How Large is a Trillion?

Dollar Rain

I was listening to NPR  (National Public Radio) and I heard an amazing and memorable explanation of “how large is a trillion.”

I thought it important to post the information here because we hear “a trillion” this and “a trillion” that thrown around today like it’s nothing. We get so used to hearing it that the meaning becomes insignificant. I’m sure our parents rarely heard it. I bet our grandparents never heard it – certainly not in relation to the economy.

And you may notice that, too often, “trillion” is used when discussing US expenditures or debt. Bummer.

So, ok, how large is a trillion?

If you stack up enough $100 bills to make $100,000 – the stack would be 4 inches tall.

If you stack up enough $100 bills to make One Million Dollars – $1,000,000 – the stack would be 40″ tall (just over 3 feet).

If you stack up enough $100 bills to make One Trillion Dollars – $1,000,000,000,000 – the stack would be 679 miles high.

In case you thought one trillion was just a bit more than one million, you were wrong.  Today, our national debt is quickly approaching $13 trillion.

The Outstanding Public Debt as of 31 Mar 2010 at 08:57:12 PM GMT was: $12,688,419,783,356.51.

Now, next time you hear the word “trillion”, think about what that means.

HUD SAFE Mortgage Act

HUD

In case you haven’t heard, there’s a new bill out there called the HUD SAFE Mortgage Act. From what I understand, it passed and became law in the summer of 2009, but states were given up to two years to implement the bill. This legislation makes Owner Financing illegal. If you are not a licensed broker, you will not be able to do owner financing.

This bill is huge. They are considering Lease to Own as a possible owner finance and, if determined to be so, this bill could immediately outlaw lease to own. So many buyers are not able to buy a home with traditional financing and this could eliminate options to those wanna be homeowners.

If you have ever purchased or sold a property using seller financing, you need to take a few moments to read the following message. After you have reviewed the information, send your comments to HUD per the instructions to help stop this devastating proposal. Please, get involved and make your voice heard. Please, help us Make a Difference.

Read more…

How Many Ways can Lenders Prevent a Closing?

It’s a rhetorical question. I do not want to know. I am certain that the answer is a number way larger than I care to think about.

However, I did just find one more answer to add to my list of personal experiences.

We have a buyer for a flip who is very qualified; high credit scores, plenty to put down, good job.

Well, the closing took longer than promised (no real surprise today) and our buyer had to be out of the rental he was in. As we were scheduled to close any day (we had passed the first date because of “lender error”) we let the buyer move in and he is paying us a daily amount until we close.

The property itself also passed qualification with flying colors; passed inspection, appraisal came in high (we always sell below market value to keep our properties moving).

So here’s the rub, the warning and the frustration.

Read more…

Mortgage Resets – Here comes the next wave

Mortgage Resets

I know everyone really wants to believe the housing market is going to get better in 2010. I know we’ve all had enough of the gloom and doom, but it appears we have to brace ourselves for more of the same, at best.

We’re so used to turning the channel when we get bored with what’s on. We expect to drive up to the window and have our food ready. We swallow a pill in anticipation of instant headache relief.

But, from the looks of this graph, we’re going to be in this one for a while.

From the graph, you can see the first wave that’s already passed, the grey wave.  It peaked mid ’07 then again in January ’09.  Those were the sub-prime loans resetting that put us into the tailspin we’re just now trying to come out of.

The next, and far more layered wave is just beginning to form.  You can see the dotted line where it began in January 2010.  It is 4 layers deep – the grey sub-primes, the red prime loans, the blue Alt A’s and the yellow Option Arms.  Everything peaks mid year 2011.

Add to that all the “shadow inventory” the banks have taken back and are still holding that some people say is more than they’ve already released.  Hang on, boys and girls, it’s going to be a bumpy ride.

It’s better to know ahead of time to be prepared. Stop spending. Save what you can, when you can. Scale back, downsize, reuse, recycle.

The real estate market will come back strong. It always does. We’ll just have to be patient a while longer.

So, what’s the good news?  There’s never been a better time to invest in real estate.

If you live in the Triad area of North Carolina, we’d love to help you with your investing.  Check out our Triad Master Mind. It’s a great group of local investors and we’re all working together to help each other profit through real estate.

Don’t wait to invest, invest and wait!  Huge returns will be there to reap in your future.

Happy investing!

Turned Down for a Mortgage? What’s Next?

First of all, you’re not alone. Hope that helps… According to the Mortgage Bankers Association in Washington, D.C., about half of all mortgage applicants are now being turned down. Half. Good grief, that’s a lot.

Did you receive a formal rejection spelling out the reasons you were turned down? If you were turned down because of information on your credit report, federal law entitles you to something called an “adverse action” notice.

According to the Federal Trade Commission, when credit is the issue, you’re entitled to a copy of the results showing the reason for the negative report from the credit reporting agency that provided the data on which the lender based its decision.  Whew!   You’re also entitled to a free credit report; see the FTC web site for more information.

You’ll want to know the reason for the rejection so you can fix what’s wrong, if anything is, and make sure you clear it up.  You also want to make sure that the reason is valid and not a mistake on your credit report.

Read more…

Wells Fargo Converts Option ARM’s to Interest Only

Wells Fargo

What is an Option ARM mortgage?

With an Option ARM, your monthly payment includes no principle payment and is actually less than the minimum amount of interest due. The difference in interest is then added to the outstanding loan balance, causing the overall loan balance to increase.

Repeat:  with this type of payment, each month your principal, or balance due, actually goes up.

Why would someone get this type of loan? Because the payments are low.  Artificially low.  But  paying the minimum payment each month is simply a way of deferring the interest, not avoiding it altogether.  Option ARMS are responsible for many borrowers now owning homes worth less than the mortgage debt.

Read more…

Reverse Mortgage – Good Thing or Bad?

Reverse Mortgage

Like most things, it depends…

A reverse mortgage provides income for people to tap into for their retirement.

One advantage of a reverse mortgage is that the borrower’s credit is not relevant because the borrower does not need to make payments. The home serves as collateral and must be sold to repay the mortgage when the borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home).

One disadvantage is that these types of mortgages have large origination costs relative to other types of mortgages. The costs become part of the loan balance and accrue interest.

No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan.

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Have 2 Mortgages & Need to Refinance?

Mortgage Refinance

It may be harder than you think.

Some banks are refusing to refinance mortgages because they want borrowers to pay off loans and clear up shaky bank balance sheets. Today, you may be rejected no matter what your qualifications.

What you can do to help the process?

  • Determine an accurate value of your home. True value drives the refinancing process.
  • Go to Making Home Affordable to find out if your loan is owned by Fannie Mae or Freddie Mac. If they own your first loan, that works in your favor.
  • Protect your credit score. Make all payments on-time. Get your balances down. You know the drill. Poor credit makes the process even more difficult.

The Obama administration is on your side. New policies encourage banks to be flexible and support the new programs that are designed to aid you and the housing industry. However, the banks are still needing to remove debt from their balance sheets so many of them are still not as flexible as you may need.

There are statistics showing as much as a 40% decrease in refinancing approvals for people who should be able to refinance. Most banks have money to lend, but they’re not.

Read more…

Owner Financed Homes Qualify for $8000 Tax Credit

$8000 tax credit

There’s a lot of action going on with the $8000 tax credit and we’re getting lots of questions concerning whether or not our Agreement for Deed qualifies.

“Yes”, is the answer! We close with an attorney and submit a HUD-1 with the buyer’s tax return so the return can be amended.

The following comes from the IRS web site:

Q. Can a taxpayer claim the first-time homebuyer credit if the purchase is pursuant to a seller financing arrangement (for example; a contract for deed, agreement for deed, installment land sale contract, or long-term land contract), and the seller retains legal title to secure the taxpayer’s payment obligations?

A. If the taxpayer obtains the “benefits and burdens” of ownership of a residence in a seller financing arrangement, then the taxpayer can claim the credit even though the seller retains legal title. Factors that indicate that a taxpayer has the benefits and burdens of ownership include: 1. the right of possession, 2. the right to obtain legal title upon full payment of the purchase price, 3. the right to construct improvements, 4. the obligation to pay property taxes, 5. the risk of loss, 6. the responsibility to insure the property and 7. the duty to maintain the property. (New 7/2/09)

So, if you’re in a lease-to-own situation, you may be able to give the owner a nice downpayment that enables them to owner-finance and qualify you immediately for the $8000 tax credit.

*Start owning today!

$8000 Tax Credit is set to expire – Are You Ready?

Cliffvale

Ok, so you want to buy a home, especially now, since you may qualify for that $8000 tax credit.  What should you be doing?  The time is running out so, hopefully, you’ve already started the process.

If you haven’t done so already, contact a mortgage lender or bank to find out if you qualify and for how much.  The lender will pull your credit or have you pull your credit to find out your credit score.  Then, they will evaluate any credit issues you may have and tell you what you need to do to resolve them.  Some issues take months to resolve.

Hopefully, you’ve already been reading the information here about credit and have been working on preparation to buy.

The point I want to stress here is that it will take, on average, 2-3 months to close your loan once you have applied.  Count the days!  The $8000 tax credit is set to expire on December 1 and we are already well into September.  Even if your credit is good, you must hurry and work closely with your lender if you hope to close your loan before the deadline.

Start today.  If you have questions, contact your lender or email me here.  Good luck!