Monday, June 4, 2007

Budgeting made easy! Part 1

Most people think they have it all under control. They get a steady paycheck, and know how much they can afford based on what they have now. I think that is wonderful! Those same people are thinking about starting the American Dream of home ownership, and think that the ease will transfer just as smoothly.
Homeownership can be easy, but properly planning is the essence of homeownership without stress. I get approached all the time by people looking to buy, and they currently pay rent of let's say $1000, and want to buy a home for $500,000. Being conservative, that will translate into a new mortgage of $3-4000 per month. These same people haven't been able to save a dime for a down-payment, have credit card debt, large car payments, and occassional collections. The reality is, without a properly WRITTEN DOWN Budget, homeownership can wear on your emotions.
My first word of advice, is to write ALL of your expenses. Not just go over them in your head, but truly write them down. See where your money is going now, and see if these expenses will continue as you own a home. Things like rent will go away, but will be offset by most likely higher mortgage payments. When I put on Homebuyer Seminars and speak with homeowners, I will give them a worksheet to write everything out. This will make the reality of your budget come to life. Maybe you can afford the $500,000 home, I just want you to be sure.
First Step: is to estimate your monthly cash-flow through the month. When do you get paid, and how much is the amount to you after taxes, and all retirement contributions?
Second Step: What are your major monthly expenses. For example, a car payment, car insurance payment, credit card payments, or basically anything that would be reported on your credit report.
Third Step: What do you routinely spend on food. Everyone has to eat, and funding that daily trend can be expensive. You don't want to buy a home and eat Tap Ramen every day. Or do you?
Fourth Step: Consider all expenses that will come with a new property. These expenses will be Water, Garbage, Gas and Electric, Cable, Phone, Cell Phone, Internet, the list can go on and on...
Fifth Step: Subtract all of the Second Step, Third Step, and Fourth Step, from the First Step and see what that gives you. This is your disposable income, or the amount of money you have leftover every month to spend on a mortgage. I wouldn't recommend taking that number and assuming that that should be your new mortgage payment, you should realize that you WILL have other expenses that come up, like car repairs, entertainment, and others, but it is a starting point.

Stay tuned for part two! I will talk about how to figure out exactly what you can afford!



Jon Vetter
San Francisco Loan Officer, for your San Francisco Home Loan

Budgeting made easy! Part 1

Most people think they have it all under control. They get a steady paycheck, and know how much they can afford based on what they have now. I think that is wonderful! Those same people are thinking about starting the American Dream of home ownership, and think that the ease will transfer just as smoothly.
Homeownership can be easy, but properly planning is the essence of homeownership without stress. I get approached all the time by people looking to buy, and they currently pay rent of let's say $1000, and want to buy a home for $500,000. Being conservative, that will translate into a new mortgage of $3-4000 per month. These same people haven't been able to save a dime for a down-payment, have credit card debt, large car payments, and occassional collections. The reality is, without a properly WRITTEN DOWN Budget, homeownership can wear on your emotions.
My first word of advice, is to write ALL of your expenses. Not just go over them in your head, but truly write them down. See where your money is going now, and see if these expenses will continue as you own a home. Things like rent will go away, but will be offset by most likely higher mortgage payments. When I put on Homebuyer Seminars and speak with homeowners, I will give them a worksheet to write everything out. This will make the reality of your budget come to life. Maybe you can afford the $500,000 home, I just want you to be sure.
First Step: is to estimate your monthly cash-flow through the month. When do you get paid, and how much is the amount to you after taxes, and all retirement contributions?
Second Step: What are your major monthly expenses. For example, a car payment, car insurance payment, credit card payments, or basically anything that would be reported on your credit report.
Third Step: What do you routinely spend on food. Everyone has to eat, and funding that daily trend can be expensive. You don't want to buy a home and eat Tap Ramen every day. Or do you?
Fourth Step: Consider all expenses that will come with a new property. These expenses will be Water, Garbage, Gas and Electric, Cable, Phone, Cell Phone, Internet, the list can go on and on...
Fifth Step: Subtract all of the Second Step, Third Step, and Fourth Step, from the First Step and see what that gives you. This is your disposable income, or the amount of money you have leftover every month to spend on a mortgage. I wouldn't recommend taking that number and assuming that that should be your new mortgage payment, you should realize that you WILL have other expenses that come up, like car repairs, entertainment, and others, but it is a starting point.

Stay tuned for part two! I will talk about how to figure out exactly what you can afford!



Jon Vetter
San Francisco Loan Officer, for your San Francisco Home Loan

Cut the cr#*, excuses only go so far.

I was a speaker at a First Time Homebuyer Seminar this afternoon, and for last time was disrespected.
Let's start off with an explanation. I was approached to host a mutually run seminar in Oakland California, for First Time Homebuyers. I think of it more as a homebuyers seminar, let's face it even people with homes need the education!
Over the last couple weeks I met with the other coordinator to go over the details, and get it all set up.
One of the things I pride myself on is my professionalism. This doesn't mean that I am a snooty know it all, with all of the answers. I wish I had all the answers. It just means that I do my best in all cases. I work hard, know what I am doing, look people in the eye, speak to them with respect no matter who they are, and 99% of the time, SHOW UP ON TIME.
Business is about keeping busy. Always having something to do. Never wasting time, unless of course, that is on the agenda! When you make committments to people to meet for something, and you don't show up on time, you are wasting their time, and basically slapping them in the face. You are telling that person, that you don't respect them, and their time isn't valuable. Now I am not trying to say that I am always on time. I would be full of it if I said that, but the reality is, I will call if I am going to be late, and my reasoning will be legitimate. Lame excuses just don't cut it. "It has been busy", "my car wouldn't start" etc., are kind of old. I am not saying that these things don't happen, you just make sure it doesn't happen again in that relationship.
OK, back to the point.
In planning for this seminar, the person that was coordinating was late to each of our 5 meetings. Yes late every single time. Excuses every time. I normally wouldn't accept this treatment, but was excited to do the seminar and see the results.
Today came, I was there 40 minutes early to put up signs, have my handouts ready, and generally be ready to go. The building that the seminar was in has a locked door at all times, so I had to call this individual to get the access code to enter the building. I dial the phone, and it went straight to voicemail.
Uh oh!
Mind you it is cold out, I am standing outside of the building, getting progressively colder...and more upset. Finally I get the call back, get the code to enter the building, and a number of crappy excuses. The worst statement, being that this person won't be there for 40 minutes. WTF????? The meeting starts in 10!!!!!!!!!!!!!!!
You have to be joking. Late again, on the big day! No way.
There was someone that was waiting for the meeting to begin, so I invited them up to have a seat and wait for the start. He followed.... Another individual came, complaining that she was supposed to have a meeting with this person a couple hours earlier and that person hadn't shown up. See a trend?
I briefed the two attendees about the situation, and we chatted about life and business.
Now I was told that there were going to be about 10 people in attendance, I am only seeing two. Do I start the seminar? After about 1/2 hour, no one else showing, I started. About 1 1/2 hours late from the original seminar start time, the co-"Planner" finally showed up. I feel like a not only got slapped in the face, but got stabbed.
I went through my information (it went well by the way), and answer questions. Nothing I hadn't heard before. Another person was set to speak, so I politely excused myself and walked out the door. (afterall it is Saturday, and I am furious by this point) The co-"planner" stopped me before I left, and had the nerve to say to me "Next month I think I can get 50 people".
I can't tell you how many things came to mind. Most of them I wouldn't ever post on Active Rain because of their indecency. I responded politely, that with me, there wasn't going to be a next time. I said a few other things, all of them polite, though I should have let her know my true feelings! I am through with that person. I calculated that this person had wasted not only about 2 hours of my waiting around outside of her office, but also I had left my office early over the course of two weeks, about 5 times, something I don't like to do.
Just wasting my time, and ultimately costing me money. Business has no place for these types of disrespect, and I don't have any patience for that in my business life.
Do you accept disrespect?


Jon Vetter
San Francisco Loan Officer for your San Francisco Home Loan.

Prime or not Prime, that is the big mortgage question.

I was doing my daily routine today, which usually starts off with a look at the morning market on Bloomberg, and then progresses to reading cnnmoney.com. One of the first articles I saw was Wow, I could've had a prime mortgage.

It discusses the fact that 15-35% of all people in subprime loans were given to people that could have qualified for prime loans. I knew this was an issue, but not to this extent. Towards the end of 2006 and start of 2007, I had 4, yes 4, clients that I was refinancing, and all 4 of them were perfect scenarios. Perfect credit, great income, easy deals. Every single one of them had prepayment penalties, when they were told that they didn't. There is no reason, at any Loan to Value (the amount borrowered, compared to value of the property), that they should ever have a prepayment penalty. Never. We have put people with foreclosures on the report, horrible credit, but with a really low Loan to Value, into Fannie Mae loans. This business is flooded with people that don't know what they are doing. I am not saying I have the answer all of the time, but I am confident that 95% of the time, I have done my due diligence on every persons situation, and have put together the best possible situation, with options for costs, to make sure the clients knows the options.
I am not joking whatsoever, this is hurting the business.
This is the first sign that you are in a "subprime" loan. A prepayment penalty is the first evidence. There are a few reasons that a lender or broker would put someone of this caliber into a subprime loan.
First, they are lazy. Often times they believe that subprime loans are easy to satisfy conditions, and overall much easier to get done. The reality is, that with Fannie Mae, documentation can be easier with a prime loan. The difference, is the underwriting process with a prime loan may take a little longer. Is it worth slapping a potential lifetime client with a prepayment penalty of 6 months interest, to save yourself 1 week for underwriting.
Apparantly so, 15-35% is a staggering number.
Second, They don't have any other options. One of the biggest subprime lenders of the early 2000's and even more recently, was Ameriquest. The reason I have some of the inside scoop is because my boss was an employee years back, and knew the ins and out of their operation. I have no issue with Ameriquest, though they have been killed in the media, but the reality is, as an employee of Ameriquest, you are able to sell Ameriquest product and that is it! They only offer high cost, high rate loans, because that is what Ameriquest needed to make a profit. It costs a lot to sponsor Major League Baseball, doesn't it? This speaks volumes for their training and salesmanship, to take a prime borrower and sell them something horrible. But, this is what has killed part of the market, putting good loans, into bad products.
Thirdly, Lenders believe that they can make more money on subprime loans. From my knowledge, maybe I am wrong, isn't it illegal to charge X person more than Y, just because they have different credit. I am not sure the regulation, but I am pretty sure that you have to give everyone the same deal, whatever you feel that should be. Help me out there, I can't find the law on it!?!?!?!?
So wouldn't it be illegal to make more from a subprime borrower? The only difference should be the fact that the rate will be higher, there is a prepayment penalty, and the margin and adjustment schedule for when it goes adjustable is different, on a sub-prime loan. Cost should be off the table, right?
The point of my writing is again to do your research as a consumer. People, though your loan officer may seem honest and can do a good job, aren't always what they seem. Ask you co-workers for advice, research on the internet (as you are doing right now!), and make sure that you are confident in what you are getting.
Knowledge is power in any business, but especially the mortgage business.
Jon Vetter
San Francisco Loan Officer, for your San Francisco Home Loan

San Francisco Festivals- Weekend of June 2nd

Finally the warmer weather is here. Well, if you live in San Francisco, you know what I mean. Cool mornings, fog burns off to put the temperature in the 70's, and then come 5, cool again. If you are a native San Franciscan, this is what you have become accustomed to love.
You have also come to love the numberous festivals, parties, parades, races, and gatherings that consume your summer schedule.
Here are some of the festivals that are here this weekend!
Escape from Alcatraz- Check out the website, it is VERY informative and fun!
This a a huge triathalon of 1800 participants who will "ESCAPE" from Alcatraz for a 1.5 mile swim to the shore, and 18 mile bike race, and 8 mile run which concludes at the Marina Green. The participants will enjoy the cheers of nearly 13000 spectators. The cost is free, go and show your support!

31st Annual Union Street Festival
This huge FREE art festival will have 100,000 people in attendance. It offers a variety of art selections, food, wine and beer gardens, live entertainment, and other. The list could go on and on. The location for this even is at Union Street between Gough and Steiner.
For the whole month of June
The SF Maritime National Historic Park will allow you to pay just $5 per adult and have access to the park for the entire month. Take the kids, they are free under 16 years of age!
Jon Vetter
650-465-5846
San Francisco Loan Officer, for your San Francisco Home Loan

Another scary Neg-Am story! ARRGGGHH...

It has happened again...Well, let's face it, happens a lot more than I hear.

I met with a Real Estate Agent I work with, who has a friend that bought a home in the San Francisco Home Loan Market in January, and was concerned because she didn't really know what type of loan she given, and wanted to find out. The Real Estate Agent was not the agent on the transaction, I know she would have looked out for her client at the loan signing. The buyer had been told she was getting a 4.5% fixed rate for 5 Years.

I have heard this before. I know where this is going unfortunately...So Predictable


I went through the entire loan package with the Real Estate Agent, and we noticed that she was given 100% financing on an Option Arm Mortgage. For those of you who don't know what an Option Arm is, you can read one of my other blog posts about the Reality of an Option Arm.
Other great Option Arm Blogs:
Ken Stampe Pay Option Arms - Suicide in a Mortgage Loan
Robert Ashby Exotic Loans Being Mistreated...
Tony Gallegos The Option ARM Is Akin To OxyContin

The basics of this loan is, if you pay the 4.5% start rate, you will add on to the balance every month, and owe more and more over the term of the loan. Scary!! Especially in this type of market!

This poor lady, who is relatively new to the country, had no idea about the reality of this loan. She was told she got a 4.5% rate, and she was comfortable with the payments. Enough said, she was happy.

She shouldn't be. After looking at the actual rates, she was going to defer onto her loan balance $1300 per month! Not good. No bueno. Bad.

She is excited about homeownership...the American dream. But will this situation continue for her? Highly unlikely. She is instantly put in the position to potentially lose her house in the next 5 years.

After crunching the numbers of what I could have done, given her prior excellent credit. I could have given her a first mortgage at 6.75% (roughly) and 9% on the second. Looking at the payments, it would have been just $600 more than her horrible Option Arm loan. Comparing that number to her amount of deferment per month pointed out earlier of $1300 (1300-600), she is losing $700 per month, just in interest!

The terrible thing about this, is she told the her friend I was talking to she could easily afford the payment she got. Therefore, wouldn't it make sense to afford (without the ease) a payment $600 more. After all, she is self-employed, and I am sure she could figure out a way to pay a little more for a much better loan that doesn't give her American Dream away month to month.

Looking further through final Hud, the truth comes out. The mortgage company had a large credit for closing costs written into the contract, so she wouldn't have to come out of pocket for closing costs. That makes sense, but the large closing costs, also were combined with a large Yield Spread Premium (rebate) from the bank. The broker net a $20,000 commission from this deal. They stuck it to her, in every way possible.

Bad Loan
High Cost
High Rate
High vulnerability to the market
Have I mentioned a 3 Year Prepayment Penalty yet? Oh, I haven't, of course there is one.
I couldn't even save her from this horrible loan if I wanted to, because it would cost her $20,000 just to get out of the loan.

Sense frustration? It is coming out of my pores.

This is the problem with this business. I am all for people making money in this business. After all, it is a business. But the loan to loan mentality is driving the market into the ground. It won't get any better until some action is taken to educate people about all aspects of Real Estate, ensuring people know that they have to ask questions, and not trust the first person they talk to.
Maybe that first person is a dream contact, but often times they are not.
Ask questions. Not asking questions can cost you. A good mortgage broker will offer free advice on your situation and not solicit you for your business. They will be there to support your concerns. If you don't ask for it, no one can help.
An honest San Francisco Loan Officer, for your San Francisco Home Loan.

There are four types of people...

Over the weekend I came to the realization that there are four types of people when it comes to credit. I think it is extremely important to find out who you are in the mix... Here are the four types:
1. People that think they have great credit, and do have great credit.
2. People that think they have great credit, but have bad credit.
3. People that think they have bad credit, and do have bad credit.
4. People that think they have bad credit, but have good credit.
In my experience, people are pretty aware of how they stand with credit, they have been told by people, banks or other, that they are strong, and use credit accordingly. However, there are people who really don't know where they stand. Check out my other blog on FICO scores and how they are formulated.
Credit, what is it, why is it so bad, why is it so great!
The issue with not knowing where you stand, is it puts you in a position to be taken advantage of. Fraud is one of the most horrible things to go through, and knowing where you stand will put you in a better position to question your situation, and make the best of it throughout your financial life. Check out my other blog on Fraud.
Real Estate fraud- How does it happen, why does it happen?
These types of fraud can happen, you must put yourself in the position to educate yourself to avoid the pain that these types of situations can put you through. It starts with credit. Know your score, know your positives and negatives, and don't let someone tell you otherwise. If in doubt about what someone tells you, ask someone else, a friend, or someone in the Real Estate business, for advice.
These questions came to my mind this weekend when at an Open House. I met a family that was looking to possibly buy the property, and the parent's were going to co-sign for the son on the loan, so that he could qualify.
Check out my blog on the reality of Co-signing... Credit and Co-signing Advice
The family was under the impression that the son would not qualify on his own because of issues with his credit. After going through his situation, I had a hunch that he might not be that bad off. One issue with credit, over a year ago, may have had the time to recover, and put him in the position to qualify. We went through the application, and last night when looking at his credit, it turns out he was strong enough to qualify. Submit it to Fannie Mae, PooF!, we have automated approval.
So we took them from possibly putting the parents on the loan, to now qualifying the son on his own, and not having to refinance at a later date to then put the son on the loan. That is a $3000 plus savings, plus they lock in a rate on today's terms, not what terms are like in the future.
Knowing your credit is extremely important, know where you stand, and find a reputable person in the mortgage business that you can trust. Without using someone qualified to offer you all of your options, you are setting yourself up for future issues, which in Real Estate, always adds up to future costs.
I may not be the person for you, but I think it would be a shame to not find out. You need to find someone that can give you ALL of your options, not just the standard options. Work with someone that thinks outside of the box.


Jon Vetter
Mercury Lending, Inc.
444 De Haro Street #130
San Francisco, CA 94107
650-465-5846 (Cell)

For your San Francisco Home Loan, from a trusted San Francisco Loan Officer.

Stevie Nicks in concert at Sleep Train Pavilion, Concord

Last night I was able to have a night out with my wife to go see Chris Isaak and Stevie Nicks in concert at the Sleep Train Pavilion in Concord, California. First off, I have heard of Stevie Nicks, probably bobbed my head a few times when it came on "RadioAlice", but never would say I was "soooo excited" that I just had to go. My wife on the other hand, completely the opposite. There are 3 bands she had to see in her lifetime, Stevie Nicks being one of them, so I got tickets.
For me, the best motivation was to just get out of the house, have a night together to not think about anything other than each other. That got me excited. So we hired a babysitter (AKA My dad), and headed out to the Clayton Valley (BRRRR last night) to see what Miss Stevie had to offer.
We live in Hayward, about 40 minutes away, not a big deal, but I was expecting the worst with traffic. As anyone from the area knows, or anyone that has been to the pavilion, the traffic getting there is tough, but once you do get there, it is worth everything. What a great venue! I went out there once in college to see the Counting Crows, and loved the place, but forgot how cool it was until last night. We had some pretty good seats, dead center, about 100 yards back (the best I could do at the time).
Chris Isaak, opened, and though I wasn't very excited at all to see him, he did make the concert entertaining. His flashy clothes, crazy hair, and surprisingly great sense of humor, I enjoyed it. Dare I say, liked it. He actually wore a full suit, with 2 inch mirrors, covering the whole suit. I couldn't believe it even existed, let along someone would wear it in front of 5000 people. He certainly stood out. He also wore a pink suit, do you think he likes attention? All in all, it served the purpose, we laughed, and enjoyed the show.
It was a good open for someone that I was a little more interested in...Stevie Nicks. At least I knew some of her songs. I wouldn't be able to tell the difference between her songs and Fleetwood Macs songs, but okay, I guess I know the voice. I had in my mind her being much less attractive, she looks great after all she has been through (cancer). She looks the same as she did years ago! She opened with a song I have never heard before, and she opened with a bang. It was a rock style song that she sold well, and got even non-Stevie junkies out of their seats. Stevie Nicks, the rock star?
The whole set was great, she played about 4 songs I knew, and they were well done. That was all I expected. Well, that and some great nachos from the food stand.

I had a great night, and left Sleep Train Pavilion with a new appreciation for both Stevie and Chris, and a remembered fondness for a great place to see a concert. I will have to see who is coming next. Here

A new fan
Jon Vetter
San Francisco Loan Officer

Wednesday, May 16, 2007

San Francisco Festivals- May 19th Weekend Festivals

The best time of year has come for San Francisco. There are many many wonderful weekends of great weather and fun coming. Stay tuned for more breakdowns of future weekend events. Here is a list of what is happening this weekend, the weekend of May 19th.

Asian Heritage Street Celebration - Both Saturday and Sunday
11:00 am to 6:00 pm, Howard Street between 5th and 7th Street. The will have food, music, arts, crafts, you name it!

Dolores Park Festival
11:00 am, Dolores Park between 18th and Dolores Streets. Brass musicians, tribal drummers, performance artists, DJs and more.

Eight Annual San Francisco Oyster and Beer Festival for even info call 415-989-6222
12:00 pm to 7:00 pm, Fort Mason, Bay and Franklin Streets. This one sounds like a blast, oysters, beer, music, shucking, how can you lose!

Mission District Brass Parade
Saturday 12:00 pm, 22nd Street and Bartlett on it's way to Dolores Park. Musicians and artist march through Dolores Park.

Courtesy of Jon Vetter, Mercury Lending
San Francisco Loan Officer - 650-465-5846 - www.jonathanvettermortgage.com

Last Call for Loan Officer...Last Call

The mortgage business has been flooded with Loan Officers looking to make a quick buck. Why? Because it is easy...Pass a couple online classes, take a test...Presto! You can do a loan...
Sometimes, if the broker has the right license, you don't even need a license!
That is great, and some of the services other Loan Officers can offer are wonderful, but long term relationships and trust is most important. It is time to stop shopping, stop floating from broker to broker, stop wasting time, and settle down with the right broker. Am I him/her? Maybe...I think you would be doing yourself a disservice to not find out.

Reasons for giving me a call at the very least:

Education - You need someone that has the real life and real business experience, but also the formal education and licensing to absorb the whole picture, and react fast with solutions. I have it all...

Availability - Your issues are my issues. I am available whenever I am not sleeping. Even then, call, maybe I will wake up. I am never without email or my phone. If I don't answer, I will return your call. I don't dodge calls, I have nothing to hide.

Attitude - Honestly, this job is fun. Sometimes it is stressful, but if you work with a smile on your face, and keep the right attitude, the world is a better place. My clients experience it daily.

Product - You will hear other lenders proclaim that they have 250 million lenders and all that. Wonderful, they can shop all day long. I don't have time, nor the need to do that. The 20 lenders that frequent my office are sufficient, and if not one of them can do it and I can't get one of them to give me the name of someone that can, forget it, there is something far more severe going wrong than any lender can fix.

Rates - The first thing I hear from most calls I get. "What are you rates?" Truth is I have lot's of them. Some good, some bad. What do you want? What can I get for YOU? I don't know...let's find out. I have lenders that reward me for bringing you to them, and that reward is passed down to you. Your income (even if it is low) and where you live are some things my lenders reward. I don't advertise rates online in most cases because they are irrelevant, rates depend on your situation, not any one else's. Though you can get a general range online of where the MARKET is at.

Speed - I push things as fast as possible. Can I close a loan in 10 days? Sometimes...it depends on the loan and the lender. I need you to help me close as fast as possible. WE can make it fast.

Post Close Contact - I don't do your loan, and then forget about you. My regular contact with you, whether through email, snail mail, or phone, will give you the security that I am here...for good. I am proud of the work I do in all cases. If you feel I have done something wrong, all you have to do is let me know, and I will do what I can to fix it, or at least make it up to you.

Are you ready to make that last call? I know I am ready for you. Pick up the phone, make the call, and let's make it happen together.
San Francisco Home Loan, from and honest San Francisco Loan Officer.

To TIC or not to TIC.

One of the major affects of the great appreciation of San Francisco and the Bay Area, has been that it has locked out many potential buyers from being able to afford housing. The market has developed, and many other options have come out to help people get started, because let's face it, starting is the most difficult thing.
I wrote a blog about BMR (Below Market Rate) housing in San Francisco, about some of the ways you can get started. It was titled BMR- Below Market Rate Housing. This is one program.

Another that has come about a lot in San Francisco are TIC's or Tenancy in Common housing. There are many differences between TIC housing and conventional housing or condominiums, and a great place to learn about there differences is at Andy Sirkin 's website. It is a great resource.
I am not writing to plug Andy Sirkin, but I have learned a little there, but mainly to encourage people to consider all of their options. One of the main reasons TIC's have gotten a lot of press is because of their price point. They are often times priced much lower than conventional housing. The draw back is the availability of lending on these properties. There are lenders, don't get me wrong, but you can find conventional housing that might make just as much sense, and in the long run, offer you a better return on your investment. If you could borrower more money, at a much better rate, with less money down, you may be better off. There are many lenders out there offering special pricing to Low Income families, you need to find the right person that can give it to you straight, without all of the nonsense.
THE POINT- analyze all of your options. First off, what can you afford to pay per month. Secondly, do you plan on putting any money down? These questions, are the heart of what you should be looking at in any market, but most importantly in the competitive San Francisco Home Loan Market.
If you plan on paying $1500 per month, the reality is you are probably better off renting or looking in less expensive areas. The key is to find the person you trust, and doesn't just tell you what you want to hear. Owning a home is difficult, and getting a plan together for affording that home is key.

What makes a great Real Estate Agent...A Loan Officers Prospective.

I have seen many great Real Estate Agents on this website and others, I thought it would be good to share with you a couple of the key points of what makes a great Real Estate Agent, from my prospective, a Loan Officer.

I had the priviledge of meeting with Dena Dorsey of Remax in Oakland, in Alameda County, California, mainly as a thank you for her referring me a client of hers who was looking into her options. Dena had talked with the client about selling their home, they were going through a separation, and didn't really know how to handle the break up. Dena met with the prospective client, and after going through the discussion of listing the property, thought it would be a good idea to also look into refinancing. She gave them my information and we went through the options. After working the numbers, it did make it possible for the client to refinance, and for the wife to keep the house. So, long story short, I got the loan, but Dena lost the listing. I think this is one of the key factors to what makes a great Real Estate Agent. Dena could have listed the property, marketed it, and sold it, but was that really what the client wanted? Not really, they wanted options, and Dena gave them those options.
In talking over dinner at Mijori Sushi in Oakland, I got an even better impression of what a great Agent she is. Her focus in all of our discussion, was on protecting her clients, not ensuring she would get a commission. That is rare in this business, and deserves praise. Whether it was focusing all aspects of the transaction, inspection, appraisal, or even the loan, Dena has focused her efforts on ensuring the transaction is benefitial to her client, and no one else.
I think maturity, experience in the business (10 Years), and integrity go along way. These things can't be taught, they are simply absorbed, and lived out in our everyday, professional, and personal lives. Dena understands life, and certainly lives that out through Real Estate.
She is a great Real Estate Agent.
You can contact her at her website .

Working late, of course!

I have come to the conclusion that blogging and expressing myself is something that I enjoy. I want to continue it as much as possible. I have also noticed that it takes away significantly from my hands on production. I guess with any new venture, it takes time to work into it, to see true results, and learn how to make it work. For me, blogging will have to take place more in off times, like at night. Not to say I won't blog during the day, the focus has to come at night. Isn't that just life!
Mary McKnight‘s Post (Betty Ford for Bloggers: 12 step program to managing blog addiction ) on Blogging is great
I think the main thing people need to do in life is give yourself some priorities. Schedule those priorities so that you continue production and make things work. When taking a huge step, like buying a new home, especially in a competitive market like the San Francisco Home Loan Market market, you must make sure you break yourself in. Similar to what people see with blogging, you can't throw all of your focus into one thing. When buying a home in this type of market, you must do your homework, and spend your money wisely. Don't put all of your money into a new pool, or building a theater, sink some money into small projects, like fixing cabinets, fixing up the garage, landscaping in sections, or even just replacing the old vanity in the bathroom.
Taking on the new weight of a home mortgage, can be overwhelming, break yourself into the payments. Get used to the fluctuation in bills other than just your mortgage. Energy bills, water bills, even garbage bills, will fluctuate throughout the year, and properly preparing for all of these events, and creating that nestegg, will prevent a lot of heartache in your new venture.
Owning a home is truly something special, you can take pride in your creation, just like blogging. But, just like blogging, you have to create something special that you can afford! Normal fluff, just won't due.

Feeling Hot Hot Hot!

So the time is here. You pack up the convertible with towels, a cooler full of food and the beverages of choice, the family if applicable, and head out! Hopefully the beaches are close, because as most of you know, beach traffic can be a pain!
Here is a list of beaches in San Francisco... http://www.sealrockinn.com/beaches.html
If you are looking for a great site for beaches across the nation, check this out! http://goingtothebeach.com/
There are a lot of things that you may not consider when planning for an outing like this. Here is a quick list of some of the things you should also consider for your outing!
SUNTAN LOTION- possible the most important thing of all. Skin cancer statistics are scary, but put out there for a reason, to make sure you are protected. Check out this link for some stats: http://www.umm.edu/skincancer/stats.htm

Water- I know you think over other beverages first, but the most important is water. Not staying hydrated can really put a damper on your day.
Your car- Make sure that you have checked your oil levels, water levels, air conditioning levels...the list goes on. With higher temperatures, your car is just as vulnerable to the heat as you are. Plus you don't want to overheat and make the traffic even worse...do you!
Garbage bags- Nobody like a dirty beach, clean up after yourself, everyone will appreciate it!
Toys- Nothing like having something to entertain yourself on the beach. Make sure you bring things to make a sandcastle, maybe a football or something to stay active.
Lip Balm - No one wants kiss leatherface.
Chairs - Pack some chairs! This will help keep sand out of your "areas".
Camera - You never know what you will see, if nothing else, you can catch some picks of your loved ones!
Hat - Nothing worse than a chapped scalp.
This is what I could come up with off the top of my head. Make sure you prepare yourself for the beach so that you can make it the best trip ever!

Saturday, May 12, 2007

Has my pre-qualification expired?

I got a call from a borrower that had been pre-qualified for a San Francisco Home Loan with one of our other loan officers that has since left the company, and the borrower's question to me was, "Is my pre-qualification still good?". That is a tough question, and I think that the question warrants explanation of what a pre-qualification is, and what a pre-approval is. Check out this post for some more information, it is along the right lines. ( Larry Morris- he is sort of competition because I am licensed in Oregon, but who cares! He wrote a valid piece! ) Often times, we can submit your application to a lender to render some sort of approval, and some conditions, but it will be subject to future conditions by the underwriter.
I read a post earlier by Broker Bryant titled Let's call a Real-a-tor, they'll do anything! , where he talks about showing properties to people just because they ask. Realtors and Loan Officers, have to protect themselves in any case. For anyone in the business, time is money, and you have to maximize your time.
This relates to my phone call because this individual had been walking around town looking at property, with a 6 MONTH OLD pre-approval. Explanation of a pre-approval is important, for both people in the business (Agents), as well as consumers.
A pre-qualification is simply a verification from a qualified person in the mortgage business, that this person has provided the documentation required to obtain financing at this time. There are a number of things required to get this pre-qualification: providing the correct income and asset documents need, having a credit report from the 3 credit bureaus run, performing all verifications of employment, rent or prior mortgage payment, and any funds required to close. The list can go on and on. In the past, issuing a pre-approval had been a lot easier. Since lender guidelines have changed dramatically, full proof of all items is strongly encouraged. It isn't a "no brainer" any more.
Was the 6 month old pre-qualification good? Not at all, for a couple reasons. First off, I didn't take the application. The old employee could have done something wrong through the application process, and that missing information could be critical, especially today. Secondly, suppose the borrower 2 months ago missed a Credit Card payment, this is a serious effect on the otherwise clean credit. The missing a payment, shows recent weekness in finances, and will have a significant negative effect on the score. Thirdly, did this person change jobs in the meantime. If, for instance, the borrower was an employee prior, and just started his/ her own company recently. Regardless of income, the borrowers employment history is important.
There are a list of other possible things that could have changed. Everyone needs to make sure that you are protected, yes EVERYONE. The borrower shouldn't submit an offer and put money into escrow until the proper pre-approval is obtained because they could lose their earnest money deposit. Agents shouldn't show houses to someone that isn't pre-approved because they could be wasting their precious time. Sellers shouldn't be accepting offers without a pre-approval attached. Everything stems from that pre-approval, and nothing should take place until you have one from a qualified loan officer or broker. PERIOD!
If you were pre-approved in the past, it doesn't mean you are pre-approved now. Consult with someone you trust, and make sure that everything is in order, it WILL save headaches for all parties.

Here is a little tutorial of what type of documentation will be needed for a pre-approval. To get pre-approved you can call me directly, or visit my website to fill out a secure application:
w2's, 1099's, Tax Returns for the last two years (Depending on you employment type)
Asset documentation (Retirment, 401K, 403b, CD's, everything you have, because the more the better you will look to the bank)
Verification of Rent/ Mortgage - Most lenders will require you to document that you have made some sort of mortgage or rental payment for the last 12 months. This is a case by case, but providing what you have makes it easier.)
Employer Information- The mortgage professional will likely call your employer to verify you work for the company...if applicable
Credit Report - Most times this will be provided by the mortgage professional upon your authorization.
Schedule of Real Estate - If you own other property, you should be able to document leases on those properties if you indeed collect rent on the property. Leases work in most cases because tax returns could be reporting old leases.

Proof of the implosion!

This post goes out to all of the people being affected by the so-called "Subprime Implosion". The effects are starting to take place. Subprime lenders are packing up and heading for the hills. I had contact with the first Subprime representative in about 3 weeks. That speaks for itself. The word from him was that many of the reps, if not close to all, are looking for new employment, some in the business, most all in other fields.
If you are an agent, and are feeling the effects, please share your experiences so far. Make sure your "pre-approvals" are coming from reputable sources, and run through the situation with the Mortgage Broker, if your are comfortable, to protect your investment into your client.
Check out this site, it is a great breakdown of why financing is a lot more difficult on our end.
Mortgage Lenders Subprime Implode
There are still a lot of good, strike that, great lenders out there, it is just a little more difficult to place borrowers with shaky credit.

What makes a great Real Estate Agent...A Loan Officers Prospective.

I have seen many great Real Estate Agents on this website and others, I thought it would be good to share with you a couple of the key points of what makes a great Real Estate Agent, from my prospective, a Loan Officer.

I had the priviledge of meeting with Dena Dorsey of Remax in Oakland, in Alameda County, California, mainly as a thank you for her referring me a client of hers who was looking into her options. Dena had talked with the client about selling their home, they were going through a separation, and didn't really know how to handle the break up. Dena met with the prospective client, and after going through the discussion of listing the property, thought it would be a good idea to also look into refinancing. She gave them my information and we went through the options. After working the numbers, it did make it possible for the client to refinance, and for the wife to keep the house. So, long story short, I got the loan, but Dena lost the listing. I think this is one of the key factors to what makes a great Real Estate Agent. Dena could have listed the property, marketed it, and sold it, but was that really what the client wanted? Not really, they wanted options, and Dena gave them those options.
In talking over dinner at Mijori Sushi in Oakland, I got an even better impression of what a great Agent she is. Her focus in all of our discussion, was on protecting her clients, not ensuring she would get a commission. That is rare in this business, and deserves praise. Whether it was focusing all aspects of the transaction, inspection, appraisal, or even the loan, Dena has focused her efforts on ensuring the transaction is benefitial to her client, and no one else.
I think maturity, experience in the business (10 Years), and integrity go along way. These things can't be taught, they are simply absorbed, and lived out in our everyday, professional, and personal lives. Dena understands life, and certainly lives that out through Real Estate.
She is a great Real Estate Agent.
You can contact her at her website .

Tuesday, May 1, 2007

San Francisco- What do you think about it?

I have lived in the San Francisco Bay Area my whole life, and don't really know much about the rest of the nation. I have traveled and seen many different places, but really have grown to love what we have here. Share with me some of your experiences in the wonderful Bay Area, and if you feel like it, share some of the drawbacks.
Here are some of the great things that I have seen here.

My wife and I took our engagement pictures here. It was foggy, and we couldn't see the Golden Gate Bridge, but still awesome. This is a picture I took! Do I have talent with photos?

I can't believe this place used to be a prison, I would love to live there!

Cable Cars can get you some awesome views of the City!

Coit Tower is a great place to see a different view of Alcatraz.

You know the Golden Gate Bridge. Just an unbelievable site!

My personal pic of the skyline. The weather was a little overcast, but still, with clouds, this view is awesome.

The Transamerica Building just got a major cleaning!
Please share with me some of your pictures or stories about this wonderful place!

Technology at it's best!

These are one of the days that I really realize how wonderful technology is. I am lucky to spend the day in Sunny Sacramento, with my dad at a huge GOLF Sample Sale at Haggin Oaks Golf Club (Come by the apparrel section). I am "technically" not having an office day, but with a new laptop, I figured I might be able to get some office work done.
To my wonderful surprise, the golf club house has wireless internet. I can blog if nothing else. I am about 100 yards away from the router, and happily typing away, sharing my surprise.
Who said you can't get anything done when you are out of the office?

I do, your honor...

So for the 3rd time in the last year, I have received the most dreaded mail, anyone could get. No not the credit card bill or energy bill in the winter, I am talking about the letter from Alameda County selecting me for jury duty!
Ugh.

This is one of the most annoying and inconvenient things we as citizens must deal with. It isn't so much that we have to possibly spend a few hours in court to do my service in society, that is not the issue, my issue is having to block out my whole day, and possibly whole life (ie. Scott Peterson trial took months and months) for the "possibility" that I might have service longer than one day. If I was getting paid for services, maybe I wouldn't complain, but let's face it, the wage they pay is not something to get excited about.
The biggest complaint I have is the lack of knowledge about what we are doing. I have set a reminder for myself to call after 5 as directed, to check to see IF I have to even show up. As discussed earlier, this is the 3rd time I have gone through this in 2006-2007. The first two times I fullfilled my duties, but now I am still accountable every 6 months until I actually report in the courtroom. I guess if I don't actually serve in court, they can recycle my information every 6 months until I have completed my services entirely. So as a father of a young girl, I have to make plans, in case, I have to report. I don't know about you, but with a young one, changing plans and adapting to the court system isn't something that just happens on a dime!

The first part of this is just a rant on my part. I thought I would convey my feelings as I wait the final 10 minutes until I can call to verify if I have to report or not. Waiting...waiting....waiting...dial tone....answer...key in my code...
Ugh...part2
This is why I rant. Now, I am instructed to recall between 11 and 12 tomorrow morning for an update on my status. That means, I can't go to work (45 minutes away), and have to sit and wait for the results. Will I have to go to court, or am I relieved? Stay tuned for the next episode...

Open your ears and let me help you learn.

The news of the mortgage and real estate business is starting to take it's toll on the individuals who rely on the media to give them their news. Don't we all rely on the media for the news? The truth is, we do...
Over the last few months we have seen the much publicized impact the subprime crisis will have on the market today and in the future. Heck, we can't avoid it. I am starting to realize what a huge impact it is having on individuals who don't have the experience in Real Estate, mainly those first time homebuyers.
The market is in no way exploding with appreciation, homes aren't selling fast, the truth is, we are in an adjustment phase. I believe the impact the media is having on people who rely on it for information is going to hurt us as professionals.
We are getting a bad reputation. Some of it may be deserved on some individuals, but the reality is, people looking for advice, need to contact us with questions, and a true understanding about Real Estate. In my case, use me as a tool for Real Estate finance. I have noticed a lot more lately, that people believe word for word, what they are told on TV, in the paper, on the internet, and the reality is, you need to find the trusted contacts that live this business everyday, to give you an honest outlook on the business. We have to know what we are doing to survive in this market. Call a professional, and build a relationship over time.
When considering buying a home, open your ears to the reality of the business. Be open to hearing what professionals have to say, and if it requires it, speak with multiple individuals until you find the person that is right for you.
I like to think that I am a reputable person, but I may not be the right person for everyone. People need to do the research to find that person that IS the right match.

Wednesday, April 4, 2007

Credit and Co-signing Advice

I want to share a little advice that I think is one of the most important things in the Real Estate and credit game. As I have said in previous posts, credit is the most important thing when it comes to Real Estate finance. One of the biggest mistakes I see people making is with "Co-signing". What Co-signing entails is you signing for a loan, mortgage, auto, or other, with someone else, using your credit as a supplement to the primary borrower. The word co-signer doesn't really play in the Real Estate game, but is very common with Auto finance. When you co-sign, what you are basically saying is that I will vouch for this person, and that you will get all payments ontime and in full. What this does is put this liability on your credit report. This can be good because it builds your credit but can really hurt you if things go bad.
What can happen? (and does)
You co-sign for your brother or sister so they can buy a car. Brother or sister makes the payments for a while, but then has some issues and can't keep up the payment. (what payments come first, food and rent, or car payment? You know the answer) Brother and sister keeps missing payments, maybe gets caught up from time to time, but overall, doesn't keep a regular payment history.
How does this effect you?
Dearly.....You now have your perfect history, tarnished by their history for the entire term of this loan. This is a huge problem. With Real Estate finance, the difference between a clean credit history and a score of "720" is a huge difference from a "600". You are talking hundreds of dollars per month.
How do you avoid the issues that can arise with co-signing?
The obvious way, is just say "NO" like the old drug public service announcements. Another way, is to make the payments yourself. Arrange for you to pay the payment, and make sure that there is no risk. Have your brother, sister, aunt, whoever, make payments directly to you, and then your only risk is that you don't get the money from your sister, aunt, cousin. Should that happen, you now have put your financial situation at risk, not having the extra cash, and you can force them to sell the car for not paying.
Make good credit decisions, if you don't, it WILL cost you.

Interesting little scenario, what do you think?

I wanted to share a little story I heard yesterday from one of my Bank Reps that not only frightened me, but angered me a little. If anyone has any insight I would love a contribution.
So, I am talking with my rep about what they are saying, what is new on their end, and they told me a story about a friend of their's that bought a new construction house about 2 years ago that they financed with a 2 year fixed through the Builders finance broker. The friend bought this new beautiful house for X dollars, which though it is a lot of money, has been the norm for such a nice area, great schools, great employment....everything. So, the builders in this community built a lot of homes in this area, and continues to build. The builders have built soooo much that that have overbuilt the area, and are forced to slash prices to clear their inventory. The people that bought this house 2 years ago are now $120,000 upside down on their property. That is about 15% behind.
This type of scenario makes me wonder, what is going to keep this from happening in the future, who really is to blame, can this be prevented.
Here are some of the causes and their potential blame:
Builders- they are a business, sometimes corporate, forced to perform for their shareholders, can you blame them for needing to create a profit? Should they have to perform ethical and look out for the people that have previously trusted them and bought at a set price?
City Planning Departments- They have given builders the ability to keep building houses They too are required to perform, should they be held liable for overbuilding and putting people at risk?
Buyers - Should they be blamed for buying a property at market levels 2 years ago, and being $120,000 behind, and should they be forced to repay that additional $120,000 or should they just let the home go into foreclosure when their current home mortgage doubles upon their first mortgages adjustment?
Lenders - They have allowed this person to get a 2 year fixed, and assumed the liability that the value when they funded the loan, might not be there 2 years later. Should lenders be required to make decisions for people, even though they already disclose the terms of the loans in the signing documents? Should lenders require 100% financing be accompanied by a fixed rate first mortgage, ensuring that there would never be a "Payment Shock" (when you payment increases as a result of a mortgage going adjustable) issue.
I am not trying to stir up peoples emotions, or get people fired up, I am merely trying to see if there is a proper way to handle this type of situation if you were in it. Is there a way to prevent this? Who really is to blame in these cases? Is it necessary to cast blame, or do we just learn from it and move on?

Possible Blog Posts by Specialization

There have been blog posts on Property Doctors with ideas of what you can post. I thought I would take that a little further and give some more ideas for each type of job. Hopefully this will inspire you to entertain me with some of your experiences or advice.
Real Estate Agents-Horror Stories, Perfect situations, Great Clients and what they do for you, What you are seeing in your market (remember there are investors all over this site, you can be an agent for them in your area if deals come along)
Investors- What do you look for in a property? How do you finance usually if you do? Everyone wants to be an investor, give us your insight.
Painters- Tell me a little about paint. What are the advantages or disadvantages to water based vs. oil based. What are some of the tools that make your life easier? What are the typical costs per room?
Tilers- What are the differences between tiles? What are some tips if people are doing it on their own? How long does it take for a job? What tools are necessary for your job?
Tech People - I have seen articles and books on SEO and topics like that. What are the realities of SEO and how else can I get my website noticed and improve traffic overall?
Motivational Speakers - Motivate and Inspire me!!!!!
Title and Escrow - What is the difference in cost between companies, what are the typical costs? What do some companies do that others don't? Are there horror stories?
Cleaning Services - Why hire someone to clean my house when I can do it myself? How much does it cost to clean a 1000 square foot house 1 per week? What do you clean, how does it work?
Stagers - What are the key points to avoid when staging your house? How much do your services usually run, and what is the return upon sale usually? How long does it take to stage a home?
Contractors - What is a typical kitchen remodel? If I had $20,000 to spend, where could I see the most improvement? How long does a kitchen remodel usually take? How do I rip out a wall, and be sure that I am not screwing up?
Photographers - Inspire me with your pictures, maybe I can show you some of mine! Photographers have it easy, just let us see your work, you don't even have to write!!
My point with this my friends is, we can all blog. I am lucky to be in an industry where I have constant things to write about, but I want you all to see that you have that ability too. I want to hear about your business. I may know a little, but I want to know all about it.
I have a challenge to each of you, if you email me at jvetter@mercurylending.com, and if I can't come up with 5 things for you to write about, I will send you a $5 Starbucks gift card. How does that sound?

Consumer Confidence Struggles

Today one of the major factors in the interest rate game came back worse than expected. That factor is Consumer Confidence. Analysts feel that this hesitancy is a result of higher gas prices and the madness that is happening all over all financial markets. This is the first we have seen actual consequences since the exposure of Subprime Mortgage woes. People are very very nervous about where we are going with these issues, and aren't spending as a result. Kind of like a recession type mentality, where everyone stays home, conserves, and takes a more reserved lifestyle. This isn't a good sign for the immediate financial spending. This can hurt the economy. The normal effect on the mortgage rates would be to see a decrease in rates to try to stimulate some action, however, the Fed released a statement that they are still concerned with inflation. So for the day, so far rates are slightly up, even with consumer confidence lacking at this time.
You can read more at www.cnnmoney.com

New Home Sales Slump

Well according to builders, we are seeing a housing slump, the worst since August 2000. This really isn't a good sign for the economy, though, from experience, next week or maybe even tomorrow we might see something showing that the economy is doing well! Darn media! (Look at me just spreading the media's word ;))
Here is the article:
http://money.cnn.com/2007/03/26/news/economy/new_home_sales/index.htm?postversion=2007032612
I think the moral of the story with news like this is that we really aren't in a strong or thriving position, maybe news like this hint that we could be closer to a recession, but the reality is our economy has so many factors that dictate it's health, the housing slump, if that is what you want to call it, has an effect, not THE effect.
I was working yesterday (Sunday) at an open house for a real estate agent I work with, and there was great traffic through the 1 bedroom condo. I think this activity shows that there are people out there still looking to buy. The real estate market isn't dead or crumbling, we just aren't seeing the growth of the last few years. That isn't necessarily a bad thing, the market will correct itself, you just need to position yourself to survive or thrive throught it.

What makes a person successful?

think this word gets thrown around a lot, and sometimes "success" doesn't stick. Is that really success?
Possible reasons a person is successful:
Lots of Money
People desire them
Consistent results and support
Respect of their peers
I think success has a few different characteristics of each. But really, I think what a person feels success truly is depends completely on the person. I think a person is successful when they do have some money. Though I don't feel money has a very huger bearing on it because the money isn't what dictates your success, it is only the result of your success. If you start being unsuccessful, then the money goes away, if you continue your success, the money keeps coming. Money doesn't make you successful.
If people desire you, I think your success is there, however that success may have a limited tenure. If many people want you, will that last? I think again, part of this aspect of success is the result of something else.
The final two points, I think are the heart of what makes people successful. In order to do what you do well, whatever your profession or trade, you need to consistently produce results, be there to support your clients or customers, and have their respect. That is success. If you want to be in your business for the long haul, you have to look out for your client, the money, or fame, comes later, with time. This translates to Real Estate through a long lasting relationship and network of people that trust your opinion, and when they need advice or help, there is only one person they think of...you. In order to be a successful professional in real estate, you must be available. Everyone needs a vacation, but if you aren't available out of your vacation time for a couple days without some sort of response, or acknowledgement of contact, then people will head for the hills. You also must be consistent. Working hard, giving solid advice, and performing in a crunch will earn respect, and help you in your quest for success. You also must make tough decisions for your client. If you client comes to you and wants to buy the $700,000 house on the hill, when you know they can only afford $400,000, then make the right call, and explain the realities of that house, regardless of what that does to your commission.
What is the moral of the story? Do the right thing, and be consistent. This will put you on the road to success, and the money and "fame" will follow.
Am I successful? Not yet, but I do what it takes everyday to get me there someday.
Are you successful? .....Please respond--

Express Yourself

Over the last month I have made it a real goal of mine to get out in front of people, make people understand what I am about, express myself... I came to the conclusion that writing in www.propertydoctors.com blog section would be a great start. It is my very own public journal about one of my real passions, the real estate business. I think the major benefit I have seen is the way I feel about what I am doing. It is great to get feedback, and know that I am connecting with someone, in whatever way that might be. I am thinking even more out of the box since starting this communication.
What I am noticing however, is that the feedback I am getting, is from a few people. I know we all don't want to comment on every blog we see, but I encourage everyone to step outside of their comfort zone, come out on the edge, test the waters, and jump in!
The benefits of expressing yourself go beyond personal fulfillment; there is a network of professionals in your same field. Expressing yourself will help get readers to look at your feelings. Finding someone that has the same goals or morals, is much more likely.
So come on people, start blogging, or commenting, or at the very least applauding, those people you feel are on the right track. The more feedback and response, the better it will be for everyone!

Thursday, March 22, 2007

What has become known as an "Option ARM" is not the best option in most cases.

The Mortgage market has been overwhelmed by lenders pushing, even specializing and promoting this loan called the "Option ARM". You may have heard it on the radio, you may have seen it on TV, I guarantee you have received something in the mail about it. It promotes the 1% payment rate, and boasts about being fixed for 5 years, or more. The reality is, there are 100's of options out there for this loan, and I have searched the blog posts front to back, and don't really see an unvailing of what this loan is. I don't want to come off like I am bashing this loan program, but I want to stress that there are good ones and bad ones, and I hope I can explain the pros and cons so that you understand my point of view.
Reality, this loan gives you 4 payment options. It gives you the flexibility every month, to choose the payment you want to make, and make it. 4 hypothetical payments on a $300,000 loan are listed here.
1% Start Rate $964
7.5% Interest Only $1,875
7.5% 30 or 40 year Amortized $2,097
7.5% 15 Year Amortized $2,781
The first thing that needs to be known about this loan, and many lenders won't focus on, is that if you make this first payment of $964, your loan balance will INCREASE. Again...INCREASE. Ok, If I am every telling someone about this option, this is the thing I stress the most. The basis for this loan is that if you make the $964 payment you loan balance will increase $911 every month you make this payment. This loan was designed for people who are self-employed or on a commission only type position where your income may vary month to month. I believe in this loan in some cases, but those cases are few and far between.
Cons of this Loan:
People promote the 1% payment rate, but don't explain that in some cases, the actual interest rate the bank is charging you, the 7.5%, is costing you $911 more than the 1% Start Rate that you can pay. Therefore until you make more than the Interest Only payment, your loan balance will keep going up and up.
The 7.5% interest rate is adjustable in most cases, though lenders have rolled out new loans like this that are fixed for 5 years, so that fear of your loan adjusting doesn't come until after year 5. The loans are based on an Index and a Margin. The Index is what changes from month to month. You may have heard of these indexes, they are called the MTA, CODI, COSI, COFI, or Libor. There are others out there, but you get the idea. The index is what makes this loan adjust. As the index changes with the market, up or down, your interest rate changes accordingly. The margin is what the loan officer chooses to give you, based on how he/she wants to structure your cost and type of prepayment penalty if any. Usually the choice is for the highest margin and largest prepayment penalty, because the loan officer will make more money. You don't have to have it that way, always ask questions to get the best deal for you. If you have a short term outlook on the property, like 4 or 5 years, then maybe this program would work, but if you are in this home for the long run, it just isn't the loan for you.
Pros of this Loan:
Flexibility is the only pro. If you use this loan how it was designed to be used decades ago, then you can make it work for you. But, I have an alternative solution for you, that makes the most sense in most cases.
If you can qualify for this loan, there are two things that are likely, you have a decent credit score, and you have some equity. (There are exceptions, but discussing exceptions would probably put you to sleep :)) These loans are usually offered if you have 10% equity or better. If you have decent equity and credit score, my recommendation is to look into a more stable first mortgage, like a 30 year or 40 Year fixed, even a longer term adjustable rate mortgage like a 10 Year ARM with an Interest Only Option, that will give you more stability than the Option Arm, but the key with why this is a better solution, is you can get a 2nd mortgage, or my recommendation of a Home Equity Line of Credit (HELOC), behind that first mortgage, to offer the flexibility you are looking for. (Look for my blog on Home Equity Line of Credit's for more detailed information). The main reason for using this scenario over an Option Arm is purely interest cost.
Option Arm Interest Cost at 7.5% listed above = $1,875 (Look Above)
Same Loan Amount, Interest Cost on a 10 Year Interst Only at 6.5% = $1,625
The difference is $250. Yes... $250 per month just in interest!!!!!
If you choose an option arm over a standard ARM, you are losing $250 per month (in most cases). You want flexibility, get a 10 Year Interest Only or 30 or 40 Year Fixed, and get a Home Equity Line of Credit in addition to it, so that when you have months where the larger payment of $1625 is too much, you can use the HELOC to make up the difference. But, and this is a big but.., you must try to pay down that HELOC when you can. If you don't, your loan balance will keep increasing and increasing, and unless you are fortunate to have $100,000's in equity, your investment will go away, and you will be forced to sell because you can't afford the ever growing mortgage, with little to show for it. I may sound harsh, but the reality is, this can happen, and people in this business don't stress that fact. When homes were appreciating like crazy, maybe 10-20% per year, this loan wasn't really a factor, because your equity would grow. Those days are over for now, without a change on the horizon.
Don't make that mistake of not examing ALL of your options. If you feel you are being pressured to take one loan over another, there is a reason, that loan officer has an alterior motive, usually based on pay. Option Arms can pay a loan officer up to 3% of the loan, that the bank will pay. Not you directly, but indirectly, the bank pays it directly. That money is coming from your interest rate, and doesn't need to be there. It also comes from the prepayment penalty he/she is telling you that you have to have, well, you probably don't "have" to have it. Always ask questions.
Call or email me if you have any questions, this may be the only option for you, but I don't think it needs to be. I can lend in California and Oregon. If you aren't located in either, still call, I don't want you to get something you shouldn't. I don't mind, I love what I do. You can send me an email to jvetter@mercurylending.com or get more information at www.jonathanvettermortgage.com. Emails go to my computer and my phone and I can respond quickly in most cases. If you feel comfortable talking about it, call my cell phone at 650-465-5846.

Tags: Neg-Am, Interest Only, Index, Refinance, Option ARM, Pick a Payment, Margin, Points Sub-prime
Comments

Friday, March 16, 2007

What is a fair fee for a mortgage broker?

What is a fair fee for a mortgage broker?

As the market changes, and it gets more and more difficult for corrupt mortgage brokers to make 5 points per deal, what I am questioning is what should a mortgage broker make? My personal feelings is that every broker should come to their own conclusion as to what they will "charge" their clients for their services, and then offer them the option to structure the loan accordingly. The reason being, there are many ways we as brokers can get paid, I think it should be up to the borrower how that is, and the borrower should make the call as to what rate and terms that is.
So what I do is, structure 3 different options of cost and rate, so that I make 1-1.5 points. My client then makes the choice what rate and cost they want. I have come to the conclusion that with the level of service and experience I provide, my clients are getting a bargain. My question to all of you is, what do you think is fair for a mortgage broker to make in points?
I guess there are a couple variables. The type of transaction being one. But overall, I think we can come to a solid conclusion.
Please give me feedback, what do you think is a fair wage, what is excessive, what is a bargain.

Thanks
Tags: purchase, Refinance, Fees, commissions, points
Comments (2)

What has become known as an "Option ARM" is not the best option in most cases.

What has become known as an "Option ARM" is not the best option in most cases.

The Mortgage market has been overwhelmed by lenders pushing, even specializing and promoting this loan called the "Option ARM". You may have heard it on the radio, you may have seen it on TV, I guarantee you have received something in the mail about it. It promotes the 1% payment rate, and boasts about being fixed for 5 years, or more. The reality is, there are 100's of options out there for this loan, and I have searched the blog posts front to back, and don't really see an unvailing of what this loan is. I don't want to come off like I am bashing this loan program, but I want to stress that there are good ones and bad ones, and I hope I can explain the pros and cons so that you understand my point of view.
Reality, this loan gives you 4 payment options. It gives you the flexibility every month, to choose the payment you want to make, and make it. 4 hypothetical payments on a $300,000 loan are listed here.
1% Start Rate $964
7.5% Interest Only $1,875
7.5% 30 or 40 year Amortized $2,097
7.5% 15 Year Amortized $2,781
The first thing that needs to be known about this loan, and many lenders won't focus on, is that if you make this first payment of $964, your loan balance will INCREASE. Again...INCREASE. Ok, If I am every telling someone about this option, this is the thing I stress the most. The basis for this loan is that if you make the $964 payment you loan balance will increase $911 every month you make this payment. This loan was designed for people who are self-employed or on a commission only type position where your income may vary month to month. I believe in this loan in some cases, but those cases are few and far between.
Cons of this Loan:
People promote the 1% payment rate, but don't explain that in some cases, the actual interest rate the bank is charging you, the 7.5%, is costing you $911 more than the 1% Start Rate that you can pay. Therefore until you make more than the Interest Only payment, your loan balance will keep going up and up.
The 7.5% interest rate is adjustable in most cases, though lenders have rolled out new loans like this that are fixed for 5 years, so that fear of your loan adjusting doesn't come until after year 5. The loans are based on an Index and a Margin. The Index is what changes from month to month. You may have heard of these indexes, they are called the MTA, CODI, COSI, COFI, or Libor. There are others out there, but you get the idea. The index is what makes this loan adjust. As the index changes with the market, up or down, your interest rate changes accordingly. The margin is what the loan officer chooses to give you, based on how he/she wants to structure your cost and type of prepayment penalty if any. Usually the choice is for the highest margin and largest prepayment penalty, because the loan officer will make more money. You don't have to have it that way, always ask questions to get the best deal for you. If you have a short term outlook on the property, like 4 or 5 years, then maybe this program would work, but if you are in this home for the long run, it just isn't the loan for you.
Pros of this Loan:
Flexibility is the only pro. If you use this loan how it was designed to be used decades ago, then you can make it work for you. But, I have an alternative solution for you, that makes the most sense in most cases.
If you can qualify for this loan, there are two things that are likely, you have a decent credit score, and you have some equity. (There are exceptions, but discussing exceptions would probably put you to sleep :)) These loans are usually offered if you have 10% equity or better. If you have decent equity and credit score, my recommendation is to look into a more stable first mortgage, like a 30 year or 40 Year fixed, even a longer term adjustable rate mortgage like a 10 Year ARM with an Interest Only Option, that will give you more stability than the Option Arm, but the key with why this is a better solution, is you can get a 2nd mortgage, or my recommendation of a Home Equity Line of Credit (HELOC), behind that first mortgage, to offer the flexibility you are looking for. (Look for my blog on Home Equity Line of Credit's for more detailed information). The main reason for using this scenario over an Option Arm is purely interest cost.
Option Arm Interest Cost at 7.5% listed above = $1,875 (Look Above)
Same Loan Amount, Interest Cost on a 10 Year Interst Only at 6.5% = $1,625
The difference is $250. Yes... $250 per month just in interest!!!!!
If you choose an option arm over a standard ARM, you are losing $250 per month (in most cases). You want flexibility, get a 10 Year Interest Only or 30 or 40 Year Fixed, and get a Home Equity Line of Credit in addition to it, so that when you have months where the larger payment of $1625 is too much, you can use the HELOC to make up the difference. But, and this is a big but.., you must try to pay down that HELOC when you can. If you don't, your loan balance will keep increasing and increasing, and unless you are fortunate to have $100,000's in equity, your investment will go away, and you will be forced to sell because you can't afford the ever growing mortgage, with little to show for it. I may sound harsh, but the reality is, this can happen, and people in this business don't stress that fact. When homes were appreciating like crazy, maybe 10-20% per year, this loan wasn't really a factor, because your equity would grow. Those days are over for now, without a change on the horizon.
Don't make that mistake of not examing ALL of your options. If you feel you are being pressured to take one loan over another, there is a reason, that loan officer has an alterior motive, usually based on pay. Option Arms can pay a loan officer up to 3% of the loan, that the bank will pay. Not you directly, but indirectly, the bank pays it directly. That money is coming from your interest rate, and doesn't need to be there. It also comes from the prepayment penalty he/she is telling you that you have to have, well, you probably don't "have" to have it. Always ask questions.
Call or email me if you have any questions, this may be the only option for you, but I don't think it needs to be. I can lend in California and Oregon. If you aren't located in either, still call, I don't want you to get something you shouldn't. I don't mind, I love what I do. You can send me an email to jvetter@mercurylending.com or get more information at www.jonathanvettermortgage.com. Emails go to my computer and my phone and I can respond quickly in most cases. If you feel comfortable talking about it, call my cell phone at 650-465-5846.

Tags: Neg-Am, Interest Only, Index, Refinance, Option ARM, Pick a Payment, Margin, Points Sub-prime

Tuesday, March 13, 2007

Fraud- How does it happen, why does it happen?

Fraud- How does it happen, why does it happen?

I have submitted another posting on the Real Estate Finance market, with basic news on what is happening every day. I think the next logical step is to talk about WHY this is happening. The main motivation and reason that a market collapses or gets saturated is greed. There is soooo much money to be made on every side of every transaction. Realtors, mortgage brokers or lenders, title and escrow, appraisers, everyone involved, gets paid, and gets paid well for their time. With the increase in demand over the last 4 years, the attractiveness of joining the real estate workforce has gotten even more attractive, and relatively easy to get started. Why wouldn't people want to be involved? (I am one of them!!)
What this did was open the doors to the negative part of the business. Everyone wants to "eat" while there is food on the table, and eat well. This desire to "eat", fueled the market, and created the inevitable demise of the mortgage market that we are starting, and I stress, starting...to see. It is only the beginning.
On the mortgage side, there are many types of fraud that exist, and ultimately kill the market. Some of the most common forms of fraud are:
Pushing appraisal values
Faking or altering income or asset documentation
Giving cash-back on purchase transactions
Flipping Properties- (not like you see on TV)
Pushing Appraisal Values
This is a basic form of fraud. Lenders are relying on an appraiser to come to a decision on the value of the property without "heat" or "pressure" from a seller, buyer, mortgage broker, or real estate agent. That "pressure" can cause them to inflate the value, for fear of losing future business from the parties involved. Now, in the case of the 3 years ago when the market was appreciating every day and you didn't have to really worry about the value, it didn't really matter as much, but when now, we are faced with the thought that home prices possibly coming down, this "pressure" can hurt the people that are financially banking on the appraiser, the lender.
Faking or Altering Income of Asset Documentation
This is a technology age. Creating fake forms of income or asset proof is out there, and I am fighting against it daily. If I have a borrower that has a credit score, makes a certain amount of income, and according to the market, deserves a certain rate, and I am getting shopped and beat by someone that is quoting a rate 1 or 2 percent lower than my quote, with the same cost, something is going on. There are two possibilities, they are faking documentation to get into a better program, or they are pulling a "bait and switch" type scheme getting the borrower to go with them, and then switching the terms upon the loan signing. Both cases are forms of fraud and are not just unethical, but are illegal.
Giving cash-back on purchase transactions
One of the more common types nowadays is when a buyer will get cash back after buying a home. This is a form of fraud, in that again, the appraisal is ceritifying a value of the property, and that extra out of escrow cash-back is distorting that value, and the lenders investment.
Flipping properties
I am not talking about when a person buys a home and improves it and sells it the next month for a profit, that is just good business. I am talking about when someone buys a property, sells it to a friend for a profit, who sells it to another friend for a profit, and sells it again to another friend for a profit. This is an evil type of fraud, because each person along the way makes a killing, and the final lender is the one left with the bill.
Fraud is happening every day, that is nothing new. When people can make 3-5 points on a transaction (in California that is up to $25,000 on a normal transaction!) and all you need is a decent credit score, mortgage brokers can make a killing, and in the long run, the person that is left holding the knife is the bank. In this case, New Century(update at http://money.cnn.com/2007/ 03/13/markets/subprime.reut/index.htm?po stversion=2007031314), the second largest sub-prime lender, is on trial, and going to be dealing with it for years, if they are even going to be around. I think over the next few years we will see a decrease in fraud, because lenders won't ignore potential red flags, and a balancing of the market, so that we will get back to a more honest business.

Tags: purchase, Mortgage, Refinance, Fraud, New Century, Appraiser, Sub-prime, flipping, w2's, assets, cash-back