Bright Idea

Are you a realtor who wants a reason to make that call to your former clients? How about a loan officer who wants to find a way to add value to their favorite real estate professional?

You likely know mortgage rates have dropped by nearly 1% since last August but you would be surprised how few of your clients are aware of the significant drop in rates. I recently heard rates are the lowest they have been in three years. So I researched it and last year the average Freddie Mac 30 year Rate was 4.55 with .55 Discount point. By contrast today rates are according to Feddie Mac is 3.6% with a .6 discount point (Freddie Mac published average on 8/8.

So maybe you are thinking – how does this help me if you are an agent? Well, we mentioned this to one of our many favorite agents, who has only been in the business 3+ years, and suggested she reach out to her clients and share the following idea. So often I hear my agent friends tell me they have “call reluctance” so we wrote a script for making the call:

“HI _______, did you know rates have dropped nearly a point since last year alone while values throughout metro atlanta have continued to rise. The result is this is a great time to contact a mortgage pro and have them review your current mortgage with you. You may be able to save significantly each month or go from a 30 year mortgage as example to a 15 year term and shave many years and much interest expense from your financial future. Please let me know and I can reconnect you with the loan officer I referred originally or introduce you to one of the many great pros I work with.”

This new agent did this and reconnect her buyers and lenders. In just 1 week, the results really were incredible:

  1. Out of approximately 30 closings, approximately 6 persons refinanced saving hundreds of dollars monthly in some cases with little to no cost.
  2. All of the clients were happy to hear from the agent.
  3. The loan officers appreciated her redirecting her clients back to them.
  4. And here’s the kicker, a couple of the people wanted to look at possibly buying another home due to the low rates.

Talk about a win-win win for the owner, the lender and the agent!

What an easy call to make. I encourage every loan officer to take this idea to their database of agents and agents to take the message to their clients. Of course we are here to help you get them closed but we would love to hear any success stories from this idea.

Good luck!

Fall is About Change

As we enter Fall, a big theme is change.  Change is happening in nature, but also throughout our industry.  For our realtor friends, we see changes with how real estate is sold, changes with how brokerages operate, business is developed, etc.  The same is true for those in the mortgage industry.  Mortgage professionals, like realtors, are seeing changes in the way they market, deliver services etc. Mortgage professionals also deal with Federal laws which regulate much of their industry (real estate agents, while also affected by Federal laws, are governed by State law). Changes adopted to TRID in 2018 go into effect October 1st.  Check in with your favorite mortgage professional to find out what’s new on a regulatory basis. Like the real estate and mortgage professionals there are changes going on in the closing industry.

Change is happening much faster in 2018 largely because of technology.  We are all on technology overload, and we have to sift through what is needed and can help us, and what is just “noise.”

Sometimes we change to solve a problem and create a new one. Years ago, funds in excess of $5,000 were not required to be delivered by wire. The “Great Recession” changed that. Georgia decided wires were the safer alternative.

Today we know wires are risky business.  With wires, the industry attracted cybercriminals intent on redirecting funds.  In past articles we have addressed this industry risk and how to mitigate.  If you have questions, ask your favorite S&D attorney to share our tips to protect yourself.

However, some innovations and changes are for the best.  Ten years ago, we did monthly bank account reconciliations manually.  Some firms did them internally, and some firms through outside auditors. Issues likely were not be caught for 30 days (if the auditor or staff was paying attention). Today, most firms, including ours use automated daily 3 way reconciliations to ensure the accuracy of their accounts.

Also, 10 years ago, fraudulent checks could be cashed at a branch and became major headaches for firms. Today our firm uses a bank product called Positive Pay to block fraudulent checks; only checks we pre-authorize to the bank (by a daily data upload) will be paid. Finally, 10 years ago, wires for payoffs and proceeds were much rarer and had to be called in.  Today, we initiate wires from our computer on-line at time of closing.   If the Seller doesn’t receive their funds within an hour after closing, we might get a call, wondering what is taking so long.

Technology leads to “faster”, and creates expectations to do, respond, address, download, upload etc. faster. When people are moving fast on computers they make potentially big mistakes.  So when dealing with those critical processes, slow down, and have a process to avoid costly mistakes.

Here are a couple of big changes in the not too distant future of closings –

E-closings.  Years ago our firm worked with one pioneer lender to do closings partially on-line. There is  major movement in this direction.   Our firm is exploring this and preparing for the future.  Some states will transition to this new technology faster.  Remember: real estate (unlike mortgages) is governed by state law.  But before too long like everything else expect to see some “closings in the cloud.”

Blockchain & Cryptocurrency in real estate transactions. Though likely not as imminent as e-closings, the buzz right now is to expect to see this relatively soon. At least a few people have asked if we accept bitcoins.  It seems cryptocurrency is presently for speculators and criminals (since they in theory allow for anonymity) but real applications for both cryptocurrency and blockchain are expected.

One thing that will never change is our commitment to you and your clients.  Our pledge to care, to improve and to serve, we hope will allow us to be successful regardless of changes within our industry!

Financial Freedom

Speaking of change… I often think about that quote –

“Insanity is doing the same thing over and over and expecting a different result.”

We want change for the better; but do we change?

Like everyone reading this review, I am not getting any younger, and like many of you, I survived the “Great Recession.”  Survive is the honest word and that’s frankly something any of us should be proud to tell our children or a stranger.  But, time marches on and I am looking to achieve financial freedom.

Zig Ziglar and Jim Rohn argued for decades about motivation and information – Zig suggested motivation was most important and Jim is credited with the famous quote –

“If you have an idiot and you motivate him, now you have a motivated idiot.”

In a way, both are correct, you need the motivation to change but also the information, knowledge and growth to make it meaningful and lasting.

David Bach’s book delivers enough knowledge and motivation to make a lasting difference if you want to improve your financial future.  You don’t have to be an economist or stock expert to implement his best ideas and improve your financial upside.  It’s easy to read, easy to learn and easy to apply.

For me, several of the chapters had an impact, but two chapters really stood out: Chapter 3 – Find Your Double Latte Factor and Chapter 8 – Pay yourself first…faster.  In both cases, I have heard the advice from others, but he helped crystalize the importance of each and better implement for results.  In the case of the Double Latte it was about focusing on converting wasteful spending into successful saving.  We all have joked about how much we spend eating out or drinking the fancy coffees. and how wasteful that is, but it’s not just about spending less.  David Bach argues that you should set a goal and invest a specific amount.  Don’t just save in one area and spend in another, find your double latte, figure out what you can save monthly and invest this amount immediately and over time consistently.

Paying yourself first…emphasizes aggressively paying yourself before you even pay your taxes. This doesn’t mean splurging on frivolous things because you deserve it, but rather investing in tax deferred plans such as 401ks and IRAs to the max before you even pay taxes.  Since these are pre-tax dollars, he shows how you can invest heavily, reduce your taxes and limit the impact on your “take home pay.”

These are just two of the many good ideas which he explains in easy to understand and apply to your financial life.  But I also liked his chapters on living a rich life and being more charitable. Making money to just collect is not the way to go – as they say, “you can’t take it with you,” right?

Each idea included the growth over time with compound interest based on a 10% rate of return.  I am not sure in this generation of low rates and volatility in the markets that 10% is truly realistic but … all the more reason to find creative ways to earn more, waste less and save your way to financial freedom.

Finally, I was in a closing with two partners this week, and one asked me the last book I read, I started talking about this book. The friend who asked the question, said

“Wow I need to read it… it sounds amazing.”

Meanwhile his friend, a financial planner, said, “It is a great book.  I have it and you can borrow my copy.”

Unless you are there already, pick up this book, read, apply and thank me in 30 years! Here’s to your financial freedom!

What Is An Appraisal?

 

Every house is unique; appraisers are trained and licensed for expertise in putting a value on properties.

Appraisers don’t work for the buyer or the seller;  their primary mission is actually to protect the lender who’s risking money against the home’s value.

Appraisers have to weigh factors about the property and location – including size, condition and comparable properties – to appraise its current value.

They know how to focus on conditions that affect value; dishes in the sink don’t; damage and neglect do.

Appraisals lower than the proposed purchase price can affect transaction details. The seller might have to lower the price

or the buyer might have to increase down payment or fund additional escrow.

Appraisal seems a lot like inspection, but they’re not the same.

You can think of it this way:

Appraisers report on value to the lender

Inspectors report on condition of the house and major components to the buyer.

So – expect both appraisal & inspection in your transaction.

What Steps Need To Be Taken To Secure A Loan?

 

You’ll see some pictures in this video to help you remember later, but the first step in securing a loan is to complete a loan application.

To do so, you’ll need the following information.

  • Pay stubs for the past 2-3 months.
  • W-2 forms for the past 2 years.
  • Information on long-term debts.
  • Recent bank statements tax returns for the past 2 years.
  • Proof of any other income.
  • Address and description of the property you wish to buy.
  • A sales contract on the home you want to buy.

During the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The application process typically takes between 1-6 weeks.

How Are Pre-Qualifying And Pre-Approval Different?

 

Watch this video and it’ll make sense.

Pre-qualification is an informal way to see how much you maybe able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.

Pre-approval is a lender’s actual commitment to lend to you. It involves assembling financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

What Is The Best Way To Compare Loan Terms Between Lenders?

 

Watch this video and take a few notes!

First, devise a checklist for the information from each lending institution. You should include:

  • the company’s name and basic information
  • the type of mortgage
  • minimum down payment required
  • interest rate and points
  • closing costs
  • loan processing time
  • whether prepayment is allowed

Speak with companies by phone or in person. Be sure to call every lender on the list the same day as interest rates can fluctuate daily.

In addition to doing your own research your real estate agent may have access to a database of lender and mortgage options or suggest a variety of different lender options.

What Is A Loan Estimate And How Does It Help Me?

 

A loan estimate lists your loan terms projected payments, costs at closing measures for comparison, including
Annual Percentage Rate and Total Interest Percentage and other considerations that lender may apply to this loan application.
Each lender must supply a loan estimate within three business days of your application so that you can make accurate comparisons when shopping for a loan.

How Do I Choose The Best Loan Program For Me?

 

The video puts this in more visual terms, but your personal situation will determine the best kind of loan for you.

By asking yourself a few questions, you can help narrow your search among the many options available and discover which loan suits you best.

  • Do you expect your finances to change over the next few years?
  • Are you planning to live in this home for a long period of time?
  • Are you comfortable with the idea of a changing mortgage payment amount?
  • Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement?

Lenders can help you use your answers to decide which loan best fits your needs.

What Costs or Fees Are Associated With Loan Origination?

 

Yes, loan origination involves costs and fees. As you’ll see in the video, when you turn in your application you’ll be required to pay a loan application fee to cover the costs of underwriting the loan. This fee pays for the home appraisal a copy of your credit report and any additional charges that may be necessary.
The application fee is generally non-refundable.