Purchase before selling

A common dilemma  for many buyers who are actively looking for a new place to live is that they already own a property and they need the proceeds of the sale of their current home in order to be able to do it. Sure, they may have the 10%-20% to put in escrow but not enough cash to be able to take a mortgage that has a payment they are comfortable with.  There are a few solutions for this:

1.  Even in this environment, if you only have 10% to put down, you can get a mortgage.  Banks and the mortgage insurance companies are still writing paper at 90% financing.  Be careful though, you will be limited on loan amount, will need a good credit score and the zip code of where the property is might affect the amount that can be financed.

2.  If you buy before you sell, consider taking an interest only loan.  Why?  Because once you do sell your other residence, you are probably going to take a portion of the proceeds and apply it towards your new loan.  With an interest only loan, that principal reduction will cause your monthly payment to go down.  A regular principal and interest loan will not do that.  It will only shorten the term in which it takes you to pay back the loan.

In previous years before the credit crisis, you could show the bank a listing agreement or contarct of sale on your current home and they would discount that debt.  Not anymore.  Aside from only 1 bank, you must qualify carrying both properties.  This of course assumes you buy before selling.

How to increase business

This post will have a slightly different subject matter but one that is of great importance to all of us and that's how to increase your business.  There is no doubt that times are tough right now in the NY real estate market.  We are all searching for new business and trying to find ways to get ahead.  many times, we marvel at how the top producer do it.  How can they consistently get more business than me?  There are simple explanations.....

Ever hear of the scientific term "Occam's Razor"?  Although misunderstood, the popular version of what it means is "the simplest explanation is most likely the correct one." We all know it and understand it, yet fail to do it as often as we should......marketing.  It is the lynchpin, the key, the whole kitten kaboodle.  here are some suggestions on how to market yourself:

1.  Ask yourself EVERY day the following question- "what have I done to market myself today?"

2.  Keep a database of old and new clients.  Know their e mail addresses and phone numbers.  Always stay in front of them.

3.  Send them a happy birthday e mail or an interesting article.

4.  Write a blog. (haha)

5.  Keep poeple informed about things that interest them, not you.

6.  Lunch, coffee or drinks.

7.  Join a networking group. (Man, I hate those).

Be careful with Condominiums

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Condominiums have become a real pain in the neck.  Fannie Mae has enforced and created new rules that have made the process more difficult.  Realize that there are 2 parts to getting approved- the borrowers financial pedigree AND the condominium approval.  Please look at the following items before jumping into a contract:

1.  Banks want to see that at least 70% of the units are sold/in contract/owner occupied.

2.  No 1 entity owning more than 10% of the units.  That includes the sponsor.

3.  Banks want to see at least 10% of the operating budget for the year in reserves.

These are not hard and fast rules for every lender but please be careful.

Setting realistic goals

I think it always smart to manage expectations from the very beginning as I think it will make life easier for everyone involved.  The mortgage process might be filled with ups and downs but an expectation of just that will alleviate some of the stress.  Some of these will may you laugh and are a little tongue in cheek, but you will understand and laugh because you know they are true.  Here are some examples of the things I say.  Maybe you can use them too:

1.  "Be prepared that I will ask things of you that might not make sense.  To all the rest of us, it doesn't, but to the bank it does."

2.  "If you read the Good Faith Estimate and the bank commitment letter cover to cover and believe every word as gospel, you will be driven insane".

3.  "You will receive disclosures in the mail from the bank shortly after they receive your file.  Don't read them and file them away, never to be read".

4.  "Realize that once we are ready to close, it may take some time to get the closing scheduled.  When managing agents, attorneys, buyers, sellers and brokers are involved, its like trying to coordinate a wedding".

How to maintain good credit scores

This is information we can all use.  With the credit crisis still in full swing, lenders have put a bigger premium on credit scores than ever before.  For lending purposes, everyone should strive to have scores above 740.  Here is how you do it:

1.  Always make your payments on time.  Remember that a late payment does not show up on your credit report unless it's at least 30 days past due.  If its less than that, you will pay a late fee and if its a credit card, you may have your interest rate increased, but it will not show up on your credit report.

2.  Keep your balances under 33% of the toal credit limit.

3.  Maintain at least 4 trade lines of some type.

4.  Many times people have collections on their report that they are not aware of.  Once you are aware of it, pay it off and attempt to get the account REMOVED from your credit report.  If you just pay it, the report will still have the collection but it will reflect "paid".  This will cause your scores to go DOWN in the short term.  It can be a tall task to get it REMOVED, but well worth it if you can as your scores will bounce back much faster.

5.  NEVER, NEVER, NEVER pay your mortgage late.  That will probably have the biggest negative impact on your scores.

Bonus Income and how its qualified

For many, especially in NYC, bonus income constitutes a nice chunk of a borrower's income.  In some cases, it is the majority of total compensation.  Generally, here is how the banks look at it:

You MUST have a 2 year history of bonus at the same firm
If the bonus was higher in the more recent year, then the bank takes a 2 year average
If the bonus was lower in the more recent year, they use the lower number.
Some of the portfolio lenders that do higher loan amounts may take a percentage of the total bonus

Note that Condo and Co op boards may view this income differently than the bank.

Loan officer compensation changes are here!

For those of you that may have seen the e mail I sent out this morning, today marks an historic change in the mortgage world.  All loan officers (and that includes originators at banks) are working under a new set of rules.  We do not have all the data in yet because it will take some time to reasearch rates at other insitiutions, but there are a few definitives that we know of:

1.  Loan officers can no longer make more money by giving a higher interest rate.
2.  As the law stands now, NO OTHER BROKER can offer a lower rate than my company at Citimortgage and Wells Fargo.  These are the 2 banks that handle the bulk of conforming loans through the wholesale channel.
3.  Loan officers can no longer give back part of their commission to cover any of the borrowers costs.

Stay tuned for more information that you can use.......

Welcome

Welcome all.  This is the maiden voyage of my new blog.  I never considered myself "technically savvy" but I have been told this isn't too tough.  My goal is to inform, stimulate, make you laugh, make you cry, (if you are in real estate then you understand what that one means).  Most of all, I want people to read what I write and say "that's useful information for me".  I think it especially important at this time, in this lending environment. 

There is so much misunderstanding and misinformation out there about the mortgage world right now and I hope to clarify a lot of that.  10 years on the front line gives me a pretty good understanding of whats going on out there.  I want to hear from you so please feel free to tell me what you think.

Kevin Ungar