Straight Talk Real Estate

End of the Real Estate Crisis?

2008-05-18T12:05:00.000-07:00

Well, to some the end doesn't seem anywhere near. But, on the other hand, if you know what's happening behind the scenes you might think twice.

#1 - The Office of Federal Housing Enterprise Oversight (OHFEO) has once again reduced liquidity requirements for the two major GSE (Government Sponsored Enterprise), Fannie Mae and Freddie Mac. Becuase of this liquidity ease, rates on the new jumbo conforming loans, those mortgages over $417,000 to $729,750 dropped drastically this last week.

A $500,000 mortgage may have cost 7% the week before, can now be obtained at 6% or under. That's over a $300 difference in payment. This change will surely help home owners with equity refinance to reduce payments or consolodate debt.

#2 - Declining Market Policy Removed. Fannie and Freddie both announced this week that as of June 1st, 2008, the increased down payment requirements needed when purchasing a home in declining markets will be lifted. Previously, loan guidelines allowed for 95% financing. That was reduced to 90% for the last several months. This requirement is being lifted and things being put back the way there were.

Does this mean that Fannie and Freddie believe the worse of the decline is over? I would think so!

Now is one of the best markets to be buying real estate in. Prices are still down, financing is considerably cheap compared to historical averages, and it's easier to qualify once again.

Will the days of 100% stated income loan return? I doubt it, but these two moves are surely moves in the right direction to get housing back on its feet.

~ CHUCK

Fannie and Freddie to the rescue???

2008-03-19T11:32:00.000-07:00

It's not the rate cuts yesterday that will save the day but the change in requirements for Fannie Mae and Freddie Mac set by the Office of Federal Housing Enterprise Oversight.

The OFHEO reduced reserve requirements that Fannie and Freddie must abide by, by 10% which will funnel $200 Billion into the secondary market to ease the liquidity crisis we have experienced.

Based on the economic data, rates for conforming first mortgages should be incredible right now, those days are sure to come as banks reduce the spread between the 10 year bond and 30 year mortgage rates that they have had priced in. Most banks have priced in the largest spread seen since about 1982 with 3.5% built in. This has kept interest rates higher than they 'should' be or at least higher than we are used to.

Watch the next coming days and take advantage of a lower 30 year fixed rate conforming mortgage.

For up to date information, tune into Straight Talk Real Estate, Live at 6pm PST on KRLA AM-870 or streaming live at www.StraightTalkRE.com.

~ CHUCK

Jumbo Conforming Loans, what's it mean to you?

2008-03-10T15:09:00.000-07:00

It's here...drum roll please. New higher loan limits from FHA and Fannie Mae, but what's it really mean?

We haven't yet gotten all the details for FHA, but here's the details that Fannie Mae released today (some of them I think are important for you to know).

You can now get a conforming loan of up to $729,750 (in most areas). They are calling these, Jumbo-Conforming if the loan is over $417K up to the maximum limit.

For this range of loan, there are certain restrictions put in place that I feel defeat the whole purpose of the increase.

For refinance transactions:
1. Cannot consolidate a first and second, can only refinance the first.
This is insane. Most folks in trouble because of large debt and rising interest rates have a first and second. Most, if not all lenders currently carrying second mortgage WILL NOT re subordinate the second lien, so no luck with this change helping these folks.

2. No Cash Out. Can only be used for rate and term refinancing. Most folks needing help have run up credit cards to offset debt so the cash can pay the mortgage. Sorry, can't consolidate debt on this program.

3. Maximum loan to value: 75%. 95% max combined if you can get your existing second mortgage to stay in place (like that's likely to happen...sarcastic here). 75% max loan to value. This will help those with homes valued over $556K to about $950K.

4. Maximum debt ratio's of 45% and no income documentation waivers. The folks in trouble can prove income, most I see are well into the high 50%'s on debt ratios.

The purchase side of this plan is tight, but a little more liberal, allowing 90% loan to value.

In either case, if you have a higher loan amount, take the time to see if this can help you. For those that do fit the mold, it will significantly help!

Take the rise in loan amounts with a grain of salt. I was believing this package would stimulate the mortgage market and real estate market, now I'm having second thoughts!

Anyway you see it, you gotta still tune into Straight Talk Real Estate! Sunday's, same place, KRLA AM-870 on the radio dial!

Conforming Change could save you $$$

2008-01-27T12:14:00.000-08:00

The upcoming change in conforming loan limits from $417,000 to $729,750 could save you a lot of money. Not to mention save the housing market from further decline.

On a $700,000 loan, a rate reduction from 7% to 6% can save you well over $400 per month, or nearly $5,000 per year. If you make $200,000 per year income, that's like getting a 2.5% pay increase. Not bad.

Analyst are predicting we could see a 2%-3% immediate increase in home values in southern california.

We've been telling buyers and investors alike, that this has been the time to buy. Values are down and rates are incredible. Those who don't act quickly may just, 'miss the boat'.

Refinancing will funnel money back into the economy becuase many home owners will be saving a good portion of their income to spend elsewhere rather than on the mortgage. Sellers currently on the market to sell becuase they couldn't afford a new Jumbo loan will take their homes off the market reducing housing inventories.

There will be more move up buyers in the market becuase of the affordable financing on the larger homes.

With less inventory and more buyers, I think a 3% market gain is pretty conservative.

Check out the Straight Talk Radio show, we'll be covering some hot topics like these and some awesome investment opportunities.

CHUCK

Real Estate Market Turn Around?

2008-01-03T11:28:00.000-08:00

There's obviously no way to really know when the market will make a complete recovery, but think about this little thought for a moment.

It's hard to sell a house right now. Especially for an owner seller (not a bank) as they have to price compete with all the bank owned properties in their neighborhood and have to significantly price reduce to have any hopes of getting it sold.

Recently, I check the Conejo Valley for homes over $600K. The number of listings dropped by about 35% between October and now. Sellers who don't HAVE to sell, are seeing the writing on the wall and taking their homes off the market to wait for happier times.

OK, so now what? Less homes on the market, less competition. A rising numbers of buyers will start to hit the market around tax return time. Rates are still amazingly low with a 30 year under 6% right now.

Couple this with First Time Buyer Down Payment Assistance Programs (see www.FTHBLA.com for more info) and more and more buyers will be in the market.

Add buyers, reduce inventory and what happens. The market sparks. Yes, more bank owned properties will be hitting the streets in the next six months, but then things should start getting back to normal and prices will at minimum stabilize.

If you are a buyer in this market, now is the time to reap the best deal, get the aggressive help from a seller.

Once buyers see the market turning around, so do sellers and they'll be less likely to wheel and deal.

Check out www.StraightTalkRE.com for the Real Estate Radio Talk Show that can be heard live streaming!!!

~ CHUCK

Take me back to the GREAT DEPRESSION...

2007-12-21T11:46:00.000-08:00

The US Housing Market is in its worse slump since the Great Depression. What's that mean to you?

Possibly nothing I suppose.

It really means nothing if you have 12-24 months living expense cash on hand, and won't be losing your job.

So, what can you do to protect yourself?

Cash will be king, just as it was in past history.

So where can you get cash? How about your home? But, you better do it quickly as prices are expected to plummet more in 2008 and into 2009. According to a Moody's Economy.com survey, many metro areas will record losses of 20% or more.

It's time to consider ways you have never thought of before to make it through the tough times.

Before the equity in your home is completly gone, you need to consider getting some of it out and keep a reserve fund, and at the same time allow that money to grow.

Think of the 30,000 Ford workers who lost their jobs. What if you job was gone tomorrow.

Gather with family this Holiday season and rejoice all the successes you had this year and start 2008 with a new plan to keep your family and your finances safe.

Don't forget, for more Real Estate and Finance information, tune into AM-870 KRLA Sunday's at 6pm for Straight Talk Real Estate. You can also listen online at www.StraightTalkRE.com.

Have a Merry Christmas and Happy New Year

~ Chuck

2008 Mortgage Interest Rate Projection

2007-12-03T09:58:00.000-08:00

Don't we all wish we had a crystal ball when it came to predicting interest rates????

If you take a look at a comparison of the 10 Year Bond Yield versus the average 30 year fixed interest rate, you will notice an interesting phenomenom. Historical, both are down in the last quarter of the year compared to the summer of the same year.

Continue to look into the first quarter of the next year. In all but two years in the last 10, rates continue to lower through the first quarter of the new year. In the two cases where they rose in the first quarter, they actually lowered throughout February.

This historical data alone, lead me to believe that interest rates will continue to drop througout the first quarter of the new year.

More importatntly in today's market is the volitialty in the current markets. As the Fed's prepare to meet December 11th, we're almost 100% certatin they will lower the fed's funds rate by another .25% if not .5%. Remember though, generally when the fed's lower the overnight rate, mortgage rates will tick higher.

I don't see that being the case right now. Lenders seem to be pricing in a .5% rate cut and it looks like the 30 year conforming rates will remain low, pushing themselves back into the mid to high 5% range at no points.

Don't forget to get up to the minute info every Sunday night at 6pm on KRLA AM-870 with Straight Talk Real Estate.

~ CHUCK

Creating success when investing in real estate...

2007-11-23T09:39:00.000-08:00

The title doesn't read, Success when THINKING ABOUT investing in real estate.

There's a reason for that.

On this Sunday's show we will be discussing the secret to success when investing in real estate, and here, I will share the most important item.

TAKE ACTION

That's right, taking action is the first step to becoming a real estate investor and generating success and wealth.

It seems a little silly, I suppose, but I watch too many people sit on the side lines and think, and think, and think, and think some more about an investment they want to make, then before they're done thinking, someone else bought it up and they have to start over.

Easy action steps;
Write an offer!

Every offer can be made with a clause to give you XX amount of days to change your mind. Make the offer to get the wheels in motion. Maybe your offer is the chance to negotiate something special that has stopped you from getting moving in the past. This is your opportunity to learn everything you can about that investment, and then make your final decission.

OK, 10 days later you decide to back out....OKAY. Did you lose? Nope.

Taking action to get the ball rolling. You will be amazed at the amount of real estate investing education you will learn just from taking this first step.

Tune in this Sunday at 6pm on KRLA AM-870 or online at www.StraightTalkRE.com and click show audio to listen. We will uncover the secrets to successful investing.

~ CHUCK

Beware of Interest Rate Advertisers...

2007-11-12T08:50:00.000-08:00

All too many times when I'm reading financial news online, I see ads for mortgage loans. What shocks me is the misleading ads that can suck home owners into a bad loan or at best a bait and switch to a poor loan. What's more is these ads appear on trusted financial websites where professionals go to get their information.

How do you know if what is being advertised is real?

I guess you really don't unless you are on this side of the business. Now true, that the rates advertised are obtainable, and more, the payments noted are reachable true payments, what's misleading is the type of loan you will be getting and the cost that you will pay to reach that advertised rate.

It wasn't until recently that I advertised an interest rate, however, only to my existing network of home owners who have requested information from me in the past. Not on my blog site, nor on the internet, nor newspaper do my 'advertised' rates show up.

Here's a sample internet ad I see today:
Refinance and Save $1,000S
$150,000 Mortgage for $483/month. Compare up to 4 free quotes.

So, what's wrong with this ad?

No APR, No Rate, No Cost, No Qualifying guidelines mentioned.

You see, it's law, that you have to note at minimum the APR when advertising a rate or payment. It's not in the above ad.

So, what is this ad trying to sell you?

This is an option arm loan program. You see, if you use a financial calculator, you'll determine that the rate you would have to get to obtain a $483 payment on $150,000 loan is 1%. The option arm has an actual rate made up of a margin + index. Generally the index is the 12 Month Treasury Average currently at 4.788% (adjusts every month). The margin on these loans typically run 2.65% - 3.5%. Add the two together to get the actual interest rate (3.5% + 4.788% = 8.288%).

This ad should read:
Refinance and Save $1,000S
$150,000 Mortgage for $483/month. Compare up to 4 free quotes.
8.288% monthly adjustable rate, payment based on 1% payment rate APR XX.XX%. Your principal loan balance will grow due to negative amortization if you make the payment advertised.

THAT would be a real ad!

Don't be fooled by advertisments. Work with those who have a reputation for doing the right thing, for the customer, every time. That's integrity.

If you get an ad or see an ad and want the real scoop, visit us online at www.StraightTalkRE.com and click the ask an off air question. Give us the details and we'll give you the scoop!

~ CHUCK

Fed Rate Cut, Doesn't Mean Rates Will Be Down

2007-11-01T18:16:00.000-07:00

The fed's cut rates again today. Last month when they cut rates, mortgage rates went up, as they generally do when the fed cuts. So, what does the rate cut mean, and why do mortgage loan rates move in the opposite direction?

It's a complete myth that rates tick down when the fed's cut. Here's why...

The fed's rate is the rate at which banks borrower money. Sure cheaper for the bank, so why not cheaper for the home owner? It's important to understand that mortgage interest rates are NOT tied to the indices that the fed's rate is tied to, other than Home Equity Lines of Credit. HELOCS will move when the fed's adjust rates.

30 year fixed mortgages are reactive more closely to the 10 year tresury yield. Which, is not tied to the fed's. It's economic data that makes the mortgage rates move.

For example, yesterday when the fed's cut rates, mortgage rates got worse mid-afternoon, a lot worse for a one day move. As investors sell off Bonds, the price moves down, raising the yield on bonds, therefor, moving the mortgage rates up.

Today, the stock market 'crashed' so to speak. Investors pull out of the stock market and buy into the bond market for 'safety'. As investors buy into the bonds, the price of the bonds move up (supply and demand) and the yields go down. Mortgage rates closely follow.

Investors were nervous about a future non-rate cut in December and fear of inflation.

Tomorrow is a key day, with non-farm payroll numbers being released. If payrolls are off of expectations we could see even lower rates.

If you are in the process of buying or refinancing, I would suggest being prepared to have your broker lock your loan tomorrow, the second the payroll numbers come out if they are better than expected. If the numbers come in worse than expected, hang tight and lock late in the day or next monday.

If you need any help refinancing or purchasing, I can be reached directly at (818) 876-9661 or online at www.StraightTalkRE.com.

~ Chuck

What does the Fed Rate Cut mean to you?

2007-09-19T12:12:00.000-07:00

Well, that's a steep question isn't it. First, let's make sure we're clear that the feds DO NOT control first mortgage interest rates. Economics control the rates. Does the fed rate cut influence economics, absolutely yes.

Being that the feds cut a whole 1/2 point, will almost work against mortgage rates in the next few weeks. The bond market was negatively effected, therefore putting upward pressure on rates.

However, the feds also cut the discount rate again which is the rate at which banks borrower their money. Banks get money cheaper, they've already built in stiffer margins, now they can ease slightly assuming the secondary market comes back and mortgage can once again be bought and sold easily.

Hang on tight, get your ducks in line, and be ready to move quickly should you be in a position to refi or purchase.

If you would like some more in sight, or a free mortgage review, feel free to contact me anytime.

Don't forget to tune into the Straight Talk Real Estate show this Sunday, 6PM on KRLA am-870 or online at www.straighttalkre.com.

The Greatest Real Estate Market in 10 years...

2007-09-05T10:51:00.000-07:00

That's right, this is one of the greatest real estate markets we've seen in over ten year! It's all in your perspective.

Some may sit back and be saying, what a horrible time it is. Prices are falling, jumbo loan rates are skyrocketig, qualifying for a new mortgage is almost immposible, etc, etc, etc.

The way I see it, for those who listened to good advice, got liquid, and who were prepared for the 'crash', there are tremendous opportunities.

Homes are not a bad investment right now, in fact, this may be one of the greatest buying times we'll see for another 10-12 years as real estate always has been very cyclical. Homes are on sale, at a discount, like a pre-holiday sale. If you could turn back the clock and purchase the home you live in for 40, 50, 60, or 70 cents on the dollar would you? Of course you would, and that's what we are already seeing, and I imagine will be seeing more of in the coming months.

As I spoke about on the Straight Talk Real Estate program last Sunday, more mortgage loans are due to reset in the next three months than ever before in history, according to a report by CNN Money. More home owners than ever will see their payments slightly, to significantly increase. For those who are qualified, can document their income, prove reasonable and logical assets, and have decent credit, there shouldn't be a problem, assuming they have equity left in the home. For the rest...this could spell huge disater. It's no surprise that there will be an increase in default rates, more bank owned property sales, and foreclosures.

The bright side? Again, the buying opportunities that lay ahead. I have several neighbors who made a fortune in the years following the big LA earthquake. The other good news? It's not too late to get prepared for this opportunity. You are sitting on tons of cash if you've owned your home for more than 5 years. Take advantage of the cash you have access to. Get liquid. In no time at all, you'll be enjoying huge profits. In the mean time, you can also be earning a conservative, safe return on your home equity.

If you would like a copy of 'How the Affluent Manage Home Equiy', visit the website and 'ask a question' to request the report.

On a side note, we had a blast playing CashFlow 101!!! Thank you to those who came out. We look foward to another fun crowd at the end of this month. Check the events page of the radio show website.

A shift in thinking may be all it takes...

2007-08-24T07:35:00.000-07:00

The middle class play the money game not to lose. The rich play the money game to WIN!

What man can believe, he can conceive, and he can achieve.

Thoughts lead to feelings. Feelings lead to Action. Actions lead to results.

You will learn more from taking action now, than from anything else in life.

There is a difference in saving money and making money.

Would you agree with all these sayings? If so, you are on your way to tremendous wealth and success. If not, answer this honestly, "Are you broke?"

There is a common link amongst unrelated wealthy families. It's their thinking that is shifted different from most. Do you fear losing money so you try to save as much as possible? What is saving? Saving is deferred spending. Do you see? You will eventually spend what you save, and having a fear of losing money will only cause you to lose money every time.

Think of your thermostat at home. You set it to 72 degrees (comfortable). Someone opens a window on a cold rainy day, what happens? The home cools to 65. But, eventually the thermostat kicks on and warms the home to 72. On a hot day, another window is left open and the home heats to 80 degrees. Eventually the thermostat kicks on and cools the home to a comfortable 72 degrees.

Most middle class Americans will say, "I don't need to be rich, just comfortable.". So guess what, that's what they will be. Think about it. When you save money, you feel good. But, something always comes up that takes that money away, am I right? An unexpected expense, a broken water heater, a flat tire, or whatever, then you are only back to being comfortable. But what about when hard times hit? You were down and out and what happened? You bounced back and were once again comfortable.

So, why not be rich? What words are associated with rich and wealthy? Ever hear filthy rich? Of course you have. So your unconsious thinks money must be bad. MONEY IS GOOD. MONEY IS A NECCESITY. MONEY CAN RELIEVE STRESS AND ANXIETY. You may be shaking your fists at the screen now, but face it, do you need money?

Open a new internet window and go to your bank online. Print out your balance. Now, take some white out and change that balance dollar amount to what you REALLY WANT to have in that account.

Now add a zero at the end.

If you can make the small and subtle shift in your thinking, true wealth is just around the corner.

If I could show you how to replace your income from your 9-5 in 60-90 days so you didn't have to work anymore, would you? How would your life change in 90 days? Come on, dream a little. Close your eyes and think about it for just a minute. Let go of the, "Yeah, right, like that will happen" way of thinking.

Now, when you go to bed at night, think about it again, but bigger this time.

Remember a few more things;
Risk is only not educating ones self of the opportunity presented.

HOWEVER

Education without application will net you nothing.

Take action. You are comfortable right now. If you lose, you'll be comfortable again. But, if you play to win the game, you WILL WIN at the money game. And, most important, you will have had a life experience like no other.

Tune into the Straight Talk Real Estate show on Sunday's at 6pm PST at www.StraightTalkRE.com. Let us help you replace your income and become wealthy.

Investment Real Estate...Too Good to be True?

2007-08-20T06:24:00.000-07:00

First and foremost, thank you to all our listeners of Straight Talk Real Estate, the education real estate investment radio show where we have opportunities available to be a real estate investor. I appreciation the strong support and valuable feedback from our listeners. If you haven't had a chance to listen, check it out on Sunday's at 6pm PST on KRLA AM 870 or on the web streaming live at www.StraightTalkRE.com

So, we presented an opportunity for a real estate investment on the show last night. By the way, all three properties look to have been reserved. But anyway, we ALWAYS get the one call that goes something like this..."How can you mislead so many people? Once you consider taxes, insurance, management fees, etc, there's NO WAY you can have positive cash flow!".

Did you look at the numbers? Did you do any research on your own? It completly amazes me how sceptical some folks can be, becuase we always get at least one when we present an opportunity.

The first question I ask them is this...Do you own an investment piece of real estate? Know what the answer has been in EVERY SINGLE SITUATION? The answer is always, NO. Conversation over.

Now, I'm not one to be rude, nor am I going to try and convince you that the opportunity is real becuase the mind is aleady closed to even hearing about it.

So, this opportunity was 10 to 20% down payment on a property that would give positive cash flow on a monthly basis, AFTER ALL EXPENSES. Yes, on an interest only loan, with 20% down, you get positive cash flow. More so, the builder is in trouble and has discounted the homes so you get $10,000 to $15,000 built in equity. Want more cash flow? Use an option arm to generate $443 of positive cash flow every month with 20% down. Not only are you making money when you buy (built in equity), you are making money every month (cash-flow), but the indicators are showing strong appreciation in this area so you can make money when you sell. The city recently removed building restrictions that have been in place for over 15 years, so 29 people have submitted plans for new developments. In addition, a community college is breaking ground, and two of the nations largest grocery store chains have purchased land to build on as well. All the indicators are pointing to a strong market in this area. Oh, and this area is within 15 minutes of two MAJOR metropolitan areas. Check this one out under hot properties at www.StraightTalkRE.com.

See, that's the thing, you can sit back and always think that an opportunity is too good to be true, someone is trying to scam you, continue miss each one and watch someone else start growing their wealth. OR, you can have a little trust in man kind and know there are actually folks in this world who want to help others and present opportunites. Do your due diligence and take a minute to run the numbers yourself.

I must admit, I was a skeptic at one time myself. And you know what...I was broke all the time. My credit was bad, and I didn't balance my checkbook becuase I was too embarased. Then, I changed my attitude and learned, got educated on how to analyze an investent opportunity. Come to find out, there were some I liked. So, I waited for one that I could afford and acted.

Next up, the difference between the thinking of the rich and the poor.

Thanks for your time, and again, thank you for your support of the show!

No Cost Loans, eh eh...

2007-08-11T18:17:00.000-07:00

There is no such thing as a free loan! Want to debate? Check out page 9 of 38 in a publication called 'Using the services of a mortgage broker' at the California Department of Real Estate's website.

Yep, no such thing. So, I know if you've listened to Straight Talk Real Estate on the radio, you've heard other real estate radio shows. So, why do they continue to entice home owners with such crap?

Well, this is how it works. The higher the rate you take on a loan, the more your broker makes. Take a higher rate, they get paid more, and throw some of the costs back in to cover the closing costs. Remember, there's always third party fees for example, an appraiser, title, escrow, notary, etc. So, why would you take a higher rate?

If this is a VERY short term loan, maybe there's some validity in going this route. If closing costs are running $5000 for example and the higher rate only costs you $100 per month, then good if you are keeping the loan less the 50 months in this case. Consider you now pay more, and get a larger tax deduction. BUT...do you have $5000 in your pocket you are saving? Face it, it all gets tacked into the loan amount anyway in most cases.

What's the real draw and their selling point? "You'll refinance again in a few years anyway"...

WHY???

Allow us to shed some light and handle the last refinance you will ever need. With TRUE wealth building strategies you shouldn't ever need to refi again. Contact me and I will explain.

Picking the right broker could be rewarding...FINANCIALLY!

2007-08-06T11:02:00.000-07:00

It's been a long time coming, this subject of picking the right broker, but I'm glad I've waited until now to share my thoughts on picking the right Mortgage Broker becuase of the rapid changing market.

First, let's define what a good lender should be doing for you. You can call around town, contacting bank after bank, shopping for the lowest rates, lowest fees, or whatever it is that will make you happy when getting a loan. But, is getting the lowest rate and fee the most important thing to you really? Are there other considerations that you should be thinking about?

A good lender should add value to your life. Yes, add value to your life. What kind of value? How about sharing other options that will enhance the way you live, transform the way you spend money, or fulfil your retirement. You choose a family Doctor based on the way they care for your family, correct? Do you ask what his or her fee is prior to going? I know insurance can carry a brunt of the payment, however, you ultimately pay through insurance premiums, but you don't even condsider asking do you?

Ask your next broker the following questions;

1) How many clients have you helped?
It really doesn't matter much if they've been in the business one month or a hundred years, have they helped more than a dozen home owners? I remember hitting the ten client mark, then fifty, then one hundred. By the time a broker has funded fifty loans, they have a good grasp of what's going on.

2) How much do you make and who pays you?
Just sit back quietly and listen to the response. It's not really the answer you are listening for, it the nature of the response. If they beat around the bush, and aren't straight up front, then move forward cautiously. There is no industry standard at what a lender should be making, however 1% to 2% of the loan amount is typical. Brokers are paid by borrowers when they pay points, by lenders in the form of a YSP (yield spread premium), or a combination of both. The YSP will be disclosed on the final closing statement you receive from escrow.

3) What will you do for me that the guy down the street can't or won't?
You want to find out what is it exactly that they can do for you. Is it in line with what you want them to do for you? Remember, your broker should add value, not just facilitate a loan, afterall, you can do that on your own.

4) Can you supply me with references or written testimonials?
Hmmmm...no one has ever asked me this, but they SHOULD! This is where you will get feed back from others, not close to you, to determine if this broker is honest, ethical, and generally a good person.

5) How long has your company been in business and how do you generate leads?
Why should you care about this? I'll tell you why. There are many fly by night telemarketing firms that generate leads from phone and mail solicitations. That's it. Their referral clients are typically low in nature and the amount of personal attention and care is limited. Generally if you call and ask the same question three times, you'll talk to three different people and get three different responses. As well, they usually employ hourly employees that are there to get a check. In addition, the length of time the company has been around is important. If they opened in the last five years, it's becuase the market was HOT and anyone could make a buck. Now, with times changing, only the strong will survive. Check that the company has been through a market cycle in the past. If your loan agent has only been around two years, that's OK, rest assured they have access to seasoned professionals in their office that are always sharing ideas and training.

My personal philosophy is, and was long before I got into the mortgage industry, go with someone who you can trust. Put your faith into someone who's credibility is on the line. Work with those who generate a commission and not a salary as they will work hard to make sure you are treated fairly and will value your referrals. Expect to pay a little more for the value add services and personal attention, and BE OK WITH IT! Think for a minute about Donald Trump or Robert Kiyosaki. Do you think they shop and shop and shop for the cheapest loan or cheapest CPA, or lowest cost attorney? Of course not. They go where the knowledge is and build a team. And not to mention, they pay a hansome fee.

If you have a comment on your last experience, good or bad, I'd love for you to comment and share with others. No names or company names please, just experiences. When we share good or bad, it will help someone else out. Remember the law of Reciprocity.

Have a GREAT week and check back soon...CHUCK

Check out the radio program website at www.StraigtTalkRE.com and Bruce Weide's Tax Free Blog at http://taxanalysis.blogspot.com.

Up Front Mortgage Brokers...Real or a Joke?

2007-08-01T09:16:00.000-07:00

I've come across a website backed by a big name in the financial industry. The site is a list of mortgage brokers who claim to be upfront, honest, have a predetermined set price, and disclose everything to you up front.

Last time I checked, that's just about what the DRE (Department of Real Estate) require that all DRE licensed loan officers and broker do. So it it real, or just another marketing tactic?

By law, in California, when you make a loan application, you are to receive a Good Faith Estimate (GFE) within 3 days of making that application. The GFE should disclose, to the best of the lenders knowledge, all the fees associated with the transaction. Yes, ALL the fees. They should know the lender fees, after all they are the lender (although they may vary slightly if the broker finds a different lender to fund with than originally planned..I'll get back to that in a minute), escrow, title, appraisal, prepaid interest, taxes, insurance, recording fees, etc. So maybe the up front kind have agreed to be as accurate as possible on these fees. I'll give them that.

Then, I come across this little excerpt;
"1.Option arm: The rate is fixed for the first 1,3,5 or 7 years, but you can refinance before the fixed period is up. These loans are 100% free of charge. We pay the title, escrow, recording and all other fees on the loan. We cover all these costs buy using some of the rebate the lender pays us to save you money. This loan has a 3 year soft prepay ( you can refi with the same lender with no prepay and if you sell the house and use the same lender to buy your new house they refund the prepay). "

A few things that disturb me. Most home owners shouldn't take a 3 year prepay. There are cases, but most should not. The option arm comes in 1 month, 3 month, 1 year, 5 year, or 30 year fixed. There is NOT a three or seven year fixed option arm. I'm referencing the Fully Indexed Rate here, not the rate you pay for the minimum payment.

In addition, if the broker is making so much damn money to cover potentially $6,000 in fees, wouldn't you think if you pay those fees yourself, you could get a lower rate, therefore a lower payment, there by saving that $6000 in payment in no time at all?

These marketing niches really get to me. A good broker, doing their job, that has a slight care about their clients coming back to them in the future and building their business by referral will be up front. They will disclose according to the law, they will let you know if something changes, LONG BEFORE you get to the closing table.

Getting back to 'things change'. Yes, they sometimes do. We are required to redisclose if something changes for the worse on the loan program. If rates or fees are 'known' to have changed, you should be advised right away.

The next blog I must write will be on picking the right broker for you. There are several easy questions you can ask to determine if you are working with the right broker or not.

For now, I vote Joke, what about you?

Don't get emotionally attached to your mortgage...

2007-07-30T14:09:00.000-07:00

I was reading today comments left on a blog in objection to the strategies taught by Douglas Andrew, which Bruce Weide of Tax Free Benefit Specialists teaches locally. The primary objections were over the attachment people have to their mortgage. Statements like, "the mental satisfaction of paying off my mortgage"...THAT'S THE WHOLE POINT of the strategies, to payoff your mortgage in a more efficient, more liquid, and quicker time frame.

What's the advantage of the strategy?

All else aside, the most basic concept is paying yourself the principal amount of the mortgage that you would typically pay to the lender. Seems fairly simple. Take out the investment portion of the whole idea for a minute. Who do you want to manage your money? You, or the bank? Who do you want earning interest on your money? You, or the bank? Who do you want to borrower money from in an emergency? Yourself, or the bank? When you need money...NOW, where can you get it from faster? Yourself, or the bank?

Yes, the whole idea takes discipline. That's where the investment portion is ideal. You can now tie up the lump sum, have access to it when you need it without qualifying, but don't have to worry about it either. Your savings is now in the form of your mortgage payment.

A side note for mortgage brokers...Most brokers feed on borrowers who come to them to consolidate debt. Give the borrower a loan for just enough to get debt free, then wait for them to come back in a few years when they are up to their neck in debt again.

The ideas taught here can steer home owners away from the perpetual refinancing to get out of debt game. With the right advisor working on your side, your goals will be discovered up front. Monies will be allocated and set aside so you don't have to rely on the credit card companies, and ideally, shouldn't HAVE to refinance again. That's my goal anyway, to put clients in a position where the next time they finance a home is because they WANT to for other investment opportunities, not becuase they HAVE to becuase they ran out of money.

Your comments and feedback are welcomed. I know this topic is highly debated. But even more interesting, is the feedback from debate I receive when folks say, yep, this is the way to go, then don't. Especially when a year later they're in the same old daily grind and haven't made any head way on saving, investing, or paying down their mortgage.

For more on the strategy, register for a live event, FREE from the Straight Talk Real Estate Radio Program. Click on the 'Events' link on the upper right side.

Drunken borrowing woes...

2007-07-24T11:13:00.000-07:00

I caught a clip on MSNBC this morning where an analyist was speaking of the end of the easy money borrowing.

With the troubles in the sub-prime lending market, lenders of all levels are tightening guidelines, scurtinizing files, and even dropping some of their more popular programs. Programs we don't see readily available now include 100% purchase with Stated Income and Stated Assets. Although never designed as such, many borrowers took advantage and turned these into liar loans. Meaning, they overstated their true income to qualify. When you borrower too much money, and that money runs out, what do you think happens next???

Drunken borrowing was the term used to describe the frenzy of equity stripping to fund household spending. I think the term nailed the problem.

Homeowners around the country were pulling new equity growth from their homes for survival. When relying on new equity growth for income, and that income is suddenly removed...OUCH!

It was fairly easy to call up your bank or broker just a few months back and get money out of the home, now it's tougher.

Here's some tips to prepare yourself if you are considering an upcoming purchase or refinance.

1. Lenders want to see cash. That's right, prove you have enough already and don't need more to get more. Have two to six months of payments stashed away in a verifable account. The amount is two times your principal, interest, tax, insurance and home owners dues.

2. Document your income. Have available current pay stubs, tax returns, and w2's. Lenders are much easier when you can document your income. However, you will be limited to only borrowing what you qualify for...IMAGINE THAT!

3. If you have hard to document income, plan on only borrowing 80-90% of the homes value and be ready to source and document the funds you are using for a down payment. If you have cash just lying around, get it in the bank, today. Besides, your money can grow in the bank, not under the matress. Check out ingdirect.com.

4. Clean up the credit. We mentioned on the radio program, Straight Talk Real Estate, last weekend many tips to help you increase your FICO score. Check out the website, under free reports for 10 tips to a 720. And, how FICO counts inquiries.

So, going forward, plan on only borrowing what you can afford. Stay liquid so you can prove reserves (if you are paying principal on your loan currently, CALL ME RIGHT AWAY!) and stop putting more into the home than you need to.

Lastly, attend a Straight Talk event to learn why your money is better off with you than with the lender if you own a home.

Remember...the best real estate investment, is the investment you own.

Don't Fall Victim to Foreclosure...Here's How...

2007-07-22T12:35:00.001-07:00

I'll never fall into foreclosure. I have a good job. I have plenty of money. I have sooo much equity in my home. I'll never fall into foreclosure.

Those are some of the first thoughts that popped into your head when you read the headline isn't it?

I hear it all the time. As announced on Straight Talk Real Estate, the reasons for foreclosure might confuse you. Yes, confuse you.

We immediately think that foreclosures happen to folks who bought too much home. Went above their means on the house payment. But, here's the SCARY TRUTH;

Loss of Job or other income change - 47%
Financial problems not related to income - 28%
Divorce - 14%
Illnes or Death - 7%
Legal Problems - 3%

So, #1 on the reason list is LOSS OF JOB!!! If you were to loose your job today, how long could you make it? One month, Two months, Three months...in my experience most home owners are not saving, are not liquid, and would be lucky to make it two months.

The simple answer for avoiding foreclosure, STAY LIQUID. Having access to cash and not needing it is far better than needing cash and not having access to it. Remember, when you apply for a home loan, you have to prove you DON'T NEED the cash to get approved.

I would love your comments related to these findings. I compiled the percentage data from various professional, articles, and other publishings.

A Lesson in Safety, Liquidity, and what the Affluent do...

2007-07-16T16:11:00.000-07:00

It can't ever be over stated, those who have liquidity will come out on top. As liquidity adds safety and can add a rate of return if played right. I know you're thinking, 'messing with home equity is something my parents said I SHOULD NOT do'.

It's not there generation anymore. Nor did our parents and grandparents pay more than $70,000 for a home in Southern California. It's time to open up to some new ideas and ways of thinking, time to have an epiphany (an intuitive grasp of reality through something usually simple and striking). Yes, using your home equity is a reality that is being done everyday, and it is so simple yet striking when you see how it all works out on paper, and in the real world.

Next week, we'll reveal on the Straight Talk Real Estate Radio Show the main reason home owners get foreclosed on. If only they had taken the time to educate them selves on new ways to utilize their mortgage as a financial tool to create safety in their financial lives.

I find, through questioning, that home owners don't call to get the information becuase they are embarassed by their CURRENT financial situation. How embarrased will they be if they DO get foreclosed on. I don't know about you, but I felt much better the first time I went to a financial planner poor as dirt to get a plan put in place, now I know I won't have future embarassment. And now I have a PLAN. A plan that is working, and has been working for several years, and will continue to work into the future. And as my life changes, so will my financial blueprint.

How often have you refinanced your home becuase there was an urgent need for cash? I've done it, I've been there, and I didn't like it. But, what I find amazing, is we do it over, and over, and over again. As Albert Einstein once said, Insanity is doing the same thing over and over again and expecting different results.

Why is it, we as American home owners do this to ourselves? Continually do the same things over and over again?

It's time to end the insanity. Take some time to learn new ideas. It doesn't mean that you have to implement a strategy today, but at least you will see different ways of doing the same thing. Doing it differently could actually have a huge positive impact on your financial future.

If you haven't attended an event at Tax Free Benefit Specialists, what are you waiting for. There's a free event coming up on August 4th. Even if you have to drive 200 miles to get there, take the time out of one day to stop the madness. Protect yourself from future losses, start earning a rate of return, and have enormous liquidity like the richest people in the world. What's more, you can use these strategies if you have nothing other than your home, today!

Turn a 15 or 30 year mortgage into 8 with no extra money

2007-07-09T10:52:00.000-07:00

John was doing everything right; he purchased his home several years ago at the bottom of the market, took a fifteen year mortgage to save on interest, and was making an addition $475 contribution to his principal balance every month. In addition, John was setting aside three percent of his gross income for his 401K retirement plan. John has 10 years and 8 months left on his mortgage today, and when paid off he’ll be ready to retire with $163,000 in his 401K, YEAH…RIGHT?

The scary truth is that John is just like most of us, we think that our mortgage is a commodity and we better get out of it as quick as possible. What John didn’t know was that if he were willing to restructure his retirement planning, and include his biggest assets, his home, into that retirement plan, at the end of the same 10 years he could have an additional $90,000.

Well, John said when he paid his home off he would continue to make his mortgage payment into his retirement savings for 10 more years. He knew, he would be mortgage free and have $631,000 in his retirement savings to generate about $38,000 per year in retirement income, which he said he could live on. What John didn’t know was at the end of that additional term, by restructuring his debt 20 years earlier, he could have retired with $1,300,000 generating just shy of $100,000 per year of income. Oh, and by the way, when restructuring his debt, he didn’t pay the house off so not only would he have had more income, he would have maintained his largest tax write off, mortgage interest.

But wait, he still has a mortgage payment you say. Yes, after his mortgage payment, John still has almost $80,000 per year of income versus $38,000. The restructure wouldn’t cost John any additional money; it would actually free up some monthly cash flow for him during his working years.

Had John only known how to implement these strategies? Had John only taken the time to seek out the advice of a professional? If John had only known that his mortgage could be the key to so much additional wealth, maybe, just maybe, John could have enjoyed a round of golf every day of the week during retirement. Unfortunately for John, he didn’t get the facts and he has realized he’ll need to continue to work for nearly 20 more years after his planned retirement.

Did I mention, had John restructured his debt, he could have paid his mortgage off in under 8 years, versus the 10 years he had remaining had he chose to do so?

What John didn’t know, his future held a job layoff for him, all his extra liquid cash was tied up in a 401K, he couldn’t make is mortgage payment, and the bank foreclosed on him. Had he only had that side account, he could have lived for 10 years on those funds and still had his home he worked so hard to payoff despite the job loss.

These strategies are used everyday by people in every walk of life. These strategies can be the key to achieving the retirement of your dreams. We invite you to visit www.StraightTalkRE.com and click the event link on the home page for more information. Come join us for a four hour, life changing event.

For more real estate financial education you can tune into KRLA AM-870 every Sunday at 6pm to hear Straight Talk Real Estate. Visit the website at www.straighttalkre.com to download many valuable free reports.

This names and situation in this story are fictional; however represent the lives of so many.

The Pro's and Con-Artists of Negative Amortization

2007-06-26T18:09:00.000-07:00

How many of these have you heard of? Pay-Option Arm, Potential for Negative Amortization, Pick-a-Pay, Half Loan, Neg Am, Four-Pay, and the loan that costs me less than a cell phone bill.

Let’s go through the technical stuff first;

Generally, the payment option ARM (adjustable rate mortgage) is a one month adjustable loan that adjusts with an index called the Twelve Month Treasury Average. Currently the index is at 5.014. The loan then has a margin which I typically see between 2.4 and 3.5%. The FIR (fully indexed rate) is calculated by adding the index and margin together. The high end of the example would be 5.014 + 3.5 which totals 8.514% interest rate. When these loans are advertised and sold, what you see and hear is 1% payments, or 50% off your payment. If you are paying only 1% on a loan with an 8.514% interest rate, negative amortization occurs. Interest grows at over eight percent, but you are paying one percent. This means that the 7.514% difference is tacked on to the principal balance of your loan, causing your loan to grow. In addition, once your loan reaches 110%-125% of the original balance (varies by lender), the loan is recast. Recasting is when the remaining principal balance of the loan must be repaid over the remaining term. If in three years your $500,000 loan grows to $550,000, you could be stuck paying principal and interest payments at 8.514% crunched into the remaining 27 years. The 1% payment would have started at $1754.03 while at recast it would jump to $4,234.90, over a 200% increase in payment.

As scary as that scenario sounds, a borrower should not have been given this loan unless they actually qualified at that higher payment level. With that being said, what if the borrower that has the above loan was stashing away, over that three years the difference in payment of $2480.87 (4234.90-1754.03=2480.87)? And, what if they used a proven financial planner that was getting them an 8% return on their investment? At the end of three years, that side account grows to $104,377. Take $50,000 and put it back into your mortgage to get it back to $500,000, add an additional $12,339 to the mortgage for principal that you would have paid down on a fixed loan, and you’ve come out ahead $42,038. Not so scary now?

There are uses for the option arm in the market place today. Consult a licensed mortgage professional if you are considering this loan. Take a hard look at the margin being offered, not just the rate at which you will make payments. Ask when the loan will recast, ask what the principal and interest payment is, and make sure you can afford the highest payment. If your goal is not to increase your assets through side accounts or investment real estate, this is most likely not a good loan for you. In addition, ask about the prepayment penalty terms, you do not have to take a prepayment penalty on this loan.

Unfortunately, too many unscrupulous loan officers do these loans at the highest margin, with the longest prepayment penalty available to earn very high commissions, while only highlighting for the borrower the low payment and pay rate and they forget to mention and disclose what negative amortization and recasting is.

For more information on real estate buying, selling, and financing, we invite you to listen to Straight Talk Real Estate every Saturday from 11am to Noon on AM830. Visit the website at www.StraightTalkRE.com for informative free reports.

Chuck Gebert is a licensed Mortgage Advisor with Troxler & Associates, Inc. located in Calabasas and can be reached at (888) 8-4-CHUCK for more information. Troxler and Associates, Inc. is licensed by the CA Dept of Real Estate Broker License #01096916.

Straight Talk Real Estate...Listen Live!

2006-11-28T11:44:00.000-08:00

We are excited to announce the release of a new live talk radio show called Straight Talk Real Estate, where we give you straight answers to buying, selling, and financing real estate.

Tune in each and every Sunday at 6pm to News Talk KRLA 870-AM in and around Southern California.