Financing – Karen's Perspective

Foreclosures – More Profitable Than Loan Modifications?

I first posted this article on November 10, 2009. I just came across it again and, unfortunately, it still seems completely relevant. I would love your feedback to know if you think any of this has changed over the past two years.

Have you worked on a loan modification or a workout with your lender in an attempt to avoid foreclosure? Have you faxed pages and pages of information only to have them tell you they haven’t received it, or that you faxed them to the wrong number, or that you faxed the wrong documents??

Have you gone through the modification process but been denied without a clear explanation as to why? Have you received incompetence and indifference from your lender?

If you’ve jumped though all of their hoops only to come out frustrated with no work out, you’re not alone.

In the last year, Consumer Affairs has received hundreds of complaints from consumers who said they followed loan modification instructions, faxing requested documents repeatedly, only to have their applications disappear.

11 / 16 / 2011
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What Credit Score do You Need to Get a Loan?

When applying for credit, one of the first things you need to know is your credit score.

But why?

Your credit score will greatly impact, not only your ability to get a loan, but how much interest you will pay if you do. The higher your credit score, the lower your interest rate and, therefore, the lower your monthly payment and ultimate price of the house over time.

What credit score gives you the best chance of getting a loan?

11 / 11 / 2011
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Cost of Closing a Credit Card

Credit Score	Close a card	Miss a payment	Max out your cards
680	40	70	95
720	55	80	115

Does closing a no balance credit card effect your credit score? Chances are, yes.

One of the factors that goes into evaluating your credit score is how much available cash or credit you have versus how much debt you owe. If you have a credit card with a $5000 available balance, once you close it, you have $5000 less available which increases your percentage of debt.

On the other hand, maxing out your credit has an even worse credit score consequence so, if you know you’ll end up spending that available amount, you’re better off with fewer cards.

The above chart shows the approximate point loss if you close a card, miss a payment, or max out your cards.

As you can see, you actually lose more points if your credit score is higher.

What are you doing to protect your credit?

09 / 21 / 2011
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Home Affordable Refinanace Program for investors!

Here is a letter we recently received from a Triad Mastermind student of our. Thanks for the heads-up, Fred!

“I can personally attest to the fact that the Home Affordable Refinance Program does apply to investors. I was in such disbelief that government funds would be available to investors that I argued with a Bank of America contact (i.e. who took my initial phone inquiry) about why BOA would not lend to someone with no w-2 income and no job. Fortunately, the rep hung in there with me and got me in touch with someone who told me that all I needed was:

A tax ID number for the business
Articles of Incorporation
Money for a $395 application fee

There was no credit check, no tax returns to submit, no bank statements, no appraisals, etc. etc.

Six weeks later I refinanced an interest only loan to a fixed 30 year rate. By the way, all of this started by responding to a “junk” mailer BOA had been sending to me for the prior 6 months. On another by the way note . .this was on a property that I purchased before finding the mastermind group and did so with a mortgage in my own name.

Anyway, I have a second property just like the one I just described. So, I contacted Chase Home Mortgage who has money for the same program and we are off and running with the same refinance for that property.”

Are you an investor? Do you need a bank loan? Try the Home Affordable Refinance Program and let us know the results you get.

09 / 19 / 2011
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Mortgage Rates – Do You Care?

Today’s average rate for a 30-year fixed mortgage is at the lowest level since 1971 – 4.1%. The last time long-term rates were lower was in the 1950′s. Back then, lenders didn’t give many 30 year loans. Most were 20-25 years.

But who cares?? We’ve gotten so used to having low rates that they no longer encourage buyers.

Just five years ago, the average 30 year fixed interest rate was 6.5% and in 2000, it was over 8%. In 2000, I had only been at my commission job for 8 months. When I applied for and received a mortgage, it was a 15 year at 9.5% and I was thrilled to get it. To this day, I teach that any loan with a single digit interest rate is a good loan.

Why aren’t more people running out to buy homes with these low rates?

We take them for granted

Lenders are expecting larger down payments and higher credit scores.

Many homeowners have seen values drop to a place where they no longer have the equity they would need to sell.

Younger, would-be buyers, are deciding there’s too much risk in buying so they’re renting instead.

The Federal Reserve expects to keep short-term rates this low through mid-2013

If you’re one of the lucky ones who can, however, afford a larger monthly payment, interest rates on 15 year mortgages are as low as 3.36%. Some analysts believe this is the lowest rate ever for 15 year mortgages.

Do you care about mortgage rates?

08 / 29 / 2011
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How to Accelerate Your Mortgage Payoff

How do you accelerate your mortgage payoff?

To begin with, you can send in extra mortgage payments at any time. Extra payments will, hopefully, be applied to the principal only, saving you a fortune in interest payments.

Here are some methods to make those extra payments work to your advantage and to make sure you get the most credit for any additional monies you send in.

1. Always make your regularly scheduled payment and be certain to make it on time.

2. Send any additional monies as a payment separate from the regular monthly payment.

3. Along with the extra payment, include a letter spelling out exactly what you want done with that additional money.

08 / 16 / 2011
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Interest Rate Discussion

When qualifying for a mortgage, of primary concern is your interest rate. The lower your interest rate, the lower your monthly payment and, ultimately, the lower the total cost of your home over time.

For example:
On a $100,000 30 year mortgage, with a 5% interest rate, you will pay $536.82 per month.
On the same loan with a 6% interest rate, you will pay $599.55 per month.

On a $100,000 30 year mortgage, with a 5% interest rate, you will pay a total of $93,255 in interest.
On the same loan with a 6% interest rate, you will pay a total of $115,838 in interest.

07 / 08 / 2011
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Loan Application Checklist

When applying for a loan, what are the first things a lender will ask for? Thanks to Jeff Geary, the Mortgage Lender for providing us with this list.

Loan Application Checklist
Income & Assets
Employer Name: ______________________ Contact:__________________ Phone: ______________

Pay Stubs for the last 30 days (most current)
W2’s for last 2 years

If Self Employed

05 / 16 / 2011
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Tax Statements and Private Money Lenders

1099 tax form information

It’s tax time… Have you borrowed hard money? Have you lent private money? When lending and borrowing, are you mailing and/or receiving 1098′s or 1099′s? Do you know how to use them?

At our last Mastermind Meeting, there were questions concerning who gets 1099 income and 1098 statements. We asked our CPA and here is what was shared:

You should provide 1099 INTs to whomever interest is paid. Whether a 1099 is sent or received, the person or entity who receives the interest is responsible for reporting the interest income. You have proof that you are paying the interest even if the recipient does not send you confirmation of the payment. If the recipient does not report it, then the recipient would face fines and penalties for unreported income. There is a $50 penalty for forms not filed.

The 1098 is filed by the interest recipient of mortgage interest. You should send 1098s to any owner financed properties on which you received interest. If private money is linked as a mortgage on a specific property, then the interest recipient should send to you a 1098. There are penalties if the IRS pursues and discovers that 1098s were not filed.

As always, check with your CPA for all tax questions and discuss with your closing attorney so these issues can be handled correctly from the beginning of all transactions.

What does your CPA say?

**UPDATE** “You should be aware that there are penalties for failure to send a required 1099 (Misc, Div, Int, etc.). The good news is that the penalty is based on how late you’re filing. If it’s just 30 days late, the penalty is only $15 per information return. It increases to $30 if you file by August 1, and goes to $50 if you file after that. So, if you’re late, procrastination will only make it worse.

You may be able to avoid the penalties completely if you can show that failure to comply was due to reasonable cause. But that’s not as easy to do as it sounds. Failure to file a W-2 results in a $50 penalty per W-2. Failure to file the W-3 summary of the W-2s starts out at $15.”

03 / 14 / 2011
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Seller Financing Escapes Extinction

Champagne Toast

I am thrilled to announce that seller financing has escaped extinction!

The conference committee addressing HR4173 – Wall Street Reform has agreed to a licensing exemption for those who do limited seller financing. Our goal when we went to Capitol Hill had been to keep the 5 transactions per year exemption in current NC law. That did not happen, however, a compromise led to 3 seller financings allowed per 12 months. This is a HUGE improvement over the one per 36 months in the original proposed bill!

As worded now, a private seller, trust or estate can provide seller financing 3 times per 12 months without licensing. Contractors do not qualify for this exemption as they were the target of the legislation in the first place. Those in the “business” of contracting must get licensed to offer seller financing at all.

The changes still have to be approved by the Senate and passed into law, but it has passed the House.