First Time Homebuyers – Page 4

Last Night’s Save: Another Buyer Rescued

I did it again last night: I wrote a loan application to save a purchase where the Buyers had gone to two other mortgage companies. Those companies couldn’t find a way to approve their loan request.

The mortgage biz ain’t rocket science. Why is it so difficult for mortgage people to get their act together?

I met a couple last night who are purchasing their first home. They have good credit, they work hard and they are receiving a gift of $40,000 from her Mom to buy the home. Her aunt attended our meeting too because she is cosigning on the loan with them.

When this situation was first presented to me by the Realtor the day before, I kept thinking there must be something I’m missing or something really bad about this loan application that the other companies can’t get it done.

I knew the fundamentals for mortgage prequalification were in place. I had spoken briefly to one of the clients on the phone; the rest of the information had been provided by the Realtor. I saw a potential “save” of this loan application using an FHA Insured mortgage. FHA is known as “the story loan” and, if you know your guidelines, you can help a lot of folks achieve their dreams of homeownership.

I came to our meeting at the real estate office warily and with an exit strategy so I wouldn’t look too foolish. I had told the Realtor the night before that all looked good and that I could find a loan approval. Now my reputation was on the line, and I hadn’t even met the clients yet.

I continued my wary thoughts last night. I grilled the clients with lots of extra underwriting-type questions just to get to the root of the problem. After two hours of this and a call to my Ops Manager (the smartest man I’ve ever worked with in the mortgage biz), I had the clients sign the loan applications and we were on our way to obtaining a loan approval and a closing.

The issue at hand was the husband’s employment history. At first blush it seemed awfully spotty. But, when the time was taken to sit there with a blank sheet of paper and note the dates and the continuity of same, well, then the puzzle was solved. The rest of the qualifications were fairly straightforward.

I’m still scratching my head wondering why the other mortgage “professionals” couldn’t get this done. But, then, a lot of the people remaining in the biz grew up during the fantasy boom when all you had to do was take someone’s pulse to approve a mortgage loan. A loan officer didn’t have to actually “think.”

I must confess, too, that as I wrapped up the paperwork, photocopied the ID’s and asked the clients for referrals, I had a nagging suspicion that I was missing something. In the end, I realized my experience of having sat through thousands of interviews like this had served me well. The “detective work” was rigorous, leading me to solve the problem; the rest was automatic.

I guess experience really does count for something. That and a thorough knowledge of FHA underwriting guidelines got me through to a successful conclusion.

Note to Sellers: CHILL OUT!

Holy Cow! You would think the market was still red hot the way Sellers are (still) behaving! Either they have no patience with the new (difficult) paradigm of mortgage financing or they still think their homes are worth $42Million!!!

Really, of late I’m seeing this ridiculous attitude from Sellers threatening to kill deals and hold the Purchasers’ downpayments all because the process of obtaining financing is more difficult and thus slower than it has been in recent years.

What part of: THE BOOM WAS AN ANOMALY or HELLO? IT WAS A FANTASY don’t these people understand???

I hired a new loan officer this week. He related a story of a Seller who legally threatened to cancel the transaction (serving a “Time Is Of The Essence” letter on the Purchaser) after only 4 weeks. The Purchaser was in the process of obtaining a gift from a relative for the extra $5,000 they needed to close. This can be a rather delicate process of asking your family for help to buy a home, so it can take a couple days.

When the Purchaser got the news about the cancellation threat—the TOE—they were so infuriated, the let the gift go and ultimately were denied for the mortgage because of insufficient assets to close. Stupid Seller lost a qualified Purchaser through lack of patience. I’m sure there are four other Purchasers lurking in the wings ready to step in and pay full price and close in 36 hours, NOT!

I have a loan closing this Friday where the poor Purchaser went to two other mortgage companies before finding his way to us. We got the loan done in a fairly timely manner (six weeks), but not without much travail and anxiety. Meanwhile my telephone blew up everyday as I had Realtors, Attorneys, the Purchaser and the Seller calling me with one question: “When are we closing?”

Fortunately my background is in customer service, so I know how to field such calls. But ultimately, I can’t answer the question, literally, until the closing date is set.

Two and a half weeks ago, the Seller served a TOE (Time is of the Essence) letter on the Purchaser. We got the loan cleared in time and scheduled a closing for the day after the TOE date. Pressure relieved, everyone got into place to attend the closing.

But then we discovered the Seller wasn’t even truly ready to close! Apparently there were documents needed from the condominium association that had never even been requested by the Seller’s attorney! So, even if the Buyer had shown up on the TOE date with cash in hand, there would have been no closing! How did they have the nerve to threaten to cancel and they were not truly ready to close?

Where do these people find the gumption to be so impatient and arrogant? Do they even READ the newspapers?

Then there are the stories I’m still hearing from Buyers about prices.

Granted there are some crazy Buyers out there who think EVERY house is in foreclosure and can be bought up for fire-sale prices; those Buyers are not serious at all.

The serious Buyers, on the other hand, the ones who truly want to own a home, are making offers on homes, and discounting from the asking price by what I would say are reasonable percentages. For example, a list price was $485,000 for a 2 family home, and the Buyer offered $460,000. That’s not ridiculous, nor is it insulting. The Seller wouldn’t even counter-offer!

A Realtor yesterday showed me a listing he just took. We all know the home isn’t worth a penny more than $575,000 and will probably sell for around $550k-560. The Seller insisted at the listing meeting that the Realtor take the listing at $629,000. Absurd. Do you want to sell or not Mr. Homeowner?

These Sellers are still thinking there are fourteen Buyers for every home wandering the streets willing to pay top price and carrying wads of cash in their pockets so they can close in ten days. Wake up call for Mr. and Mrs. Seller: THOSE DAYS ARE OVER!

I want to send a package containing a GIANT CHILL PILL to each of these Sellers with a note that says, “Hey Seller, CHILL OUT!”

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It’s All About the Monthly Payment

I learned early on one fundamental of buying a home: it’s all about the monthly payment. If you can’t afford the payment, you don’t buy the house. Pretty darned simple math, really.

Truly, the monthly payment is the only guide you should use. Interest rates change, prices of homes go up (and down), economic conditions vary. Focusing on any one or even all of those issues can only obscure the truth of owning a home: every month you have to write a check to pay the mortgage. It doesn’t really matter who is in the White House, what the economic forecast is, where interest rates are or what the value of your home is: ya still have to write that check!

I was reminded of this one fundamental truth of homebuying during this thread over at the Craigslist Housing Forum.

In the many, many, MANY interviews I have had over the years with homebuyers, truly, the monthly payment is what people care about the most.

I’ve developed a method where, once I calculate the payment on my handy-dandy calculator, I recite the total payment (including Principal, Interest, Taxes, and Insurance, or PITI) out loud, then look up for the reaction on people’s faces.

If I see a look of horror, I’m rather concerned about doing the loan for those folks.

This happened a lot during the “fantasy” years of the Sub-Prime boom. Being old-fashioned, I was still quoting 30year fixed rate loans when the entire planet was originating 2/28, I/O ARM loans. Sure, those loans had initial monthly payments that seemed affordable, but, when all was said and done, well, I don’t think I need to describe the consequences—just turn on your news channel, the results are splashed all over it daily.

Tax time advice for Homeowners

Do something spectacular and unusual this year when you visit your tax professional: tell her you don’t want a refund next year more than $1,000!

Yes, you read correctly, NO REFUND next year more than $1,000.

Wow, this is a radical concept.

Everyone knows that we Americans love our tax refunds. That late winter/early spring windfall of cash helps out with so many different financial goals. Doesn’t it?

I don’t think so.

I think most people get that money and fritter it away. Spending it on a new flat screen television or a spring wardrobe or a weekend away at Mohegan Sun: this isn’t prudent financial planning. And, if you’re a homeowner, you need to plan your finances carefully.

There’s always work to be done on the house. Or maybe there’s the credit card bill from your purchase of new windows last fall to pay off.

I digress. Let’s return to the concept of that “windfall” of a tax refund.

The truth is this is just a repayment of an interest-free loan you made to the United States government, nothing more.

When your employer takes money out of your paycheck, what is really happening is you are making an advance payment to the government of your tax bill. But that tax bill won’t be prepared by your tax professional until next winter!

And, if you are a homeowner, then you will find your tax bill is substantially lower than the one calculated by your employer. The reason is simple: your mortgage interest and property taxes are tax deductible against your income.

That means your “taxable” income is actually lower than your “real” income!

That’s why you get the windfall, the refund. You are getting back your own money that you loaned to the government all year.

Uncle Sam repays it to you with ZERO interest! There’s not even a “Thank You!” note enclosed. Believe me, if you made an interest-free loan to me, I’d definitely say, “Thanks!”

Often that refund is a substantial chunk of change; it’s a lot more than $1,000!

Think about it: if your refund is $6,000 that’s $500 a month you overpaid your income taxes! You can do a lot with that $500, can’t you?

So, do something radical, spectacular and surprising this year: tell your tax professional you don’t want a refund more than $1,000 next year. Your tax professional—admiring your obvious financial smarts—will then calculate how to reduce your withholding on your paycheck so that money you’ve been lending the government goes into your pocket each payday, instead!

Armed with that advice, you then pay a visit to your payroll department, file a new W-4 withholding form and KEEP YOUR MONEY!

I’ll bet you can put it to better use that way in your monthly budget than waiting for that windfall next year.

[tags]Word Press, Technorati, SimpleTags, Tax Time, Tax Refund, Mortgage Interest Deduction, Home Buyer, IRS[/tags]

“Asking Price” Doesn’t Matter to Realistic Buyers

A Buyer who worries about asking price is missing the bigger picture of how to negotiate the purchase of a home.

The methods used to determine asking price on any given property are so wildly varied as to defy clear definition. Especially as emotion plays such a large part in the ultimate decision.

In this market, in my opinion, the Buyer should set their own price.

A Buyer who worries while shopping about asking price and list price is missing the bigger picture of how to negotiate the [tag]purchase of a home[/tag].

The [tag]Realtor[/tag] doesn’t control you—and you should never let them, either!

1. Create your wish list for the home you want.
2. Identify the neighborhood(s) you like.
3. Get out there and shop, shop, shop (that means: do NOT sit at home looking at internet listings; all you’re seeing are ADVERTISEMENTS, not homes).
4. Being out there you gather personal data to compare/contrast against your wish list.
5. Being out there you develop your own personal “gut-feeling” of [tag]market price[/tag].
6. Make offers. That’s how you, the Buyer, determine the market price. (btw: I gave the SAME advice during the boom).

If a Seller is truly interested in selling, you and the Seller will work out your differences on price (in other words: your opening bid is almost NEVER your maximum price, nor is it the Seller’s bottom price) and find that equilibrium wherein both parties are happy and there occurs a “meeting of the minds.”

If a Seller is unrealistic, you will walk away from the [tag]house[/tag] because no amount of patient negotiating is going to convince that Seller of the “true” market price.

This isn’t rocket science: it’s just patience and a realistic appraisal of the market for [tag]home buying[/tag].

[tags]Word Press, Technorati, appraisal, SimpleTags[/tags]

Everything That Was OLD is NEW again.

You know, there was a time in the mortgage business when you had to actually use your brain to qualify your clients and work your loan applications. It took a certain amount of intelligence and dedication to read and understand the underwriting guidelines for any given loan program.

I remember when we would conference with an Underwriter with questions such as, “There is a loss of income on the Borrower’s tax returns for the two-family investment property he owns. How do I use that income, or loss on the application for my new purchase?” OR “The Borrower has salaried income as well as a Social Security pension paying her $1400 a month. Can I ‘gross up’ the Social Security income for this FHA loan application since it’s tax-free?”

Those were the OLD days: we actually asked for, received and read the Borrower’s tax returns!

Yes indeed, back in the day we loan originators used our brains for issues far more complicated than “What’s a good job title on this Stated Income loan?” We didn’t depend on Account Representatives from huge Sub-Prime Banks to tell us what to fill in on the loan application or how to structure the loan file. (When confronted with that kind of treatment in the past few years, I would fairly bristle at the notion these reps. had that I didn’t know what the hell I was doing or that I wasn’t capable of understanding their guidelines. I would describe what my client really had while the rep. was trying to get me to change things to “fit” their loan requirements. The experience was a lot like speaking Latin to and elephant)

And, when confronted with valuations falling below what you need to help a client refinance a home, you had to come up with other creative—and intelligent—solutions to achieve the client’s goal of lowering the monthly mortgage payment or converting an ARM loan to a Fixed Rate loan. Solutions such as, “Mr. J. the appraisal is not high enough to justify a loan which will payoff your existing loan as well as cover all your closing costs. But, if you can bring money to the table to pay for part of your closing costs in cash, then I can lower your mortgage payment by $223.00 a month.”

Or to attempt to perform a complicated legal maneuver here in New York State called a CEMA; a necessary legal assignment of an existing mortgage to a new Lender so as to avoid paying the exorbitant NYS mortgage transfer tax (now up to practically 2% of the loan amount). By doing this legal dance-step you could substantially reduce the Borrower’s closing costs.

That was OLD. Now we’re doing those CEMA’s again, even on purchases! It’s all NEW I tell ya’.

Solutions. Problems. Brain-power. Problem-solving. Yes, yes, indeed, those were the days and that’s what it was all about.

Well, those days are back again. Everything that was OLD is now again NEW.

We’re spending the time thinking and working out problems to help our clients achieve their goals—whether that be purchasing a home or refinancing a mortgage loan.

The loan products are out there, too. You just have to take the time to read the guidelines and ask the pointed—and intelligent—questions of your Lender reps. so you come to understand what Banks are doing today in their corner of this otherwise confusing “mortgage-world.”

I spoke to a Realtor a few minutes ago. He has been in the business just over four years. He told me of a conversation he had recently with a mortgage professional with twenty years experience. The mortgage pro said, “The last four years were like a Dream. Before that four year period, that was a REAL market. And that is what you are seeing today, a real market where we have to think to work out the problems and really earn our income.”

The Old REAL market is back again, and it feels brand NEW.

Your personal market value “divining rod”

Go out there as a “dowser” to learn about homes in your chosen neighborhood. You will determine market value better than any Realtor or appraiser or homeowner because you will have been comparing homes, checking features against price, and meeting Sellers.

There is long-standing folklore about those interesting people who walk around with a divining rod searching for water and the best place to dig for a well. Those folks call themselves “dowsers.”

“Dowsing is as strictly defined the claimed ability to discover underground sources of water or metals by means of a ‘dowsing rod.’ Another term used is ‘divining.'”

While that may be myth, there’s something to be said for developing your own ability as a “dowser” when shopping for a home. Especially in these crazy times when Sellers stand firm on prices from 2005 and refuse to price the house to sell. The fact is, without Buyers driving the market prices down, those prices won’t change on their own. And there are not many Buyers walking the streets these days.

If you have decided that you must own a home now—regardless of market craziness—then you’re obviously going to be out there on the streets looking for a home to buy.

With reluctant Sellers and a dearth of Buyers, what’s a person to do?

I say, “DOWSE!” (is that actually a verb?)

Your “divining rod” as it were, is your own personal market value indicator. You create this divining rod by researching property values in your chosen neighborhood.

1. Research the values using internet tools. The ‘net resources available for this are many and varied: propertyshark.com, zillow.com, MLS.com, and Realtor.com are good starters. But the internet is not the be all and end all for information about the home you wish to buy. Don’t fall into the trap of relying solely on the ‘net for your research.

2. Get out there and look at [tag]houses[/tag]. There is no substitute for visiting houses in person. Whether you do this on appointments with [tag]Realtors[/tag] or just by visiting open houses on the weekends (I recommend BOTH methods), you must undertake this important facet of your research for a home.

When you are looking at lots of homes—both online and in person—you will soon develop your “divining rod” and you’ll be a home-buying-dowser!

You will get a sense of the features of different homes at different price points.

You will learn the quirks of the people selling homes and how it is possible for someone to have a ridiculous expectation of what their home is worth.

You will get to see yourself more clearly—in your mind’s eye—in the [tag]home of your dreams[/tag].

Most of all, you will develop a personal perspective on prices and thus market value in your desired neighborhood.

With that experience, you will be a better negotiator on price. Because you will have developed a “gut instinct” (or divining rod!), you can better set a maximum price you’re willing to pay for any given home. You can see past ugly wallpaper and ancient carpeting; you can better understand when a Seller is being completely unreasonable.

Get ready to go out there as a “dowser” to learn about homes in your chosen neighborhood. You will determine market value better than any Realtor or appraiser or homeowner because you will have been comparing homes, compiling features versus price, and meeting Sellers.

Dowse away!
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When is the best time of year to buy a home?

If you know that buying a home is the right thing to do for your own personal reasons, then YOU make the time. YOU determine the “when.”

Is there a “best” time of year to buy a home?

Is there a time of year when Sellers are more willing to negotiate because they are more desperate?

When is that time? When?

If you trust your fundamentals, if you know that buying a home is the right thing to do for your own personal reasons, then YOU make the time. YOU determine the “when.”

Maybe it’s because I teach my clients how to negotiate like piranhas.

Maybe it’s because I’ve been looking at (and dreaming of) real estate since I was in my twenties living in an apartment in Astoria.

Maybe it’s because of my eighteen years in the mortgage business working all year ’round through all kinds of markets.

Whatever my reasons, I will say to you this: YOU make the time because YOU get out there and find, force and MAKE the deal that you’re happy with.

The “when” is not based on the market; rather YOU determine the when by shopping and finding and making your deal.

I believe in negotiating hard and tough and forcing a price. I believe in getting up and walking away from the table.

I believe the “dream house” exists in our minds, therefore you can never truly “fall in love” with a house.

I believe you, as a Buyer, truly control your own destiny and I believed that even when the market was overheated and Sellers were insane. (In my long experience, Sellers are ALWAYS insane! You just have to search until you find one who’s willing to be a bit more reasonable than the rest!)

Maybe it’s because I believe it’s all up to YOU.

Make your own Supply to meet your Demand

Toss economic theory out the window. If you are ready to buy a home—for your own reasons—then it’s time to make your own economic theories and make ’em stick.

So you know you definitely want to buy your own home. No matter the market conditions, interest rates, or status of A-Rod’s quest to hit Home Run #500, you have your reasons.

If that’s the case, how then to find a house at a price you’re willing to pay?

There is a glut of homes available for sale, but you can be pretty sure there is also a glut of Sellers out there with unrealistic expectations as to the price they’ll accept. And those expectations might very likely be out of line with your personal viewpoint on market value.
Back in Economics 101 we were taught about Supply and Demand, and how one affects the other, especially regards price.

I say, chuck the economic theory out the window. If you are ready to buy a home—for your own reasons—then it’s time to make your own economic theories and make ’em stick.

Here’s how, then, to find the Supply of houses you’d be willing to buy and thus meet your own personal Demand.

1. Determine a monthly payment you’re comfortable with.

When you are prequalified, your mortgage professional will calcluate for you the monthly payments on a maximum loan based on your income. If the maximum loan you’re qualified for has a payment beyond your comfort level, then ask your mortgage pro to “step it down.” You’ll have a payment you’re comfortable with and you’ll know, based on the new calculations, your maximum price.

2. Shop, shop, shop.

Create your own “gut-sense” of market value. You do this by looking at homes—in person—in your chosen neighborhood and learning the price points of different houses with different amenities and sizes. Look at a lot of houses.

When you are out shopping for a home on a Saturday and a Sunday, make offers. In New York you can make as many offers as you like; until you sign a contract of sale with your attorney, you’re not committed to anything. This is a good way to get at the essence of a Seller’s mindset: are they serious about selling, and what price do they really have in mind? At worst you’ll find out just how unrealistic a Seller is with price expectations. When you meet those kinds of Sellers, it’s time to move on, and you haven’t lost much time “falling in love” with that house!
While negotiating offers, determine the maximum price for any given house. You set that price by trusting your “gut sense” of market values because you’ve been out looking at lots and lots and lots of houses.

When you negotiate offers, first with your opening price and then up to your maximum price you create your own opportunities for “corrected prices” by seeking out the Homeowners who will sell to you at YOUR price.

3. Trust your “stuff.”

In baseball, when a pitcher is a bit flummoxed, the catcher or coach will come out to the mound and say, “Trust your stuff.”

When you’re shopping for your home, the “stuff” is all that homework you’ve done by looking at homes in your chosen market, developing an instinct as to true market price.

The second ingredient in your “stuff” is the knowledge of your personal “fundamentals.” These fundamentals exist with you, not out in the ether expressed on some internet site somewhere as an unfathomable variable in a real property valuation equation. YOU are the equation: your instinct, and your fundamentals. Taken together, it’s your “stuff,” and you should trust it!

The fundamentals are very simply:

-Do you want to rent or own?
-Can you locate a house at a price you’re comfortable with?
-Will you own that house for a long enough period of time to make sense considering how much money you’ll invest to make the purchase?
-Are there intangible benefits to owning that you want to realize, and that you absolutely cannot obtain by renting?

Those are the fundamentals.

A lot of people think there should be some baseline, some pre-defined “bottom” of the market and a condition of economic equilibrium at which point it makes sense to buy a home. They think there is some fixed equation like the Pythagorean Theorem when it comes to real estate market prices and timing.

Umm, no. There’s no such thing. Take it from someone with 18 years professional and 21 years personal experience with real estate.

Homeownership is what you make of it, quite literally. It starts with a dream, continues with your comfort level with the numbers, and finishes with your decision as to your own personal fundamentals.

Tax Time Benefits of Homeownership

One important financial benefit of homeownership is often overlooked. Only at tax time, it seems, do folks think about these benefits.

The benefits of homeownership extend far beyond the feeling of satisfaction you get when you return on a cold February evening to your own hearth and home.

The experience of owning a home changes you in so many ways, not the least of which is financially. Your awareness of all things financial increases dramatically when you own a home. You become more alert with regards to budgetary considerations.

One important financial benefit of homeownership is often overlooked. Only at tax time, it seems, do folks think about these benefits.

Depending on your income level (consult your tax professional), you can likely deduct the interest on your mortgage and property taxes. Your “Adjusted Gross Income,” is lower. You pay less income tax because you own your own home! WOW!

My reminder to you is this: don’t forget about tax time once your return is filed.

Prepare for the rest of the year. Your tax professional can suggest other deductions. You may only need to keep some receipts, track mileage, or increase retirement contributions.

Ask your tax professional how to decrease your tax withholding at work, you’ll take home more money weekly.

I believe homeownership is one of the greatest experiences we can strive for. I have dedicated my 18 year career as a mortgage professional to that end both for my family and for my clients.

I am happy to recommend these excellent accountants to my clients:

Jessica Vaiana CPA
Vaiana & Co.
516-502-6760
39 Maple St
Garden City NY 11530
Se Habla Espanol

Gilbert McLean CPA
718-252-6213
1193 E 39 St
Brooklyn NY 11210

Janie Bradley CPA
718-221-2909
1785 Fulton St
Brooklyn NY 11233

Wilson Charles
Intellifacts Services
646-423-7208
2667 Pitkin Ave
Brooklyn NY 11208

Roseline Borno CPA
RM Borno Management LLC
212-867-5096
60 E 42 St, Suite 1259
New York NY 10165

Elvin Olivera
Castle Hill Business Services Inc
718-829-3655
1208 Castle Hill Ave
Bronx NY 10462
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