more about if you're serious about investing in real estate.

Number 1: Short Sales—A Win/Win/Win situation
A short sale involves a complex transaction on a property where the owner is in default on the loan payments and has received a Notice of Default, and where the market value of the property is less than the amount owed. The 'short' refers to obtaining a discount on one or more of the notes on the property. Investors will usually turn the property quickly for a nice profit.

There are many factors to consider in a short sale even to determine whether it's a deal worth pursuing. The investor must understand all title issues, have complete knowledge of all outstanding notes and liens against the property, and have a good sense of what the Brokers Price Opinion is likely to be. Even after finding a good candidate, the investor needs to be knowledgeable in negotiations, in how to put together a complete and professional offer packet for the banks and in how to obtain the best possible BPO. As well, it is always best to have buyers lined up before hand.

We've selected this strategy as one of our top two because there are so many opportunities in today's market. Many homeowners are in serious trouble out there, with some researchers estimating that foreclosure sales may account for up to 10% of the properties in many markets in California. The recent flat and down market combined with too many 100% financing deals with adjustable rate mortgages has created an opportunity for savvy investors. A typical short sale in California can net the investor $25,000-$40,000.

If you don't know EXACTLY what you are doing, you should not be entering this arena. However, if you DO have the knowledge to systematize this strategy, it can be lucrative in today's market, not to mention it's a win/win/win situation: homeowners may be able to prevent foreclosure and can move on with their lives, the bank gets the bad debt off their books, and YOU pocket a nice piece of change!

Number 2: Multi-tenant—The Opportunity Behind the Opportunity
If you know what you're doing, opportunities to cash in on the current market are everywhere. Case in point is the multi-tenant market, or what we see as the opportunity behind the short sales opportunity.
Think about all those people facing foreclosure leaving their homes to become renters…and rents are lagging far behind property values…

So, will there be upward pressure on the rental market over the next few years? We think so. Where would you go with your investments to take advantage of this situation? Perhaps it's time to consider multi-tenant situations. Remember, though, that you are now entering the world of commercial real estate. These are the higher stakes tables. Before you sit down at one of them, you really need to have 'game.' If you'd like more information on how to take advantage of these opportunities contact us.

The 212 Degree Experience

"At 211 degrees water is hot. At 212 degrees, it boils. And with boiling water, comes steam. And steam can power a locomotive."

    -212 The Extra Degree by Sam Parker and Mac Anderson

This past week I had the opportunity to go down to Palms Springs to an event named "Sales Mastery". The focus of this event was all in going that extra degree in life, business and relationships. I believe that once we embrace this truth we can accomplish amazing things. It was great to spend three days with the top mortgage professionals from all over the country all of us looking to improve our business and our life.

Out of nearly 250,000 people who call themselves loan officers only 1400 people attended. Sadly, I think this says a lot about our professions. Just a short two years ago there were over 450,000 people who called themselves "loan officers". That number has dropped significantly but even with that drop in numbers 60% of all loan officers have less than 5 yrs experience and have never experienced a down real estate market. What this tells me is that today, more than ever it's crucial to work with an experienced loan professional. I feel fortunate to say that here at Evergreen Pacific I am the newest Mortgage Advisor and still have nearly 13 years with the company.

Over the next several months we will be implementing the 212 philosophy into our business. Good things will be coming down as a result of the new outrageously high goal we are setting for our customer experience. During the event I had the opportunity to meet Horce Schultze. Mr. Schultze is one of the founders of the Ritz-Carlton luxury hotel chain. In case you don't know much about his company the Ritz is considered to be the best luxury hotel chain bar none. They've earned that distinction by offering customer service that makes any other business you have ever dealt with look mediocre at best. They work outrageously hard every single day to exceed the expectations of their visitors and have put systems in place to make that happen. It is my new passion to see that Evergreen is known by it's clients and the community to offer that same "Ritz-Carlton experience to its clients. Watch over the next several months and you'll see what I mean.