Happy Thanksgiving! 10 Things I am thankful for.

THANKSGIVING is the holiday that we all get to take a moment to be thankful. 2009 has been one wild ride for many of us. Many times we can get so caught up in the middle of the ride we forget what we have to be thankful for. So here goes my TOP TEN things I am Thankful for:

1. Jesus Christ – He is my Lord and Savior and without him I would not have the opportunity to be thankful and reminded of the things that I am so truly blessed with.
2. My Children – I have three of the most wonderful children in the world. They love me through it all regardless of my status. To them I am famous and so is there mom as she was on TV recently. A simple hug from one of Children is a constant reminder of my many blessings.
3. My Parents and Family – For being there for me through all the things that they do. They love me unconditionally.
4. Realtors that refer me business – This is one of the most important although it is fourth on the list. I have been so blessed that there are Real Estate agents that have come to trust me enough with not only there clients but with their financial well being. As I perform they perform because no house is bought without Money:) Those people include but are not limited to: Nathan Novelo, Dayna Neuse, Karen and Robert Wallace, Peter Bond, James Herron, Keisha Mathews, Brook Terhune, Bryan Hill, Marcus Fillipi, Paula Nelson, Jennifer Walker and Melanie Wright. There are several others that I would like to mention but these mentioned I successfully closed at least one transaction and enjoyed working with them immensely.
5. My Clients – Thank you for placing your trust in me. In today’s world it can be hard to trust a Mortgage Professional as the picture that is painted s not always rosy. For whatever reason you placed that trust in me. I am thankful for you and your families and I hope to serve you for many years to come. You are the backbone of what I do and without you and the interactions and the lessons that you taught me about life I would not still be a successful Loan Officer today.
6. Adversity - adversity is the obstacle that leads to growth and change. Without it I would remain the same and would not grow. Growth is necessary always and I hope to continue to grow until my final days here. 2009 has placed so much adversity in front of me that I feel like a new man going into 2010.
7. Capitol Mortgage – Greg Teeter has done an amazing job giving us a place to work. It has been a pleasure to be part of a company that is moving forward, growing, and so Loan Officer friendly.
8. Facebook – This has giving me the opportunity to reconnect with so many great people in my life. I recently received and email from a friend I have known since Kindergarten letting me know that I have always been one of his dearest friends and that he cherishes our friendship. It came at a great time!
9. Opportunity – I am so happy to live in the United States. I am thankful for the soldiers that fight for our Freedom and Independence. I have had opportunities that some will never see. The opportunity to be a homeowner, Father, Husband, to own my own business, to get a degree, to learn grow and develop and even when I do not accomplish them at the highest level I get the opportunity to try again. I am thankful for that.
10. THE RAIDERS AND THE FACT THAT THEY PLAY THIS THANKSGIVING DAY!!!!!!!!!!!!!!

What are you thankful for? There is so much that I could write about that I am thankful for. This just touches some of the things. Feel free to comment about the things that you are thankful for……………………………………..

My new house for Christmas!

Often I hear that it is getting close to the Holidays so I am going to wait until the new year. I understand what people are trying to say. There is a lot going on around this time and everything is rather stressful. For some the holidays are not so joyous. However, if everyone has that very same mentality then you will have less competition.

Each year my business activity increases in November and December. Just in time to claim that income for 2009. Ughh! I will never complain about it though and when I think about it I realize it is because I am working. I do not take the Holidays off. There are only three from November 1-December 31st. There is Veterans day, Thanksgiving day, and Christmas. All other days are work day and sure I take a half day here and there but overall there really just are not that many holidays. I find that because of the drop off my clients get fast efficient service and keys to celebrate Christmas and start the new year in style. If there are 100 people looking for the same home as you and 50 of them take a break for the holidays your chances just doubled to get an accepted contract.

Moral of the Story: It is a great time to get your new house for Christmas. The homes are there, the price is right and the rates are awesome. Time continues to pass whether or not we want it to. So why do we pause our lives and our futures, wants, hope and dreams for a few days that we are told to celebrate. Make the celebration more grand.

Consider having the holiday party in the new home before you replace the carpet and paint. No need to worry about making a mess!

Authenticity is my style. What you see is what you get!

Some feel that in business you have to present yourself a certain way. Suit and tie, professional demeanor, correct grammar and representation and many other items that I am sure you are aware of. In many respects I do not disagree. However, I give up being someone I am not to be authentic. When I am comfortable you get the best me. The knowledge that I have is still the same. The advice is the same. When I act the part I lose a little authenticity. I am trying to be someone I am not. I am simple in spirit and I do my homework. I know what it takes to get you in to your home and that is who I am. Here is a short video about me, California Home Strategies, Capitol Mortgage and how I want to help you!!!! Enjoy!

PCAR Variety Show Fundraiser for CanTree and the Salvation Army

I was fortunate enough to be given the opportunity to be part of an amazing fund raiser. Placer County Association of Realtors banded together with the food sponsor Capitol Mortgage and the Bar Host Chamber of Commerce to throw one heck of an event. Much of the credit for the organization of the event has to go to Val Berlin Douglas (North American Title) as she was responsible for corralling and organizing a bunch of entrepreneurial professional that like to wander around and do our own thing. Great job Val.

So what is a variety show. We did everything along the lines of musical skits that were pieces of movies like 13 going on 30′s Thriller dance a tribute to the man Michael Jackson and Santa Baby musical. There were several one and a half minute lip syncs done by many of the volunteers from artists like Rod Stewart (Geoffrey Poulos), Prince (Kevin Capps), Beyonce (Tami Hinkle), Katy Perry (Deb Newton) and so many more excellent solos. We even got a guest appearance from Willie Nelson (Bill Johnson).

The show started out with a bang and had two groups perform their stuff. That was followed by another round of songs and performances and finished off with all the solos. Then there was an encore presentation to end the night. Many of the attendees stayed after the scheduled performances to take part in some Karaoke set up and put together by Joe Crespillo of Sell State Realty First our emcee of the night.

I do not know the final count I think that it would be safe to say that we raised in the ball park of 3K -4K for the evening. This was my very first year to be a part of the event and one of the things that I learned and respected from all the volunteers is that they were all repeats. So many of the volunteers were on their 6th year of the event. I now know why. It is so much fun and the camaraderie was awesome. I was welcomed in as the newcomer and assisted and helped the entire evening.  We were able to get away from the normal stressful situations that are present in Real Estate transactions. We were able to do something that is above and beyond our own self interest which showed me the true values of the agents in this industry.

I want to say thank you to all the participants and all of the attendees that came together to make this event happen. I am already excited about what next year may bring!

Onions are not the only thing with Layers!

I was sitting on my couch the other day watching one of the most infamous movies of all time with my children. The movie I am certain that many of you remember. During the movie there is a point when they talk about how “Onions have layers” and it got me thinking. Yes, that movie was Shrek and no this is not a pitch for the upcoming Shrek 4.

Like onions, all mortgage loans have layers. The layers are risk layers. Every file that we touch or work on is evaluated by the amount of risk to the investor. Risk is evaluated on several different ways. An underwriter has to be comfortable with the level of risk in order to approve the file. These layers can be described the following way: 1) Credit 2) Collateral 3) Capacity and 4) Compensating Factors.

Credit – Credit is more than a score. The score does make up the first level of assessment. If you do not have a score that meets the minimum requirement for the program you are done before you begin. However, what if you do have a score that is high enough to qualify for the loan program. Does that mean it is a done deal at that point? Credit has several components that we must go over to make sure that a consumer not only meets the requirement for score but credit as well. Some of these factors are:

• # of trade lines open and rating current – A trade line is an open account such as a credit card, and auto loan, a mortgage note, and installment debt or even a lease. These trade lines must remain open and most be rated to the current date. Some people have old credit cards that they never actively closed that have not reported in months. This shows the lender that you have the ability to open and maintain credit and when you have done so for several different types of credit it will help establish a solid score. They do go hand and hand. However if you have a 700 score and only one open trade line that is a small credit card open for 5 months this will not qualify. Although the score is high there has been little time for you to make a mistake and the low limit is a low risk for the credit card company. This would be insufficient credit.
• Several Open Collections – FHA specifically looks at the last twelve months of credit to see how you are doing now. There are cases that the scores are qualifying scores but a client has many open collections for semi large amounts. If this is not in the last twelve months the underwriter might require them to be paid especially anything over $1000 or so. If they are in the last twelve months and there is more than one you most likely will not qualify for the loan. If it is only one then you will have to write a suitable explanation and it will be left to the underwriters judgment. The only exception to this rule is Medical collections.
• Open Tax Liens or Judgments – Any of these items will have to be paid no matter what. They will also be further evaluated to see when they occurred what it is and why. Remember they are trying to see if there is any recurring behavior patterns of unpaid debts without explanations that make sense or situations you could not have predicted.

Collateral – is based on how much you are putting down on the property you are buying or the amount of equity you have in your current home. The larger the down payment the lower the risk. Anything less than 20% down requires Mortgage Insurance. Mortgage Insurance is designed to cover the investor on their losses in the even that the consumer forecloses. FHA is a Government insured loan and is designed to have a limited down payment so generally the collateral portion for FHA borrowers is usually not considered a strength of the file as a whole.

Capacity – This is the consumers ability to repay the debt. This is largely based on your debt to income ratio. However, capacity can be broken down further and commonly is:

• Time on the Job – If you are in a new industry where you get tips, overtime, bonus, commission or any other special compensation that you did not receive at your previous job they may not include this income. This could have a dramatic impact on the qualifications.
• Work History – I have had situations where the borrower had many jobs and this spooked the investor. I had to make up for spotty job history but accenting the positive factors of the loan.
• Self Employed Income Decreasing Year over Year – many loan officers take a two year average and that is the way that we are taught if and only if the income is steady and or increasing. In the event the income is decreasing year over year we use the current year only and we must make sure that the decline is not severe.

There are other items on capacity that we may look at in the layering of the risk but for time and length purposes that is all that we will discuss here.

Compensating Factors -Any factors that decrease the layers or levels of risk in the file. Some compensating factors may include but are not limited to:

• Assets
• 401K
  
• Long time on same job
• Reserves after down payment (not an FHA Requirement but considered a compensating factor)
• Low Debt to Income
• own funds to close not gift

The following Illustration is one that I have always used to give myself a visual of all the information above. Then I would rate each section 1-10 and determine how to present the strengths and minimize the exposure of the weaknesses.

Although overly simplified the graph shows that Credit, Collateral and Capacity are the focal points or base of the triangle. If any one of them are not very strong it is up to the supporting arms or Compensating factors to make up the difference. In order to do so the compensating factors have to make sense and be supportive to the overall structure of the file.

Ultimately the layers of risk will make or break your file. The goal of a loan officer should be to package the file in the best manner possible to make sure the underwriter sees why this is a good file. If someone has a high debt to income (Capacity) then it is essential that they are strong in credit and collateral and it is a bonus if they have compensating factors such as reserves. When borrowers want to do down payment assistance programs they are adding layers to the file. When you increase the layers or levels of risk you create a greater chance for error or decline. It is imperative that as you increase the risk you have supporting compensating factors that help to justify the risk an investor may take on you. As a consumer you can work toward this. Set yourself up for success. Decrease the layers that your file has and maximize your three C’s. This will help you to get a loan in today’s economy.

In conclusion, it is all about risk or layers. You want to give as many reasons to the investor to buy your loan as you can. I understand that it is hard to fire on all cylinders all the time and that is why Compensating factors play a huge roll. If you know that you have lower credit, don’t make a ton of money, and have limited down payment then you have to understand that you may be asked for several items. If you want to ask for down payment assistance you have to take a step back and be the investor. The question is why do I want to give my money to this person? Our job is to assist you in answering that question for the investor.

As always thank you for reading.

25% Gross Income. Don’t become a Jones!

When we set out on our home search we often think of a lot of things but rarely do we really analyze our budget totally. For many years Conventional Lending and Conventional Wisdom would tell you that your Housing payment Taxes and Insurance should not exceed 28%. Government Lending would set that standard over the years at 31%.

What do the Experts Say? In the book Total Money Makeover by Dave Ramsey he suggests that 25% is a great number to shoot for.

So what do these percentages mean? Debt to income is a measure of your debt versus your income. In this case the debt that we are talking about is your total housing responsibility. The income is your Gross Monthly Income not what you take home to live on.

Let’s Look at Example – Borrower A makes $8,000 per month Gross Income. Their Future Housing Payment will be $2,700 out the door. Their Debt to income in this case would be 2700/8000 = 34%. Based on conventional wisdom or even the number for government lending this would be higher than we would like to see. However, it is very common that this is acceptable through the automated underwriting engines. In fact I have seen ratios that are in the high 30′s and low 40′s make it through the system. In this example it would be advisable to have a payment that does not exceed $2500 on the government side and $2240 on the traditional conventional thought. According to Dave Ramsey $2,000 would be the max and I tend to agree with him.However, if I insisted on this I would be out of business!

Why are high ratios bad? Just take a look at the numbers as a whole. Going back to Borrower A. Borrower A represents a family of five. They like most families have expenses like daycare, food, insurance, cell phones, and you know the rest. So let’s mock an expense report.

Gross Monthly Income $8000 in a 30 % tax Bracket leaves the take home pay at $5600 per month.

$5,600 – $2,700 Housing – $800 Food – $500 in Auto Loans – $800 in Daycare conservatively = $800 remaining for all the everyday life expenses. It would be impossible to not use a credit card. How could you save for retirement, Christmas, incidentals etc.

Same Example: $5,600 – $2,000 Housing – $2,100 = $1500 which would be better.

So why do we not all buy with a 25% housing ratio? The Jones’. We get so caught up in the need to have a home like our friends. Facing the fact that we simply may not be able to afford a home is just to difficult. We, as a society, have not been taught about the numbers. I realize that some wise individual may read this and say you did not mention the tax benefits of home ownership. You are making a lot of assumptions on net income as they have three dependents, 2106 expenses, and a whole slough of write-offs. I understand that. I also know that I did not include many of the incidentals that we come across or even mention vacation. I simply want to illustrate a point that may get us to challenge ourselves to look deep into our finances. Owning a home is awesome. Living to service the home is not. When you are stressed each month about whether or not you will be able to pay by the first your whole life is affected.

Please consider your entire budget and consult a CPA before you even look at homes – The reason that I say this is simple. If I go to the local lots and test drive a 2010 Range Rover and then I realize that to have a life I would have to buy a base model pickup truck disappointment would overtake me.

My Job as your professional consultant for Mortgage is to lay out the facts – I want to make certain that I set you up for financial success not only a mortgage. I wish that I had been set down and taught these very basic principles before I entered the work world and housing market.

The principles out-lined here are not my own. They are a collaboration of wisdom that has been passed on to me over time and through trial and error.They are opinion. I have seen some great devastation and continue to see situations that are less than ideal and always will. Free will is awesome we are all given the opportunity to decide what is right and wrong for ourselves. I hope that you have enjoyed the material.

First Time Homebuyer Tax Credit Extended Pending Obama’s Signature.

The First time Home Buyer Credit was extended through 2010. We are just waiting for the President to sign it. I still do not know how I feel about it as a whole but it is very good news for my clients!!!!

Thank you for visiting California Home Strategies…………… I am humbled by all the visitors each day. Your readership is very much appreciated and I am glad that you find value in the content.