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Tuesday, December 2, 2014

The value of the appraisal

The value of the Appraisal and why you the consumer need it. As much as we love Zillow and it z -estiment of value, we never count on those values to make a deal. The Appraisal gives you an unbiased opinion of the property value. The key is you can never over pay for a property with an Appraisal! Although with some negotiation you may purchase a property with equity. The Appraisal helps the lender to determine how much money you will receive in a refinance.

Set To Go Loans  have some lenders who will use other lenders Appraisal, although it is not uncommon for lenders to refuse to use them , simply because they want to make sure that the value is really there. Don't take it personal, really its strictly business and they must protect their investment!

An Appraisal can only be used within the first six months from the date it was issued. So my number one question asked to me is why? So here is the skinny, when you upgraded your kitchen, added new doors and windows to your home. It was worth $200,000 and the upgrades made it worth $250,000. So is it really fair to you to under or overvalue the property. Now after 6 months you can use the appraisal but you have to have it re-certified. Re-certifying an Appraisal is when the original Appraiser updates the original Appraisal.

There are two ways to evaluate the value of your property the first is the Appraisal. There are basically 2 types of Appraisals. 1st is an As Is Appraisal, which is based strictly on the value of the home as it currently sits. 2nd is a ARV or After Repair Value which gives an evaluation of the property after future improvements will be made to the home.

Many lenders require that the consumer pay for their own Appraisal. The question that I often receive from customers is can you roll the Appraisal fee with the loan? The answer is no, and here is why. No deal is guaranteed. An Appraisal is  protocol to helping the deal close and anything can make a deal  loan fall through. So to expect a lender to pay for your Appraisal is out of the question.

Set To Go Loans has lenders that uses Appraisals and BPO,  which helps the consumer because  the BPO price is cheaper than an Appraisal.The  BPO is a Broker Price Opinion.

The Appraisal is completed by a license state agent and there job is to value the property, take pictures, find comps and give a true value based on the information that he received? While a BPO  is  performed by a licensed Real Estate Agent.

Many consumers orders their own  appraisal to get there best bang for the buck, although they soon find out that no lender will accept it. because it could have been obtained at arms length. An Arms Length Transaction is when an Agent motivates an appraiser to gives a higher value to a property than its actually worth?

Thursday, November 27, 2014

Credit The Good, The Bad and the Ugly

The one thing that I have learned about credit is from the work that I do, and it is all factored on who you are and when you pay your bills. So there are basically six categories of people and how they pay their bills.
  1. The first is the person with an elite credit score. He has a 700 to 800 credit score he manages his bills like a science.  He keeps a list of what is spent, when he spent it and why he spent. They also qualify for the best interest rate and the best programs.
  2. This is the 2nd tier group they have a credit score between 650 to 700 credit score. They pay there bills like clock work. Even though the second tier credit group pays his bills like the tier one group, they have a little more debt and how its managed determines why there credit score is lower. They live to be ahead of the curve but in some cases they may be late sending in a payment sometimes.
  3. The 3rd tier group is some what deceiving because the score is lower 600 to 575 but they can buy anything they want like the 1st tier group. The difference with this group is they are extended on credit cards and there bills. They help there son, daughter, sister and brother and on paper you wonder how are they making the payments. The reality of the 3rd tier group is they can qualify to buy anything but the interest rate that they qualify for is the 7 to 9% interest rate. So regardless of there intent to pay off the bills, they tend to live extended.
  4. The 4th tier group is the group with good intentions but Murphy Law is always lurking close by. Their credit score is 570 to 540, and they can buy but it always falls to a last minute discussion before the final approval is given. This person as priority set in there ind on how they will pay the bill when they are getting credit but forgets when its time to pay the bill of the credit priority that they said. So as they look at life they are always living for the moment. They credit card is over almost to the limit and they are one moment away from disaster.
  5. example of bad credit
  6. The 5th tier group is the ones that don't pay anyone. They scores are 535 to 400. They start with the great intention when they get the cell phone, credit card or car. Yet they never seem to hold up there obligation. When you look at there credit report you see charge off, collections and alot of petty bills that they never pay. So here is something that you have to remember with the 5th tier of people, there children usually have good credit???
  7. The 6th tier group is the people who buy everything with cash and they will have no credit score.We call those people ghost because they don't really exist.

So the number#1 question that I have about credit, that consumers ask me is "how can I improve my credit score"? So if you want to make your credit score rise, and make significant leaps. You need to live like this, first never let your credit card balance go over 45% half of your max credit. An example (your credit limit is $1,000) so you never want your balance to go over $450 dollars. If you don't have a credit card, get one! Number #2 is use your credit card to buy your gas and at the end of the month pay the balance down to just a few dollars. (REMEMBER CREDIT IS BASED ON YOUR ABILITY TO STAY IN DEBT AND CONTINUE TO PAY YOUR BILLS ON TIME) One thing you must consider is that if you payoff a car loan or mortgage your credit score will drop. Not a drastic drop but a possibility of 50 to 80 points.

One of the ugly things in life if you are late on your payments as indicated below it effects your credit scores and it will gradually drop your score.

Think of your credit like stairs you have to put effort to climb to the top, although when you are going down its always easier to go down than to climb.

This Legend is one of the factors that help determine what your credit score will be.

The big three in credit is Experian, Transunion and Equifax. These are credit reporting agency that tell you what your credit score is. So many people think that credit is the ability to stay out of debt. In reality credit is the ability to stay in debt and pay your bills on time.
This is not a science of credit, but just my interpretation based on my experience in the mortgage world. If you are trying to repair 

Sunday, November 23, 2014

Mortgage 101 the Value of the 1003

When I first thought about doing the Mortgage 101, I would talk myself out of making posts just because I felt like everyone knows that. Now there has been multiple occasions that I have found myself explaining the 1003, or as we call it in the mortgage world, a Uniform Residential Loan Application. My Goal is to make it easier for the average consumer. You see the 1003 is a road map of the customer and it gives the loan officer all the pertinent information to help the customer to get a mortgage loan. When I first started as a loan officer I would call customers and fill out the 1003 on the phone and mail it to the customer to sign. Although after I started doing commercial loans it changed everything. Although with a Commercial Loan the 1003 covers 80% of the information needed, we also need 2 years tax returns, a profit and loss statement and a Executive Summary, depending on what type of project it is.Investment loans are more labor intense because of the amount of paper work involved.
information about the Uniform Residential Loan Application and I found out maybe everyone does not know that!... My rational was wanting to break down sections of

 The property Information and Purpose of loan is important because it tells where the property is located and a legal description and year it was built. .  The 1003 has tells the Lender if its a purchase or refinance. When you bought it and what you bought it for. It also tells how the property will be titled and how the title will be held.

BORROWER INFORMATION tells who you are lending to and where they are employed and how long they have been with that company. Now this is a important piece of information, you must show a 2 years of residency. You must also show that you have a work history of 2 years in the same field.
The first page of the 1003 is the most intense because of the amount of information that is needed . I always believe it better to give to much information than not enough. The more time spent chasing information the less likely that you are going to have a fast and speedy closing. 
Monthly income always seems to be a walk in the park for most people. Although that Asset and Liabilities section where most customer tend to leave off.

So after you filled out 2 or 3 of these 1003 it becomes easy, plus now you have a place that you can refer your customer so that it can help them. This is really a start and I am feeling out my readers to see if they would like me to continue more information on my site. I have been in the mortgage industry since 2002. Most of my knowledge is from trial by fire. So I learned the business, so I could be in business

Saturday, November 22, 2014

100% financing, does it really exist?

100% financing, does it really exist? Yes and no. So too begin why I even choose this subject. Around August or September of 2014 I had been hearing this radio advertisement stating that they could show consumer how to purchase property with no money down. So 3 to 4 times monthly I get calls from new investors who want to know the qualification for obtaining a hard money loan. I am figuring that this is people who have attended this seminar and now they are ready to try out what they learned.

So to begin if you don't have any money, who do you expect to lend to you? Second if you have bad credit, that is usually grounds for a turn down. Now let me put clarity on a couple of things that the new investors love telling me. "I found this property for $20,000 and after the ARV the property will be worth $150,000". So as I listened as they tell me the scenario. It does not take long to figure out that he did not have a clue! So I asked him what is ARV, his answer was " I don't know". So with a deep sigh I explained what ARV is. ARV means After Repair Value. So who ever gives the seminars really stress that they can get a hard money, based on the ARV. So my next question is do you know what a Hard Money Loan is. In so many words no, they don't have a clue. So to explain a hard money loan I must first explain what a Conventional Loan is. A Conventional Loan is a loan that is based on ICE. Okay ICE is Income Credit and Equity. So lenders determine if they will loan you money based on your ICE. So now a Hard Money is usually based off of the equity in a property that you own, not one that you are trying to purchase! Although after the housing crash in 2007 it changed the way lenders lend money. Now Hard Money Lenders want to see credit with equity. Credit can kill a deal if its horrible (550 or lower). So the difference between a Hard Money Loan and a Conventional Loan is that what you need to qualify for a loan. With a Hard Money Loan it is generally Equity and Credit.

Now an Asset Based loan is a loan that is based on the equity in the property. If you own a property free and clear and you get a loan to pull equity from the property, that is a Asset Based Loan! Now because you are buying a property with equity. Please remember that is not your equity, its the sellers equity, until you buy it!

Now lets get back to the Myth of the 100% financing. 10 years ago it did exist, but in this day and time, no it does not! Nothing is more frustrating to me than someone who blew smoke and filled people heads with the ideal that they can buy property with no money down. "REALLY". Let me break it down a little more. If a lender did loan you $100,000 dollars to fix and flip a property and it did not cost you 1 cent. So what if you are working on the property and a problem pops up that is going to cost you $20,000 more than what the Lender Loaned to you, what are you going to do? You are vested in the deal because you are overseeing the project. Yet you don't have credit and no money, and believe it or not this is the easiest loan to walk away from. Now imagine that you walked away from the loan, and the lender is stuck with the property for $100,000 that you were suppose to rehab. So the money that they had is now sitting in real estate which is waiting to be sold.

Now this is the reality that everyone must face, all lenders want you invested in a deal. Conventional lenders prefer around 10 to 20%. Hard Money lenders  prefer 30 to 40%. When you are invested in a deal, nobody wants to loose there money. So they are going to fight harder to not let the deal fall. So here is something else if they loan you $60,000 dollars on a property that is worth $150,000 they have a better opportunity to come out smelling like a rose.

So I do have some lenders that will loan money on ARV but they have stipulations that you must qualify under or they will not do the loan. 1st and most important credit score must be 700. 2nd area specific. Not all states qualify! I have several lenders that will not lend in Cook County (Chicago, Ill) Cayuga County (Cleveland, OH) and Wayne County (Detroit, MI). Simply because to Foreclose in these states is a process that takes years to complete ( 2 to 3). Who wants to have a few Hundred thousand dollars tied up in property that you can not touch?

Even if a Hard Money Lender want to lend you money for the ARV you still have to pay closing cost, and those are not cheap!

So in reality no there is no such thing as 100% financing, so when you hear that talk, go the other way.

Saturday, October 18, 2014

The Mortgage Professional

I have been a mortgage professional since 2002 when I left selling cars. I decided to write about this simply because like car sales men, mortgage professionals are so miss-understood. Everything about being a mortgage professional involves skill although you would never know it from the lack of training that most
companies give them. I sold cars from 1999 until 2002 and I probably would have still being selling cars if 9/11 had not have happened. The market changed and the impact was severe! I went from making $5,000 a month to a little over $3,000. I realized that change needed to come and I made my move.

So my epiphany came to me that I would be a loan officer simply because I knew I was a good salesman. I will never forget my first day with Heartland Home Finance and my manager Michael gave me a phone book and a stack of 1003 (uniform residential loan application) and said start making calls. I had developed quite a data base from car sales and I started calling my old customers that I had sold cars to. My first month was so intense, every phone application was a roller coaster ride of now I am going to start making money. I started in May of 2002 and I did not get my first paycheck until July of 2002 for $6,000. If you ever decide to adventure into this business please learn the term pipe line. Pipe line is loan apps that you have taken and hope to close. So the longer that I stayed in the business I started finding out just cause you took a loan application does not mean that the loan is going to close and you will get paid! Mortgage professionals are 100% commission, which means that if they do not close there loan they are not going to get paid! As many of us have learned with the Mortgage Industry there is always an issue... Here is a little food for thought, if you put 10 applications in your pipeline you will be luck if you close 2 or 3 of them, that is reality! My first issue was credit, bad credit no loan. So you have to keep chasing them credit applications. Here is another term that if you here it, its the kiss of death! A fair appraisal, a fair appraisal means that the house is bad almost a shack and at that time no lender would touch that kind of deal.  Damn there goes 2 of those applications. I made some money at Heartland, but what I really gained from Heartland was understanding. I started learning the business from trial by fire.

Heartland was my base, but Worldwide Mortgage was my ignition. Now when I took credit application I knew what I was looking for. Then I start growing I started with Worldwide Mortgage in September of 2004 and I close 2 loans in December 2004. Then in January of 2005 I close 5 loans and I started rolling. I created a flyer that was very catchy that simply said call Kenneth. It worked! I realize finding a niche is key in this business and that was what inspire me to start focusing on BK buyouts. A bk buyout is when someone is in a chapter 13 and you use there property to refinance and pay the bankruptcy off. I started mailing out 1,000 mailers a week. I hired 3 people and we were closing 5 to 10 loans a month. Worldwide had allowed me to grow into a season veteran.

As a seasoned professional and creative thinker I was inspired to write this article simply because a customer that I worked with for 2 years finally closed there loan and was honored enough to tell the world that I helped them! Having diligence and perseverance coupled with the desire to never give up allowed me the opportunity to close this loan. Success in this business does not come in seconds but with hours of preparation! Friendship was a starter church meaning that they were in existence for less than 3 years and no bank or lending institution would finance them. They were producing some incredible numbers and was growing but because they had no history they had no chance to get financed.

I live for the opportunity when someone calls me with "can you help me with this loan"? In most cases I Can!

Tuesday, October 6, 2009

Why the Mortgage Industry

The mortgage industry is one where you literally have to learn from scratch... There is no easy remedy to learn this business. First you either have to spend several hundred dollars to learn from a textbook, or you have to get in and get your feet wet, while learning from your mistakes to get good. I suppose if you asked several of the best Brokers in the world, they would tell you that's how they learned! Lets be be honest thousands of people have a way to do it, but does it work? Just so you understand the mortgage industry is tough, the mortgage industry has one of the highest turnover rate. Plus the job is 100% commission, that means if you don't close a loan you don't get paid!

Now if you close 2 to 4 loans a month when you first get started that is good, although I have seen several people in the industry that don't close that many period. So why would they stay in the business? Hope, some people believe that they will close 1 or 2 this time. In reality they may close 1 but if you are only in the business to make 1 to 3 thousand dollars a month don't waste you time. If you want to make unlimited money(5 to 20,000) in this business then you have come to the right business.

I have closed over 150 loans in one year. Don't let me blow smoke, it was not easy to make make money at this job. To take things to a different level you may have to wait 1 month to get your first paycheck! Why you ask, because most mortgage company's pay every 2 weeks and if you loan has not closed by the deadline day you will have to wait 2 more weeks matters even more intense if you have 10 loans in you pipe line, maybe 3 or 4 will close.

I have been working with Caylx and it is all that you need to help you climb to your top. My search for help material with Caylx has not provided many Options. The Objective of the site will help you learn Caylx in a intermediate to senior level. The use of Camstudio will allow you to see the action to produce the desired results.
Also I have written a book with search techniques to help you build a database of leads to help you make more income. If you are interested in finding unlimited mortgage leads, let me know and my Loan Orginator guide for searching for Refi and Purchase Leads

Tuesday, August 19, 2008

How the Housing Law Affects Reverse Mortgages

The housing bill signed by President Bush on July 30 raises the amount seniors can borrow using federally backed reverse mortgages and lowers the cost of getting the cash. But aging experts say you should still be cautious before spending down your home equity.
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Here's how the new law affects reverse mortgages and what you still need to be wary of.
Instant cash—with strings. A reverse mortgage is a loan against your home if you're generally age 62 and over that doesn't have to be paid back as long as you live in that house. Tapping home equity to finance your golden years is growing in popularity, with 107,367 reverse-mortgage loans made in fiscal year 2007, up from 6,600 loans in 2000, but they still account for only about 1 percent of older households, according to the AARP. After you pay a variety of fees on the loan, you can get a lump sum, monthly payments, a credit line, or a combination of these options based on the value of your house. If the home is sold, the loan must be repaid with the proceeds, and any equity that remains after that is distributed to the borrower.
Know the limits. Most reverse mortgages are home equity conversion mortgages, which are backed by the Federal Housing Administration, so you'll still get your money even if the lender goes under. (The other two types are private loans and single-purpose reverse mortgages offered by some state and local government agencies and nonprofit organizations.) FHA limits the amount you can borrow with a HECM, which ranges from $200,160 to $362,790, depending on the county you live in. The new housing law, which will take approximately 60 to 90 days to implement, creates a single national loan limit of $417,000 that can increase to as much as $625,500 in high-cost areas.
Avoid fees. High cost is the reason 63 percent of reverse-mortgage shoppers ultimately decided against applying for the loan, according to a December 2007 AARP survey. And 69 percent of actual borrowers agreed that costs were high. The origination fees lenders can charge are currently capped at 2 percent of your home's value or the county lending limit, whichever is lower. The housing bill recently reduced the maximum fee to 2 percent on the initial $200,000 of the home's value and 1 percent on the balance thereafter, with a cap of $6,000. But some lenders charge less, so it can pay to shop around and negotiate on the fees charged. Also, bargain on closing costs, service fees, mortgage insurance premiums, and interest rates.
Get counseling. In order to qualify for a HECM, you must discuss the loan with a loan counselor employed by a nonprofit or public agency approved by the U.S. Department of Housing and Urban Development. "You should take the counselor very seriously and be very forthcoming with the counselor so that the counselor can help you do a thorough job of making sure that a reverse mortgage is really the answer for you," says Peter Bell, president of the National Reverse Mortgage Lenders Association, an organization that represents the reverse-mortgage industry. Barbara Stucki, director of home equity initiatives for the National Council on Aging, recommends spending an hour or longer discussing the loan. The counseling is free or has a minimal cost. You can find a local housing counseling agency by calling (800) 569-4287. The Financial Industry Regulatory Authority recommends verifying the independence of counselors recommended by your lender by asking whether they receive any funding from the lender or the mortgage industry.
Be wary of sales pitches. Nine percent of reverse-mortgage borrowers said their lenders offered them specific financial products like annuities and long-term-care insurance, which may be unwise investments depending on the purpose of the loan, the AARP survey found in late 2007. The new housing bill prohibits requiring the purchase of annuities and other financial products. But it never hurts to be cautious of any financial product someone is trying to sell you. "I think seniors still need to be careful that they are not talked into a loan that they don't really need," cautions Stucki. But if cash is a necessity, seniors should crunch the numbers on a traditional second mortgage and downsizing to cheaper housing alongside a reverse mortgage to parse the best deal.