Interest Rates have been on the rise lately moving up and out of 3’s for 30-year fixed rate loans. The reason for this can be viewed as good from the standpoint of our economy but bad as you qualify for less. The reason the Federal Reserve raises interest rates is to slow down inflation and inflation in prices of goods and services is due to a higher demand for those goods and services. The reason the demand for goods and services goes up is because more consumers have more money to spend as they have good paying jobs and more of them. So when interest rates go up you probably have seen an increase in your pay or have landed a better job. The theory is that people can now afford higher interest rates with higher income levels.
What this does to the Real Estate markets is slow them down. With higher interest rates your buying power diminishes. If your household income is $100,000 annually and the interest rate increases 1% it will diminish your buying power by $60,000. Multiply this by all of America and you will definitely see a slow down in the amount of people that can qualify for financing to buy homes. However, if your income increases faster than interest rates it won’t really affect you. This would hold true for the 25-45-year-olds who are in careers that have a high growth rate. For those that don’t have high growth rate jobs you might get priced out of buying a home or must settle for a home in a lower price range.
The Federal Reserve (the FED) will stop raising interest rates when they see inflation slow. This unfortunately is viewed by the number of jobs that are created and the demand for labor. Thus, when you start to hear the unemployment numbers are at historic lows, that is good for the economy as more people have jobs but the Fed sees this as a potential for inflation and will continue to rise interest rates. This is not an exact science of regulating the economy through interest rates but it has been policy since the 1970’s.
The Fed has come out publicly and said that they intend to continue to raise rates into early 2019 unless the economy shows signs of cooling off. We are seeing rising gas prices as well as rising food prices so the likelihood of the Fed to continue with it’s rate raising campaign is still pretty good. Housing prices have started to level off with decreased demand for the high priced housing across the nation. I don’t see interest rates coming back down to the levels they were at this time last year until the economy slows. If you are in the market to buy a home here at MAE Capital Mortgage we have a program where you can lock your loan in while you are shopping for a home. This will allow you to look for a home without the pressure of rising rates. This is called our Lock and Shop program. We can provide this service for any home buyer in California so if you are in the market to buy a home this could potentially save you thousands of dollars. Call us today 916-672-6130.
How do we get this done you ask? It all boils down to experience and knowledge of the current laws and regulations and communication with our clients. With that knowledge we have created a system that that appears seamless to the client when they enter the home buying process. Whether they meet us first to get pre-approved, or to look for or to sell property we can advise them through the entire process. Our clients are not tasked with finding their own Agent who may or may not understand exactly what the client’s financial situation is. Or when talking with our Agents they may not fully understand how the financing part works so they can get all that information with one phone call or email. Our Real Estate Agents can get their answers immediately as opposed to having to hunt down a busy Loan Officer. We have an in-house processor and a Transaction Coordinator so at anytime our Agents and Loan Officers can get the answers they need. A Loan officer can quickly determine if the refinance transaction they just got will have the value they need before moving forward. An Agent can get a floor call, pre-approve the client, and find houses for them with one phone call, with no more hoping they call you back after you push them off to a Loan Officer.
Would you like to offer a service that you have never been able to in the past? How about offering Private Money loans to investors? Yes, with only a DRE license you can offer Non-Qualified Mortgages to Investors. A Non-Qualified Mortgage is a private money loan for folks that need short term funds to fix and flip, or land deals, or fund commercial projects, construction loans and much more. I addition you might like to offer expansion capital loans to small business’, you can utilize our sources for Merchant loans for business owners. So when you do your marketing you now can offer more services to more potential clients.
Do you like the model of Multi-Level Marketing (MLM) by recruiting more Agents and making money from their production? If you do, take this on internally and be at the top of the pyramid for both Real Estate and Loans. We have more opportunities under one roof than any other company. Choosing the way you do business as opposed to being told how to do your business is the way we work at MAE Capital Real Estate and Loan. This MLM approach to Real Estate has its ups and downs but it can just be another option for your business if you have that sort of energy.
Bundling Services can prove to be a great service for both you and your clients. If you have just done loans or Real Estate in the past you will now have the opportunity to bundle those services together. Imagine offering to your client that you will list their home qualify them for their next home loan and find their move-up home. Then be able to say that you will use a portion of your Real estate commission to offer them a lower, than your already low, interest rates thus lowering their payments for them over the term of the loan saving them money continually. Also buying them a Home warranty so if anything breaks in the house after you sell them the home it is covered. Don’t you think this will drive more customers to you? Talk about a Win-Win-Win situation for both your client and you. Your clients need only make one phone call to get the info on both the goings on with their purchase and their loan. Who wouldn't want to get paid for 3 transactions with one client? Although you may have given money towards the loan from your Real Estate Commission, or paid for work to be done for the client, the point is you are getting 3 commissions with one client and I ask you how many of these do you need to do per month to keep your finances flush?
All-in-all with more opportunities to make money and help customers it will be your own fault if you do not succeed. We have several ways to get you in front of those potential Clients and it will be your choice on which path you take to get them. I would love to see what a person with unlimited energy could accomplish here, as the sky is the limit. Learn the business then take your business to another level by opening your own branch hire folks under you and all the while knowing that your home office team is behind you 100% and is encouraging you to succeed as opposed to competing against you. This business is not for everyone, but those that have the drive the sky is the limit. If you are interested in joining the team and or meeting us please feel free to give me a call at 916-672-6130 or click here to email me (Gregg Mower Broker).
As a consumer you might be asking yourself why loan officer compensation is important to me. The reason Loan Officer Compensation is important to you is simple and it boils down to your monthly payment. And for Loan Officers it is important to know how your compensation is derived as your manager may not give you a straight answer for one of 2 reasons; one he or she doesn’t understand how it works or; two they don’t want you to know how it works. This little blog may cause ripples in the industry but personally I have learned to educate people in the industry as well as consumers and not to hide anything is always the best practice. I write this with 34 years experience in the mortgage industry and have seen the good the bad and the ugly in this industry and we are going through another change and consumers should be aware of all of their options when it comes to financing and the right questions to ask. I think all would agree with the statement that consumers are best served with the lowest interest rates and fees as possible.
How does Loan Officer Compensation effect my monthly payment and why should I care? Great question, and the answer is a bit complicated, but it will be helpful to a consumer to know how to get the best deal possible when shopping for a loan. Loan Officers should know as they will be directly affected when clients go the lending source with the lowest interest rates. We need to start at looking at the current laws surrounding Loan Officer compensation and those laws have now been around since the Mortgage crisis of 8 years ago in 2010. These laws targeted Loan Officers but the laws were not equal in the way they were prescribed. For example, a Commercial Bank Loan Officer may or may not have an NMLS license and may be paid a salary and the Bank Loan Officer may also be in charge of several other types of loans other than home loans such as Auto Loans and credit cards. A Loan Officer that works for a Mortgage Banker or a Direct Lender, depending on the terminology, can can be compensated up to 3% of the Loan Amount by law. A Mortgage Broker can only charge 3% total to their company and the Loan Officer is paid from that. The difference is how much the respective companies can charge the consumer then how much the loan officer can add to the company profit margin for their compensation. The Commercial Bank Loan Officer has no control over how interest rates his or her Bank presents them to the consumer, however, it is safe to say that Banks having to maintain a nice consumer Branch and personnel have a high cost of doing business and generally have higher interest rates. The Mortgage Banker or Direct Lender has the same high branch operations that need to be covered in the profit margin before the Loan Officer adds his or her percentage to the interest rate and they can add up to 3% for themselves. The Mortgage Brokerage company has to be lean to stay in the game as the Mortgage Brokerage Company can only make 3% of the loan amount total to the company and the Loan officer has to be paid from that. Next, we will need to look at how and where interest rates come from.
This is where is gets complicated but if you are a consumer reading this know that you will generally always do the best if you work with a Mortgage Brokerage Company and here is why. As I said above a Mortgage Brokerage Company can only make 3% on a Loan transaction and the Loan officer must be paid from that. As a Loan officer you might be saying why would I ever want to work for less? Here is where the consumer will drive the answer to that question as a Loan Officer that makes more money per transaction at the Mortgage Banker you, the consumer, are paying for it in higher interest rates. As I stated earlier a Mortgage Banker or a Direct Lender, which ever terminology you wish to use, can make unlimited amounts of money to the company without regulation. Here is where you may have to read this a couple of times to fully understand what is going on. Having an understanding how interest rates are derived is important as all companies go to the same well to water their water, so to speak, to get their rates, and that is Wall Street. The basic interest market where Commercial Banks, Mortgage Bankers and Mortgage Brokerages get their interest rates come from the trading of large security pools of mortgages called Mortgage Backed Securities or MBS’s. These MBS’s are bought and sold every day all trading day long (from 9am est. to 4pm Est). These pools of mortgage have interest rates associated with each pool and are averaged to the nearest 1/8th of a percent. This is not a math lesson so I won’t go into the deep details of pricing, but this is where it begins. Banks and Mortgage Bankers who service mortgages (collect mortgage payments from borrowers) set the interest rates and the discounts and rebates associated with each interest rate in a 1/8th percent interval and they add their company profit margin on to those MBS rates and that is called a Wholesale Interest Rate. A Wholesale Interest Rate is the interest rate and fees that the company needs to make on each transaction as a minimum. A Mortgage Brokerage Company will go to these companies to find the best rates and deliver their loans to them and offer the Wholesale Interest Rates with their fee of a maximum of 3% (MAE Capital Real Estate and Loan only adds 2.5%) added on. A Mortgage Banker or Direct lender, on the other hand, is a company that will fund their own loans then either put them into a pool of MBS’s and sell them or keep them and service them. With those extra Origination expenses, a Mortgage Banker has, such as the cost of a Branch Manager, the branch rent, processing expenses and support staff will have to be added to the Wholesale Interest Rate before a Loan Officer is paid. The Loan Officer will then have to add his or her compensation costs above the branch costs this drives the costs up to the consumer thus higher end Interest Rate and fees. The Mortgage Brokerage Company will take on all the origination costs of the loan and will be able to use the Wholesale Interest Rate and simply add their fee to be profitable thus leaving the consumer with a lower interest rate and a lower monthly payment.
Now that you understand how Loan Officers and Companies are paid you can make a logical choice in companies you wish to get your financing through. However, since this is an industry secret you may be confused when you talk with companies and Loan Officers when shopping for a Mortgage. First, MAE Capital Real Estate and Loan is a Mortgage Brokerage and our regulator is the California Department of Real Estate and we do offer wholesale rate to our clients so you don't have to look farther than this article. As a Mortgage Brokerage we are required to hold 2 licenses to be able to offer Loans to our clients and Real Estate Services, those are a Real Estate Broker license and a NMLS License (National Mortgage Licensing System). A Direct Lender or Mortgage Banker, on the other hand, only has to hold the NMLS license. Another advantage of using a Mortgage Brokerage Company is that we have to maintain both licenses and with the additional knowledge we can help negotiate and explain the Real Estate process to consumers and even bundle our services to save them even more money. So, if you are reading this then you have found the key to finding the best interest rates as Mortgage Brokerage Companies in California have the ability to offer the lower interest rates. But don’t be fooled if you are calling around and get a Direct Lender’s Loan Officer and they call himself or herself a Mortgage Broker, you will have to ask them who their Business' regulator is and if it is not the California Department of Real Estate and it is the Department of Business Oversight then you are actually talking with a Direct Lender's Loan Officer trying to get your business. Call us today even if you are in the middle of a Loan Transaction we can analyze your transaction for free and let you know if you are not getting the best deal possible. Again, our phone number is 916-672-6130 and our website is www.maecapital.com we look forward to saving you money.
The Real Estate Market is still Hot in California but not as hot as it was so why? Rising interest rates has a lot to do with the lag or slight slow-down in the market as well as a few other factors. When evaluating Economics and economic trends you have to look at more than just the numbers and statistics, you should be looking around and talking with people in the industry to hear first hand what is happening. To fully understand what is going with Real Estate Economics there are many factors to take into consideration such as people and their tastes or appetite to purchase Real Estate which can't be found in published statistics. In California we have about as many different Real Estate Markets as we have climate zones. So to throw a blanket over the entire State’s Real Estate Markets would be doing everyone reading this a disservice. So for the interest of time I will cover the macro economics of Real Estate in California (or for those that follow Bernie Sanders Macro is a broad overview of the Real Estate Markets in the state). I know economics is not a class taught in High schools in California so I will try to break the theories down to a level that everyone should understand.
First let’s start with the obvious change since the beginning of the year in the world of Real Estate and that is the fact that interest rates have gone up. Interest have gone up from an average of 3.5% a year ago to 4.5% this year. This may not seem like a lot but when you equate it to qualifying for a home loan it can be significant. An example would be a couple that makes $100,000 annual income with about $800 a month in car payments and revolving debt. These folks would have been able to qualify for a $464,000 home loan last year at 3.5% and this year making the same income they will only qualify for a $411,000 home loan. The difference in buying power is $53,000. So as you can see their buying power was diminished by higher interest rates.
The next factor we have seen is that prices of home have gone up by 10-20% over the last year depending on the area in California you look at. What this means is that if you were looking at houses last year in the $400,000 range those same houses are selling today for an average of $480,000 at a 20% increase and to $440,000 with a 10% increase. So if your income has not gone up as fast as home prices you just lost buying power. Some Home buyers are feeling this coupled with higher interest rates and many have decided to stay put where they are at. Potential move-up buyers may re-evaluate his or her ability to better their current living situation with these factors and may chose to stay put. With rising prices and interest rates some first-time home buyers may have "priced out of the market" and not have the ability to purchase a home. If you live in a market like Southern California or the San Francisco Bay area these percentage increases will hurt even more people with the higher home costs in these areas.
Supply of housing is also a huge factor in how fast Real Estate will increase in value. For example, in Southern California or the SF Bay Area there is only so much land available to build new housing on. With a limited supply of housing and a large demand for the housing that exists the prices are soaring and in those markets like Southern California and the Bay Area many people have been held out of the ability to buy or even live in those areas. So we have seen, and continue to see, people and businesses migrating to the central Valley to places like Sacramento, Fresno, Bakersfield, and the desert areas of Southern California. This migration has caused home prices to increase in those areas to record highs as well. Construction of new homes in those areas have increased dramatically and continue to do so as long as people and businesses need a place to be. As we see the creation of more jobs in California we will continue see the demand for those homes to house the workers. This could also be the demise of California’s housing boom as more and more employers are tired of the business environment in California and are choosing to leave this state. With more taxes and regulations put on businesses in California we are also seeing a record migration of businesses leaving the state. Although this is regulating the demand for housing to an extent currently there will become a time in the not so distant future that the business cycle will slow and the California Real Estate Market may be the first to feel a down-turn.
Which brings up the fact that there is a current migration out the state of people, especially retired folks due to it’s high cost of living. People are realizing that they can’t retire in this state and are looking to other states that have lower taxes and a lower cost of living to retire. If this migration out the state continues when the Real Estate market corrects California could feel the pains worse than other places around the country. However, as long as there are good paying jobs in California there will be people to fill them, but as soon as that changes so goes the Real Estate Markets.
Going back to rising interest rates and what effects that has on the economy we will see business slowing their expansion for the simple fact that the money to expand is costing more. This is the whole point of the Federal Reserve raising interest rates in the first place, to slow a hot economy and keep inflation down. In California we are experiencing that slowing effect now in some industries. The Real Estate Finance or the Mortgage Business has slowed dramatically with the rise of interest rates cutting out those that may have wanted to refinance to lower their mortgage payment. Although there is the home purchase business that is still good Mortgage companies depend on the demand for money to keep going as people need to mortgage their homes for other reasons that purchasing them, such as bill consolidation, College, home improvement and the rising interest rates have slowed those areas so the financial industry has also slowed.
Other factors that are slowing the demand are seasonal with vacations in full swing people are looking for fun not buying or selling Real Estate. The weather could have an effect on Real Estate Sales as the hotter the weather becomes the less people want to go out and look at houses. This time of year traditionally we have seen the vacation/weather slow-down to around mid-august to September then it starts to pick up as children start back to school and people have more free time to think about moving. At MAE Capital Real Estate and Loan we know these cycles as we have seen them occur for over 30 years of being in the business. We are here to help you buy and sell Real Estate as well as Finance it whether it be a cash-out refinance to pay for college or home improvement or to finance that first home or even that 20th investment property we have done it all and are doing it every day and look forward to working with you. Call us today at 916-672-6130 and we can help you with all your questions.
Private Money Lending is just like it sounds, money that comes from private sources. Private sources are individuals, retirement accounts, hedge funds, basically any source other than regulated funds from a bank or loans sold to Fannie Mae, or Freddie Mac, or FHA, or VA. These funds are made available for business purposes which are loans for a property that is something other than a borrower’s primary residence or personal use. Another name for this type of lending is “Hard Money” which references to the fact that is someone’s “Hard cold cash” they choose to lend instead of letting the bank lend it. Private/Hard Money Loans have been a staple source of money for decades, it is expensive money and it is short term, but it can help people out of bad situations and or help rehabilitate properties.
Private Money borrowers have generally come to the conclusion that they do not qualify for traditional bank financing where they are required to have excellent credit and be able to prove their ability to repay the loan through their tax returns. A private money borrower may also simply enjoy the convenience of not having to go through all the troubles and the time it takes to get a loan done through a bank. The property that a borrower needs funds on may not traditionally fit what a bank is looking for either, such as a fixer, or a mix-use property. There are many reason a borrower chooses to utilize private funds to fund their transactions.
The type of properties that can be financed with Private Money is endless. At MAE Capital Mortgage Inc. we have made loans on a RV Park, Vacant Commercial Buildings, Raw Land, Land and Construction, Mix-Use property, Total fixer uppers, Apartment buildings, Churches, warehouses buildings used for legal cannabis production, one loan to encompassing multiple properties and list goes on. The possibilities are endless, however, it has to make sense to the investor who will be lending the money. The only real way to make the loan make sense to an investor is to have a good equity position. The equity position is a fancy way of saying that if you’re a buying a property with Private Funds the investor will want a large down payment and the larger the amount down the less risk to the investor and the better the terms will be for the borrower. The simple reason for a large equity position is that if the investor has to take the property back they will be able to re-sell it and get their money back and hopefully some profit for their trouble. The down payments required will generally start at 20% down for the single-family investment property where the borrower generally has decent credit. Investors will require more down as the risk levels go up, such as, if a borrower has poor credit, or no verifiable source of repaying the loan back, if the property they want to finance would be difficult to re-sell like raw land. Each transaction is different and there is no way to be able to tell what the risks are until we have seen the property and talked with the borrower about their financial situation.
The Borrower will be required to complete an application and have their credit run as minimum requirement. Although the loan will be based primarily on the equity in the property, the borrower will judged based on their past credit history to determine the loan to value the investor will feel comfortable lending to them. Private Funding does not have requirements like traditional loans do with regards to how long a borrower must be out of Bankruptcy or Foreclosure. The only real requirement is that a potential borrower generally cannot be in the middle of a bankruptcy and get a loan. The reason for that is simple, an investor doesn’t want the potential of losing their money if the courts decide to give the property away in lieu of a debt or forgive his note altogether. As far as a wait time they will only require that the bankruptcy be completed and released by the courts. A foreclosure doesn’t matter to an investor so long as it is not on the subject property (already transferred from borrower’ name). However, Private money can be used to cure an existing foreclosure, so the borrower can remove a property from foreclosure prior to transfer. So, Credit Score doesn’t matter either when applying for a Private money loan.
Equity position seems to be a recurring theme here and it is. The more equity a property has, either from down payment on a purchase, or the difference between the property value and the loan amount being requested on a refinance, the better the transaction appears. The way we determine an equity position is by an appraisal, in most cases. In some cases we have ways of determining value on a property without going through the expense and time of a formal appraisal. Either way a valuation of the property must be done and shown to a potential investor prior to them funding the transaction. On a purchase transaction this is easier to ascertain by simply looking at the purchase price and the amount of down payment the borrower is putting into the property in relation to the sale price. On a refinance we can generally pull comparable sales and determine a value based on other similar sales in the area. If we are doing a unique property, such as a commercial building, Land, or some other property where it is difficult to find comparable sales we will defer to a licensed appraiser’s opinion of value. So to say that no appraisal is required, is simply not true. Although, a formal appraisal may not be required on every transaction some professional opinion of value will be required to be supplied to an investor on every transaction as the property is the security and the investor will want to be protected.
All Private Money transactions will require a title search and title insurance. This requirement is to protect the investor and insure that the investors is in first lien position. This means that the title insurance will insure that if the loan goes to default that the investor would be the first one paid off upon sale. This is extremely important if the property has been damaged or requires completion in order to sell, as the large equity position required may have become eroded and other investors may have liens against the property. Title insurance also insures the boundaries of the property instead of having to have a survey done. The lending investor will also require that there is hazard insurance in place prior to funding the transaction. The hazard insurance policy insures the borrower and the investor that if the property burns down it will be replaced with an equal or like structure, thus keeping their investment secure. Although, this is a requirement of all loans being placed on real property it is extremely important for Private Money transactions where the borrower may be fixing up the property, or renting it out or both, these insurance policies provide insurance for both the borrower and the investor.
Those are the general requirements of a Private Money Loan. At MAE Capital Mortgage Inc. we will simply require a borrower to get started by providing us with an application, a borrower’s Authorization to check credit, and an address of the property, or a purchase contract if they are buying the property. We take care of all the details like opening Escrow/Title company and gathering the information the investor needs. We also will order the appraisal (if needed) and set up the title searches for our borrowers and investors. As far as where the money is coming from, well, that is our “Secret Sauce”. We have complied many sources of funding, some we will fund ourselves, and some we arrange on behalf of an individuals, and some we arrange through other Brokers who we work closely with that have the investor for the type of transaction we are looking to fund. This process requires a California Bureau of Real Estate Broker License which MAE Capital Mortgage Inc. has (#01913783). These types of loans are not for everyone, but knowing they are available, if you should need the money, is a great resource to have. We here at MAE Capital take great care to make sure our borrowers as well as our investors are well informed of the fees and risks upfront. We do look forward to working with you for your Private Money needs. Please Call us today for more information or to start the process at 916-672-6130 we are here to help.
FHA Loans were born from the great depression in 1933. The idea of the government insuring a Real Estate loan, at the time, was ground breaking. In today’s world we expect the government to step in and try to fix things when the economy is sluggish or depressed. Back then our government was far less apart of the ordinary citizen’s life. So when the private sector was approached by the government to insure mortgages that were traditionally insured privately by large down payments was a ground breaking concept. At the time Banks and Brokers were the only way to get a home loan and they required that a potential home buyer put 25-50% or more down to buy a home. So when the government said they would insure mortgages up to 95% of the value of the home, you can imagine how this changed the way Real Estate Loans were originated. It was designed to stimulate housing growth to get the country out of the grips of the Great Depression. It worked, along with a whole new age of people relying on the government to help them when things were tough. Out of the Great Depression we also got a welfare system, unemployment insurance that the government collected from employers to help with displaced workers, and a whole litany of other programs that expanded the scope of the Government. The Federal Housing Administration (FHA) was designed to be a short-term way to get the housing markets stimulated to get out America out of the depression. The program still exists today, and you can take full advantage of it.
Today FHA loans are still alive and well and are used still today to get people into home with a small down payment. FHA loans are still a viable loan for those that have a small amount of money to purchase a home. The way an FHA loan works is very similar to Conventional or Private Loans in that a potential borrower must qualify for the loan with their income and current credit. When we say qualify there are several factors that a lender must review in order for a client to “qualify” for any loan. These factors are but not limited to having shown the ability to handle credit or in today’s word have a credit score that meets the criteria of an FHA loan (550 or better). Generally speaking FHA loans are more liberal when it comes to having a good credit score than that of it’s Conventional counterpart. If a borrower has a low credit score due to circumstances out his or her control and has shown that they are trying to take care of it and that is the only factor with regards to their financial situation they generally can get approved for a FHA Loan. There are several other factors that must fall into line before that can happen, however. For instance a borrower’s house payment combined with their monthly bills should not exceed 43% of their gross monthly income. This brings us to verifying income and what is required by FHA. First, a potential borrower must have a two year history of working that could be multiple jobs or a combination of school and a job and must be able to show that their income will be stable enough to maintain the mortgage payment. Next, a borrower has to be able to prove they have enough money for the 3.5% down payment. This money can come from savings or can be a gift from a relative or a close family friend, or aa approved Down Payment Assistance Program.
We talk about FHA loans being a federally insured loan, but what exactly does that mean when you have to pay the mortgage insurance on a FHA loan? Simply put there are two payments to the insurance fund a borrower will have to make; one the upfront insurance is 1.75% of the loan amount (Sales Price minus the 3.5% down payment requirement) this is actually added to the loan so you don’t have to come out of pocket for this; two the monthly payment of the mortgage insurance is a small percentage of the Loan amount every month. These insurance payments go into pools that are designed to protect the lender’s yield on the loan if there is a foreclosure. This insurance makes FHA loans more appealing to lenders and thus lenders have more flexible underwriting guidelines and can get more people into homes utilizing the FHA Loan.
When talking about flexible Underwriting guidelines your eyes probably just rolled to the back of your head. Not to worry I am here to help break it down to simple bullet points that you may not have heard of before. Being evaluated for loan approval seems daunting but that is why we have a team of folks to walk you through the whole process. Our highly qualified loan originators will walk you through the process. The Loan Officer will gather your pay-stubs, tax returns, bank statements and W2’s and they will do the analysis for you. Your loan officer will check your credit, check your debt-to-income ratio, and make sure you have enough money verified to close the transaction. The loan officer’s job is to paint your financial picture with your financial information and presented it to the underwriter, who will approve your loan. Our Loan Officers do this every day, multiple times, so they are experts at what it takes to get an FHA loan approved, so when you are looking for expert advice and guidance please let us to walk you through this process.
The benefits of using an FHA Loan are:
Now that we have explored the history and the benefits of using an FHA loan you may ask how do I apply for an FHA Loan? At MAE Capital Real Estate and Loan, we have over 35 years’ experience working FHA loans, so we would be your logical choice, not to mention our interest rates are better than the rest. Simply click on this link and you can start to apply right now or call us at 916-672-6130 and we can do it for your over the phone.
You may hear from your Realtor that using a direct lender is faster and cheaper than using a Mortgage Broker. That is just wrong, in fact, it is quite the opposite. With Innovations in Technology and the laws that came about from the Mortgage Crisis it has made the Mortgage Broker more viable than ever. The changes in the mortgage business over the last 10 years has been wide sweeping all designed to help the consumer, however, I feel it has just caused more confusion than ever. The one constant is that all Loan Officers now have to be licensed under the National Mortgage Licensing System (NMLS) which I find to be a good thing as that forced Loan Officers to be accountable for their actions. What also changed is how the fees became regulated and what institutions could charge what fees. These little but significant changes have created areas within the Lending Industry where the consumer may not realize there can be significant Interest rate and fee differences from one company to the next and it all is determined by what regulator the Loan Officer falls under in California. We will be exploring these differences and how you can benefit from having the knowledge.
If you are the market to buy a home and your Realtor has recommended a lender to you because they have worked with them in the past you might want to do your research as you could save yourself thousands of dollars. The big Mortgage Bankers or Direct lenders as your Realtor will call them have carved themselves out a niche to where they can charge more money to consumers than that of a Mortgage Broker and most Realtors don’t even know of the differences. That is where this article comes into play to open up some little known facts. First, your Agent may think a direct lender is a better deal for you as they underwrite their own loans. That sounds sexy, however, in today’s automated world every Loan Officer be it from a Direct lender or a Mortgage Broker has the same automated underwriting systems available to every underwriter. So when you apply for a loan with either a big Direct lender or a Small independent Mortgage Broker they all have the same access to an underwriter. So the myth of having your own underwriter as a selling point is just that a myth. Technology has improved so much that all of the paperwork necessary to process a loan can be uploaded and transmitted to an underwriter instantly and that underwriter can make a decision quickly. Most underwriters today use the Federal National Mortgage Association’s (FNMA or Fannie Mae) automated underwriting system to underwrite all transactions and that same system is available to all Loan Officers either from a Large Direct Lender or a small Mortgage Broker so the decision time is the same or better with a Mortgage Broker.
Let’s talk about the part of a Mortgage transaction that is the most important to all clients and that is where they can get the best interest rate with the lowest fees associated with that interest rate. This is where it get interesting and you will not get a straight answer if you talk with a Loan Officer that works for a Direct Lender as they probably do not understand it themselves as they are working for the direct lender simply because their commissions are higher per transaction. That is where, as a consumer, you should ask how or why their commissions are higher than that of a Mortgage Broker Loan Officer. That’s right, you are paying them so you should understand how it all works. You have to understand that all Loan Companies get their rates from the same sources it is how they stack their fees onto the interest rate that makes the difference. I could go deeply into how the secondary and Primary mortgage markets work but that would utterly bore you so I will simplify it for you. Big Direct Lenders have a larger overhead and more expenses than that of a smaller Mortgage Broker and they have to pay for all of that by adding fees to their interest rates. In addition, the regulator in California for direct lenders is the Department of Business Oversight (DBO) and they have different laws than the other Regulator; the Bureau of Real Estate (BRE). To be a Mortgage Broker in California you must hold both a BRE license and an NMLS license under the DBO all you need is an NMLS license. The next big difference is how the loan officer receives the Interest rates they can quote to the public. The DBO Direct Lender has to be able to make profit for the company to stay in business as does the Mortgage Broker but the Direct lender has to pay staff to originate the loan as well as the Loan Officer and that stacks up to be a whole lot more than that of a Mortgage Broker. A Mortgage Broker is limited to a maximum of 3% of the loan amount they can make on any one loan and that is a combination of all fee charged or not charged. A Direct lender does not have that limitation and can charge what they want to be profitable. A Mortgage Broker can go to the back door of a direct lender and get wholesale interest rates that only includes a small company profit for the direct lender as they are not paying for staff, branch managers, and Loan Officers. The Mortgage Broker will pass the lower fees and lower interest rates on the customer.
Having been on both sides of the fence I understand completely how this process works and will tell you that you will save thousands by working with a company like MAE Capital Real Estate and Loan. Every Loan we close is a testimony to this as the client’s rates and fees are significantly lower than that of a Direct Lender. As an example we closed a VA loan that came to us from a Veteran who works for the VA and he received a quote from one of the Veteran’s Administration’s “Approved Lenders” that is a Direct Lender and we beat them by .5 in interest Rate and $13,000 fees. We closed the loan at 3.875% and the veteran paid $0 down and $0 closing costs, saving him $13,000 in costs and has a lower mortgage payment. We have many stories like this and most of our clients don’t even realize the savings they are receiving as most clients don’t shop for a loan. So if your Agent is recommending a Loan Officer Check the rates and fees and then check with MAE Capital Real estate and Loan and you will be shocked at what you will save. If you are buying a house in the Greater Sacramento Area (El Dorado, Placer and Sacramento Counties) ask about our Bundling of Services where we represent you as the Realtor and the Loan. This has saved our clients even more money as we can bundle our commissions and get you a home warranty and other goodies that you would have otherwise had to pay for yourself. MAE Capital Real Estate and Loan is one of California’s best kept secrets when it comes to saving people money on their home financing. Call us today to find out more or have us compare your Direct Lender’s Loan Estimate with ours and see how we can save you thousands of dollars. We can Lend all up and down the State of California. Our phone number 916-672-6130 or go directly to our site at www.maecapital.com.
What is the difference between the Large National Chain Real Estate Companies and the local mom and pop Real Estate brokerages? The traditional thought is that if you list your home with a “Big Box” Real estate firm your home will have more exposure to more potential Agents that can sell your home. But is this actually true anymore with the internet playing such a big role in real estate sales and marketing? Can a small company compete with the “Big Box” real estate firm, or can they not only compete but beat them out in service and price? The answer is not only can the small Local Firms compete but in most instances, they can react faster to a changing markets and provide a better service at a more affordable price.
To prove this let’s first define what a Real Estate Agent’s responsibilities are. There are 2 basic functions of a Real Estate Agent or Realtor (An Agent has to belong to the National Association of Realtors to be able to be called a Realtor) and those functions are representing buyers of real estate and or representing sellers of real estate. When representing a Buyer an Agent must act in the buyer’s best interests and when working for a Seller the Agent must look after the Seller’s best interests. It is possible to represent both but when doing so Real Estate law dictates that the Agent must look after the Seller’s best interests first. These functions have no relation to whether an Agent works for a large firm or a small firm, the law is the law.
An Agent that works for the “Big Box” firm will generally be working there for one of three reasons and none of which benefit you the client. One; they are new and work there to gain more information or are in constant training. Two; they have a friend that works there. Or three; they believe that the name recognition will benefit them in their personal career. I ask, does any one of those reasons benefit you the buyer or seller? They will tell you that they can pitch your house to all of the Agents that work in their office and that might sound good to you but ask the Agent how often he or she is actually in the office and the answer might surprise you. The Agent that works in the smaller firms actually gets more hands-on experience and has access to the Broker directly on a daily basis to get his or her situations handled quickly.
In today’s Real Estate world everything an Agent does revolves around the internet. An Agent no longer has to go to the office to “pitch” their listings to their colleagues as their colleagues are all connected to the internet as well. In fact, as an Agent today, we all have to go to the same internet source to see newly listed houses, and that is the Multiple Listing Service or (MLS) which is now done all on line. The MLS is syndicated with many other internet Real Estate Search Platforms such as , Realtor.com, Zillow, Redfin, Tulia, MAEcapital.com and many more. In the “good ole days” the MLS was published in a book and Agents depended on other agents telling them what was on the market. This is how the business was done for years until the internet came along and changed everything. There is still this belief in the minds of many consumers today and that is why there are still “Big Box” Real Estate Firms. An Agent working for a small Local firm will have all the same tools available to an Agent that works for a large firm but will be able to work for their clients more efficiently with less overhead. In fact, all Agents that have access to the MLS are members of the Local Real Estate Board, the California Association of Realtors and the National Association of Realtors whether they work for a large or small firm.
Another aspect of Real Estate that has not changed is the commission rate charged to sell a house. Astonishing enough the standard rate to sell a home is still 6% of the selling price of the home. I am not downplaying what an Agent must do and maintain to be able to sell your home, I just think the concept of 6% is just a bit out of line. If you are trying to sell a $600,000 house and you list it with a 6% commission with a Big Named Real Estate Firm you will have to pay $36,000 in commission. What do you get for that you ask? You get an Agent that will put your home in the computer (MLS) and put a sign in the ground and will hold your home open several weekends for potential buyers to see. You also get the professionalism of a contract that will be written to a high legal standard. Your Agent will have to go over any work requests of the buyer and work with an Escrow on your behalf. This is what an Agent will do for your no matter if they work for a large or small firm. Your 6% helps pay for that nice “Big Box” office that you will probably never go in. A Small Frim will have the ability to make that number a whole lot less offering the same services and some cases the small firms have more local contacts as they have been local longer. When you sell your house, it is all about exposure whether it is a Million dollar house or a fixer-upper, as a seller you need to look for experience and someone you can trust and hold accountable and knows the local market.
As a Buyer of Real Estate, the commission your Agent gets doesn’t really matter to you, as it has been pre-determined prior to the house coming on the market, or does it? When looking for an Agent to represent you as a buyer they need to know the local market, have knowledge of financing available, understand the local closing costs, and understand how to research properties. Although, the commission that is paid to them is truly not your concern as the seller pays the Buyer’s Agent but what your agent does with commission is. Most “Big Box” Agents have no say in what they can do with the money they receive when representing a buyer, an Agent working for a small firm can chose to give back some towards closing costs, work items, warranties and title costs. At a minimum a good buyer’s Agent should pay for a home warranty, that insures the buyer if there are problems with any of the major systems of the house in the first year or 2, they have a warranty that will fix those issues with little or no cost to the new home owner. This, however, is not legal for an Agent to advertise as is goes against the Real Estate Settlement and Procedure Act or RESPA to tell a potential client that. So it is always a good idea to establish what they will pay for you, on your behalf upfront, but you have to ask them they can’t say “if you use me I will pay for X” that would be a violation.
The newest type of Brokerage is a Hybrid Real Estate Agency, a Real Estate Brokerage that also can arrange your Home Loan and bundle all the services into new low cost package. Now the smaller local shops, like MAE Capital Real Estate and Loan, can offer all the same services as the their “Big Box” Competitors, but they also have the opportunity to offer more. The listing and selling of homes is an art and you want a person that knows this and has the experience to do so on your side. At MAE Capital Real Estate and Loan our Agents typically have far more experience than those in the “Big Box” shops. This experience also allows us to provide multiple services to our clients such as standard financing options for homes as well as private money options. We have found that being able to show the Sellers and the Buyers how they can save money by bundling the services they need to sell and buy homes proves to be invaluable to them. At MAE Capital Real Estate and Loan your home is marketed on the MLS, on our site, Realtor.com, Zillow, Tulia, RedFin and 70 other sites along with social media, and if you request your home can have its own page with video and all the interactive bells and whistles. As a Hybrid Real Estate Firm, we find homes for our buyers that fit their needs, and yes we are “Realtors” (belong to the National, the California, and the local Association of Realtors), in addition to that we can also qualify our clients for their mortgage and provide them financing. We will also screen potential buyers in ways our competition cannot. This ability to offer more services not only benefits our clients in the time they save to find out if they can sell their home and buy another home, it also saves them thousands of dollars. Take a typical seller of a home, they have to find an Agent to list their home as well as find a Loan Officer to see if they qualify to purchase their next home. As a smaller shop we can do all this at the same time for you with one call to one office to get multiple answers.
Let’s talk about cost now, as that is the most important part of all this. Remember the typical Commission on Real Estate is 5-6% (2.5%or 3% to the listing Agent and 2.5%or 3% to the Selling Agent respectfully). What if you could get away with 3-4% or even less in some cases would you do that? Of course you would, as you know you will get exactly the same service, or better in most cases, and reach the same or more people for far less money. One more thing, the cost of your loan will be less as we don’t charge you any fees for your loan. That’s right as a Broker we go and find you the best rates for your situation. As a Mortgage Broker with a long history in the Mortgage Business MAE Capital Real Estate and Loan has sources across the country that can fund your loan. Also a little known fact, as a Mortgage Broker, we are limited on the fees we can make, and we receive wholesale rates (lower than retail rates) and pass those low rates on to you. In addition, our Agents must hold both a California Bureau of Real Estate license and the Nation Mortgage Licensing System license (NMLS). So what you end up with for your loan is a lower interest rate and a no fee loan transaction. As we are bundling these services we can lower your cost of all them, thus saving you thousands of dollars upfront and a lower monthly payment than you could get going to a Banker.
So let’s recap the differences between Large and Small Real Estate Firms. A large firm has high overhead, Agents that are there for selfish reasons, and they don’t do the mortgage portion of the transaction, and expect higher commissions. So a small Hybrid firm like MAE Capital Real Estate and Loan (selfish plug) has low overhead, Agents that value their customers, and sincerely want to help them with the costs, can do the mortgage portion, can bundle services to make the cost significantly cheaper for their clients, and generally have more years of experience, and hold both a BRE and a NMLS licenses. It is still your choice on who you pick to help you with your real estate needs, but now you have the facts about the differences between a small real estate firm and a large one. I don’t want you to be underserved and over charged as you can see this can happen quickly in the Real Estate world. We would be happy to sit with you and show you how this works and the consultation is free, let’s get going today. To talk with an Agent click here, For Employment inquires click here or Call us at 916-672-6130 PS. Further proof of how Box Box Firms really are not in your best interests. We had a listing that was priced really aggressively to get a bidding situation going at the seller's request. We had one offer come in significantly over the listed price but upon inspections during the contingency period that buyer decided the house was not for them. Then a hot- shot Agent from a Big Box Firm submitted the next best offer at a lower price with no contingencies (meaning that they were to take the house as it sits with the inspections we provided) and promised to have the earnest money deposit (EMD) in within 3 days of acceptance. Every day for 10 days we were promised the Deposit would be in and that the clients were in Hawaii and would get to it when they could. Then 10 days after the Deposit should have been in escrow we get a cancellation from the Agent from the "Big Box Firm" with no call back. This goes against ethics in Real Estate, so we called the Agent's manager from the Big Box Firm at 3:00pm and left a message and no answer or callback. Before that trying to get a name of a manager was a chore as it is not published on their site at all. In addition, this particular Agent was part of a "team" within the Big Box structure which can be confusing to clients, so watch out for the "Team Concept" within a Big Box firm as it is an attempt to hide from accountability. If you choose a an Agent from a Large firm see if you can find who their broker in charge is prior to engaging. The "Big Box" firms and those Agents that work for them appear to be insulated from ethics (In some cases) of Real Estate, which I find appalling. I believe that an Agent should have all parties interests not just their own, in fact, Real Estate law states specifically that the Agent's have to look after the seller's best interests first. Just one recent example of many. So Buyer Beware.
2018 started off with relatively low interest rates but in the last few weeks interest rates have been on the rise. The stock markets have hit record highs and the economy has added over 200,000 new jobs. Although the Stock has corrected and has become volatile in the last week or so it is still trending over 24,000 points, the highest in it’s history. So with the strong stock market and new jobs interest rates are rising to slow inflationary pressures, a kind braking system to the economy. In order to understand this affect to the equity markets (Stock Markets) and why it signals coming inflation, we have to break it down to why it is happening. As people make more money and buy more things that puts a pressure on the supply of goods and services and when there is a stronger demand for goods and services prices will tend to go up. As prices go up for goods and services the Federal Reserve will raise interest rates to slow the demand down as the higher prices for credit (higher interest rates) will slow people from purchasing goods and services, in theory.
The theory of fighting inflation by raising interest rates has been a policy of the Federal Reserve Board since the 1970s. So, when the interest rate markets see any possibility of inflation they will tend to start the process of raising interest rates in anticipation of the Federal Reserve raising them. This is what we have been seeing since the first of the year. Several events have happened to signal possible inflation in the future and as they unfold we see the markets adjusting to stay in front of what the Federal Reserve will do with interest rates when they meet at their monthly meetings. One of the major events that is signaling inflation is the lowering of the corporate tax rate to 20%. It seems people in the media and some closed-minded folks think that by lowering corporate taxes helps the rich some how when, in fact, it helps the American middle class people far more. This is simple economics that is not taught in our public schools.
To fully understand this, you must first look at corporations as tax pass through entities. When a corporation pays higher taxes they just pass that cost through to the consumer in the form of higher prices for their goods and services. Higher taxes also mean a big corporation will limit how much money they keep as profit in the U. S. as opposed to taking that profit in a country with lower taxation rates. The money saved by the lower tax rates will tend to keep the money in the US and will be re invested to hire more American workers and keep dollars in the US. Thus; more money in our economy for the American people to spend and eventually driving up prices causing inflation and forcing the Federal Reserve to raise interest rates to slow the economy down. You see, if the economy grows too fast then there will be a higher demand for goods and service than they can be provided and that will cause prices to go up. The theory has been to raise interest rates so the flow of money slows down with the higher cost of money. This is a confusing topic for most people that don’t have a degree in economics like your author, but if you understand these basic principles you can not only save yourself money, but you can make money by knowing what is coming.
So how does this relate to Real Estate you ask? Knowing the economics behind the economy you can make better decisions as to when to buy home for investment or when to lock in your interest rate on your home or when to refinance and save on your monthly payment. What this tells me about this year in Real Estate is that it should be a hot year for Real Estate Investment on both the Residential side as well as the commercial side of Real Estate. A smart investor will note the economy is starting to improve and more people will have more disposable income to invest thus driving up Real Estate prices. We have seen this happening in the residential sector for a few years now but it did not have to do with a strong economy as so much as the lack of supply of homes. We have seen builders come back into the markets where they can build, and the supply of homes has increased to offset demand. In the markets where builders can not build, due to lack of land, we have seen prices increase to astronomical levels. IN some markets the Government has kicked around rent-control which would limit the amount of rent a landlord could collect in a certain area. The result of rent control would be more run-down real estate, lack of new investment and corruption. The Government should let the free markets figure out where rental prices should be as well as values. As you can tell I am a firm believer in free markets and less government involvement as history has shown that when governments intervene in economics it causes markets to tighten as people and companies have to spend more for compliance of the government regulation that enviably hurts the very consumer they are trying to help. I know the what the argument is from the other side is but it makes no economic sense as every result of more government is higher prices to people, bar none.
In conclusion my advice to potential new home buyers is to lock in their interest rate as soon as they can when they are buying a home in this market. If you have been contemplating refinancing your home my advice would be to do it sooner than later as you will be facing higher interest rates. If you are looking to invest in Real Estate, again do it sooner than later as you will not only get a lower interest rate today than you will tomorrow, but the prices of the Real Estate Investment will be lower today than tomorrow. Interest rates will be common place to be in the 5%-6% range for residential homes in the next 30-60 days from February 7, 2018. For more questions on buying Real Estate or Refinancing or even commercial Real Estate give us a call and we will help you with all your Real Estate investment needs. Again, MAE Capital Real Estate and Loan 916-672-6130. Update to this article 2/22/18- Rates continue to rise due to all the factors listed above and now the Federal Reserve has also said they need to counter inflation by raising rates. I will predict that interest rates will be consistently in the 5's by mid summer. So if you are looking to refinance to take cash out to consolidate bills, pay for college, or home improvement I would suggest that you push up your time frames and get it done now so you can lock in a lower interest rate. It is simple, call one of our qualified Loan Officers and lock you interest rate in today. Update: March 5 2018, Interest Rates still are trending upward although not as fast as we have seen. Again the stance we are taking is to lock our clients in as soon as we can to get the lowest rate possible. As a Broker we are trending about 1-2 points lower in fees or about .125%-.25% better in interest rates than our Mortgage Banking friends.
As a Real Estate Broker who has been in the industry for the last 33 years I have learned several tricks and secrets that other Brokers don’t want you to know about. I want to share them with you as I have learned to save my clients money using the secrets other Brokers don’t want you to know about. In Real Estate everything is negotiable and that is the first secret I will share with you as that will be theme of this whole post. We will cover how Agents are paid and how loan officers are paid, as knowing this will help you negotiate and choose the best firm and Agents to work with. We will explore the various other aspects of Real Estate like how the financing works and how you can bundle the services from one company to save thousands of dollars.
Let’s start with selling a house. If you are considering selling your home, you should know that when you talk to an Agent about listing your home that he or she’s commission is negotiable. The Agent will tell you that the going rate is 6% or 5% but the dirty little secret here is that there is nothing written in stone. If you did a little research you could find a company like MAE Capital Real Estate and Loan that can that can save you thousands by bundling Real Estate services you will need anyway and receive a discount on the commission you pay to sell your home leaving you with more money to buy your next home. If you are dealing with a “Big Box Real Estate Firm” you may not be offered this option as they are not allowed to negotiate like that and may not offer all the same services, but the smaller firms can. Another little secret is that when you list your home for sale whether it is with a small Brokerage or a large Brokerage the way your home is marketed is exactly the same. Your home is listed on the Multiple Listing Service (MLS) that is a digital service that every Realtor has to belong to. So, if you think your home will be seen by more Agents if you list it with a large firm you would be mistaken. In fact, smaller firms generally have strong roots in the community and those Agents that work for these firms understand that they have more ways to serve their clients and save them money. Another secret is that when listing your home and you know you will buying another one the same Agent who listed your house for sale can sell you your next home and when doing so can now accept a lesser of a commission on the sale of your giving you more money to buy your next home. Here at MAE Capital Real Estate and Loan this practice is common place.
This brings us to Buying a home. Did you know that you don’t pay your Agent to represent you when you are buying a home? It’s a fact, the seller pays commissions to the Listing and the Selling Agent as per the listing agreement already completed before you ever saw the house. This is why, as the seller, you will have to pay something to sell you home or you won’t get anyone to show the house. So as a buyer, either moving up or a first-time home buyer, you should always have representation. Did you know that if you go directly to the Agent who has the house listed it won’t save you any more money as a buyer? This is a common myth when looking to buy a home, as what you don’t know is that the Agent who has the house listed for sale has already made arrangements with the seller for their commission, in fact, in that scenario it might end up saving the seller money and not you as the buyer. In Real Estate in California the Agent has to look after the seller’s best interests first, that is the law. So, knowing this will put you at the advantage as, if you remember, everything is negotiable and if you have the right Agent they should be able to negotiate a better deal for you than the Agent representing the seller could by law. The trick is when you are selling a house and buying another is to work with a MAE Capital Agent as they will bundle their services and take less when they sell your home leaving you with more to buy the next home if they also represent you when you buy your next home, this is called service bundling.
The next aspect of the Real Estate transaction is the financing. This is probably the part of the transaction that you will be least knowledgeable about as you can’t see a loan like you can physically see a house. This part of the Real Estate transaction is the part most people are afraid of and have no knowledge of how it all works. I’m not going to teach you how the financing works, but I will teach you the secrets that your Loan Officer doesn’t want you to know about. Again, going back to our theme of everything being negotiable, you guessed it, the financing is also negotiable. Most people don’t realize this as the laws have changed to where Loan Officers and companies have to set their fees up in advance of disclosing to you. This is where you have the advantage as you can easily shop an interest rate and fees to get the best deal. Going back to small shops verses large shops, the same holds true for Mortgage companies. The large Mortgage shops are far more restrictive when it comes to negotiating fees and interest rates than smaller shops and the reason for this is the regulators who the companies report. A dirty little secret is that most of that larger Mortgage Companies in California are licensed under the Department of Business Oversight(DBO) which means they don’t have the same restrictions that the smaller companies that are Regulated by the Bureau of Real Estate (BRE). The secret is that if the regulator is the BRE the Mortgage Company under them can only make a total of 3% in fees and commissions whereas the Mortgage company regulated by the DBO can make unlimited amounts of money on your loan thus they are generally higher in interest rates and fees. Choosing a Mortgage Company under the BRE that can provide multiple services translates to you not only having a lower mortgage payment but also lower costs to get that loan. At MAE Capital Real Estate and Loan, we are regulated by the BRE and thus ours rates and fees are less than any of our DBO competitors before we discount anything. Here is a secret that will save you thousands, and you can quantify it. If you use MAE Capital to Sell and Buy your next home and use our financing without any discounts you would be better than our competition in fess and costs and monthly payments, however, the reason for sharing this is to show you how we do use discounts to save you additional money. Having the ability to have Listing, Selling and Loan Agents under one roof will not only save you time it will save you money, we are here to help.
I understand you have choices when you need a Real Estate Service or services, I wanted you to learn some secrets and tricks to save money whether you use MAE Capital Real Estate and Loan or not. I am a firm believer in empowering my clients to make informed decisions. If you are reading this blog then you are one who researches and fills your brain with knowledge before you make any big decisions. You are the smart one as most people follow the leader like sheep and you know where that leads you (to the slaughter house). Here at MAE Capital Real Estate and Loan we pride ourselves on serving our customers and they keep coming back so we must be doing something right. When you talk about experience and the ability to think outside of the box that is what we are and sharing the secrets of the trade is just one way of keeping our clients informed. If you need further assistance with one or a bundling of our services, we would love the opportunity to show you how we do this Real Estate and Loan Business. www.maecapital.com 916-672-6130
Welcome to 2018. I
think it is a good time to review all the available loan types in today’s
lending world and what they are uses for.
Although there has been changes in the industry There are still options
for people to get financing for both their primary homes and their investment
property. There are creative options for
those that are self-employed that don’t show all their income on their tax
returns. Of course, we have the basic
home loans like FHA, VA and Conventional loans that are still priced really
good for an economy that is starting to build steam. On the end of the spectrum we have Hard MoneyLoans available for those investment properties that banks may have said no to
for one reason or another. All these
loans have their purpose in today Real Estate Markets.
Let’s start a look at the most basic of loans that are used
for purchasing and refinancing primary residences. These loans are, what we in the industry call,
“A” paper loans. These loans also fall
under, what the government calls, Qualified Mortgages or QM loans. These loans are full of regulations designed
to protect the consumer from lenders that may not have their best interest in
mind. One of these loan types is the
Convectional loan and is the most widely used type of mortgage. The Conventional Home loan will allow buyers
to purchase home and put as little a 5% down.
A Conventional home loan is privately insured which means if you put less
than 20% down you will be required to purchase mortgage insurance from a
private institution. The same would
hold true for a refinance, you would need greater that a 20% equity position in
order to refinance a Conventional loan without Private Mortgage Insurance
(PMI). Because the insurance is private
the underwriting guidelines are a little tighter than that of the Government
insured loans like FHA. Traditionally FHA insured loans have had the
full faith of the Federal Government backing these loans making them more
desirable for banks to sell the loans to each other. Thus, interest rates on these loans are
little lower than their Conventional counterparts and the underwriting criteria
for FHA loans are little easier as well.
So, if you have a lower FICO score (550-660) FHA will probably be your
best bet as there are not additions to the interest rate with lower credit
scores with the FHA loans. FHA does come
with mortgage insurance, however, with the higher Loans to Value loans it still
is a lower payment than a conventional loan.
Both FHA and Conventional loans now
do not require a termite report and clearance unless it is asked for in the
Real Estate Contract making both loans flexible for home buyers in a tight Real
estate market or if buyers are willing to buy light fixers. The Veterans Administration loans or VA loans
are only for those that have served in the military and have the eligibility required
(usually 4 years in) to qualify. The benefits
of being able to use a VA loan are great, besides the fact that the Veteran
does not have to put any money down at all it is fairly easy to qualify for the
payment as interest rates are low for these loans, as well. VA loans will take Veterans with credit scores
as low a 550 with no money down and no mortgage insurance. These are all considered Qualified Mortgages
in the Government’s eyes and will require certain waiting periods to ensure
borrowers have the ability to shop and compare and make sure the loan being
offered them is good for their situation.
Another option for home buyers under the Primary Residence
type of loan is the Bank Statement qualifying loan. These types of loans are still considered
Conventional loans as they are privately underwritten. They are specifically designed to provide an
alternative way of qualifying as opposed to the traditional way of having to provide
Federal Tax Returns. These loans will require
a borrower to provide 12-24 months of bank statements from their personal or
business accounts or both. They will be
qualified by averaging their deposits and taking out a certain expense number
and that will be the income that will be used to qualify them. As it still falls under QM loans these loans
are required to make sure the borrower has the means to make their mortgage
payment that they are applying for. Due to
the fact that Private Mortgage insurance companies will only underwrite under
traditional income qualifying guidelines these loans will require a 20% or more
down payment. As they are considered “higher
risk” loans and interest rates are bit higher than Traditional Conventional loans and
Lastly, we need to cover a sector of the market that is
almost considered “Underground Funding” and that is Private Money Loans or Hard Money loans as they have been called traditionally. Private Money loans are for those investors
that don’t qualify for financing under traditional bank guidelines. Hard Money loans are used primarily on
investment property both Residential and Commercial properties. These loans are arranged by mortgage brokers
with private funds from private investors (individuals) and hedge funds. The borrower is not scrutinized as much as
the property is under this type of funding and the bigger the equity position
is the better chances are that an investor will fund the project. The minimal investment required to get a
Private Money Loan or Hard Money loan is 30% of the project’s value or purchase
price. whichever is less. These loans
can be used to purchase Residential, Commercial, Industrial, Mixed-Use, Land,
Construction projects, Churches and those properties that Banks tend to shy
away from. Hard Money loans can be used
to refinance an existing project, or provide funds for construction.
There are many different types of loans available today and
can be used for many purposes. Here at
MAE Capital Mortgage we have all these loans available. Not only do we have these loans available we
have experts in guiding you to the right loan product. As we are a Mortgage Broker we are also
limited by the government on the amount we can charge for certain products thus
making our loan interest rates and fees the best in the market. We work with direct lenders and get what is
called a wholesale interest rate which is lower than a retail interest rate you
would get from a Banker or direct lender and we pass those saving on to
you. We know you have options out there
and I would advise that you work with a team like MAE Capital Mortgage that has
decades of experience that will be passed on to you in the form of knowledge
and reduced costs and fees. Please call our offices is you have any
questions regarding these loans or Real Estate we welcome the opportunity to
help you with this process. MAE Capital Mortgage 916-672-6130 or www.maecapital.com.
Without a doubt this is the hardest time of year to try and
sell the family home. It is not so bad
for home buyers this time of year, but a seller has to always have their home
ready to show. With family coming and
going from the family home it can be nearly impossible to keep your home “show
ready”. If you are selling a staged
and remodeled home this may be the perfect time of year to sell as homebuyers are
always looking and inventory is traditionally lower this time of year. As homebuyers are always ”in the market to buy”
a seller may not be for obvious reasons.
Traditionally, during the holidays there is so many extraneous
things going on in lives of people that they most often decide to wait to sell
their homes after the first of the year when things calm down and they have the
time to keep their homes “show ready”. Most folks that want to sell the family home,
decide not to list and sell their homes during the holidays as they may have
family coming and going or they may be going to family. They may also be shopping coming and going
from their home, decorating, or parties
or all the above. So, for these reasons some
people will opt to wait till after the first of the year to put their home on
the market. In January you will
traditionally see more homes come on the market as time has freed up for the
potential sellers to get their homes ready to sell and all the holiday
decoration have been stowed away.
Homebuyers, I have found, are always looking to buy so if there would be
a possibility to list your home during the holidays chances are greater that
you will sell your home during this time.
For investors listing and selling their houses, they won’t
have of the same pressures as they do not depend on the house they are selling
for their family. For an investor this
is a business of buying, fixing and selling homes so they don’t have the same problems
that a homeowner will have that lives in the home they are selling. So, for that reason you may see more
remodeled homes hitting the market place this time of year as investors are
smart and know that their houses will be in more demand this time of year as
the inventory of available homes for sale has shrunken due to the
holidays. For a smart homebuyer they may
get to take advantage of buying a newly remodeled home where other home buyers
may have opted to wait till after the first of the year to resume looking for a
There are pro’s and con’s to buying and selling a home this
time of year, but always remember that both Buyer’s and Seller’s can write
anything they want in the contract. If a
Homebuyer doesn’t want to move over the holidays they can always write a Close
of Escrow Date to be after the first of the year so they do not have disrupt
their living arrangements during the holidays.
The same holds true to a seller they can dictate when they wish to close
escrow as well. Some other factors
during this time of year to take into consideration is that the service
providers such as the Lenders, Title Companies, Escrow Companies, and even
Realtors may have travel plans with their families that may slow things up as
well. The toughest time of year to try
and close an escrow is the last day of the year and that should be taken into
consideration. This year is particularly
difficult as the 31st falls on a Sunday which makes December 29th
the last business day of the year and it is a Friday before a 3 day weekend,
people may be leaving town or trying to leave town which can slow or delay a
closing. Also, Christmas falls on the
Monday of the same week making that week only a 4-day week at best. There are a lot of things going on this time
of year that doesn’t usually happen other times of the year, so if you are
buying or selling a home I would say be flexible as you never know what may
happen to delay a close of escrow. Working with a team like MAE Capital that has figured this out ahead of time will aid in your negotiations this time of year. We always look forward to helping our Buyers and Seller's navigate this time of year and throughout the year. Click here to learn more about selling your home. Click here for more information on buying a home. Or call our office and we would be honored to help answer your questions 916-672-6130.
Wow, the DOW Jones Industrial Average is over 23,000 and to think just 10 years ago it dipped to 8,000. If you are invested in the Stock Market, chances are you have done pretty well. So, when is the right time to take money out of a hot Stock Market and invest in Real Estate? My contention is any time, as Real Estate over time has outperformed the Stock Market in many ways. I know it is tough to give up those double digits gains in your stock investments year after year, but as you know there has not always been those gains and when you take out management fees on mutual funds and 401ks you might only have only had single digit gains or none at all. Not to mention unless you are invested in income producing stocks (stocks that pay a dividend) you generally have just realized equity gains or value increases. Real Estate has also seen double digit gains but the difference with Real Estate Investments are that you also receive rents, so you have appreciation as well rents received.
Every Financial planner will tell you that you need to be diversified with your portfolio, but what exactly does that mean? Well simply put you should have investments in the Stock Market, Real Estate, Gold, Bonds, etc.. When you find yourself too heavily invested in one area you should spread out your wealth. If you can devise a way to sell some of your stocks that may have seen the bulk of their gains and are poised to have a correction and turn around and buy Real Estate, I think when the correction does come to the Stock Markets you will already have the hedge with Real Estate. When the Stock market corrects money tends to move towards Real Estate. If you are prudent and can see ahead, you will profit greatly when the correction does happen.
So what type of Real Estate Investing is for you? Most people know single family homes as they probably own one as the house they live in. But there are many other types of Real Estate Investment. Of course, you can invest in single family homes, but don’t throw out the possibility of investing in multi-family homes, Commercial property or even Notes. Single family homes are pretty straight forward in that you have one home one renter pretty easy to take care of. The only downfall is that when that renter moves out and you have the downtime to find another renter and fix up the damage from the previous renter. With Multi-Family homes you will still have income, however, if one renter moves out you have others still paying so you are still receiving income. In addition, with multi-family properties you generally get more rent per square foot over time. The Percent of appreciation you receive will vary from location to location on any property. With a commercial property you generally have better rents and better lease opportunities such as triple net leases where the renter(s) will pay their portion of taxes and expenses on their space. With a commercial property you get a different kind of use than that of a single or multifamily dwelling. You might have a retail building with shops that are only open during the day, or an office building that the tenants must keep up for their clients, or a warehouse, all of which bring in good rents but are very different in the up keep and maintenance and the ability to have the tenants pay for it.
You have to ask yourself if you are getting all the return on your money that is possible. If the answer is no then you should look towards Real Estate. It is a fact that the wealth of the top wealthiest people in the world have huge Real Estate holdings. Starting your investing in Real Estate can easy, first you have to come up with a budget for purchasing Real Estate. Unlike Socks (generally) you can leverage Real Estate to get the most for your money. As an Investor you don’t have buy property outright you can get a loan against it allowing you to purchase more thus leveraging your investment dollars. Investors should obtain an operating statement from the seller when purchasing commercial properties as you need to know what the income and expenses are of a property before purchasing. Then you can apply your new tax base and your loan expenses and get an accurate income estimate of the property prior to purchasing. This is far easier with a residential Single Family investment home as you will know what the expenses are prior to purchasing as the renter will pay for their own utilities and maintenance, you will have to pay taxes and insurance which you can estimate pretty close prior to purchasing. One more thing you have to ask when placing investment dollars is when will the next correction be in the stock market and can you weather that storm before it comes back. Here at MAE Capital Real Estate and loan we love to help investors obtain investment property as well as helping them finance those ventures.
The Income Solving home loan has been designed to fill the gap for those folks that can’t qualify when they have to provide their Federal Income Tax Returns. Current rules for obtaining a Conventional or FHA loan require the applicant to provide tax returns to prove they make enough income to qualify for a home loan. This traditional style of qualifying for a home loan can leave an entire segment of the population out for qualifying for Conventional, or FHA and even VA home loans. So, the market place has come up with a type of loan that will comply with the current laws and allow for those that are self-employed or on commission to be able to qualify for a home loan without having to provide Federal Tax Returns. You may have even heard them advertised as Income Solving Mortgages.
The current law states that a borrower must be able to show “the ability to repay” the mortgage when applying for an owner-occupied home loan. This does not hold true for properties that are being purchased as a rental or for business purposes. So how have lenders come up with ways to avoid providing Federal Tax Returns? First, you may want to ask why not show the tax returns? The answer is simple as people that are self-employed or on commission don’t get the luxury of company expense accounts, paid health care, and other expenses. So those folks may make more than enough money to actually make the payments they just have to write off so many other expenses that a normal salaried person may not need to. This, in turn, lowers the income shown on their tax returns and, in some cases, may take them out of being able to qualify for a traditional home loan with their tax return.
The solution to being able to show “the ability to repay the loan” comes in the form of showing the actual income made by the individual. Showing the income can be best done by showing the deposits made to a business or personal bank account. For example; a borrower may show $300,000 in deposits for a year and yet their tax returns after expenses only show an income of $25,000. If we are allowed to look at the deposit record and apply the actual expenses of running their business their income would be far greater and probably enough to qualify for what they wish to purchase. So, to prove deposits we would require a borrower to bring in one or two years of bank statements to support their “ability to repay the loan”. We may also ask for a year-to-date profit and loss with the true income and expenses minus any paper write offs like depreciation.
Have you ever wondered what it takes to become a Real Estate Agent or a Loan Officer in California? First, you have to ask yourself what exactly you want to offer your clients once you have the appropriate licensing. You might just want to sell Real Estate which will only require you to have a California Bureau of Real Estate License. If you just want to be a Loan Officer you would have to take and pass the National Mortgage Licensing System (NMLS) test for both State and Federal. This is where it becomes confusing for new licensees with the NMLS license. If you just have the NMLS license and not a Real Estate License you can only work for a Mortgage Company that is regulated by California Department of Business Oversight (DBO) or a Bank. If you hold both a Real Estate License and an NMLS license you can go to work for a Mortgage Broker that is regulated by the BRE and you can practice both Real Estate and Loans. If you want to offer your clients a one stop approach where you can offer both the Real Estate Services as well as Loan services you want to hold both licenses and work for a company that has the appropriate licensing under the BRE, like MAE Capital Real Estate and Loan.
So, once you have decided that you want to get your Real Estate License where do you go to get your licensing prerequisite courses. The Bureau will require that you take an approved Real Estate Principles course, and Real Estate Practice then you can choose from a specialty course such as: Appraisal, Property management, Finance, Economics, Legal aspects, Accounting, etc. for more information on the specifics click here to go to the BRE license requirements page. If you have 4 year degree you may be exempt from taking all or some of the courses and you can go right to the Broker’s test if you wish as opposed to getting the Sales Person license first then wait the 2 years to get the necessary experience to take the Broker Exam. Now if you have not taken the college courses and need to take the prerequisite courses you can find approved Real Estate Schools online and they will generally walk you through exactly what you need to have to take the test and get your license. The school I recommend to my people is a school called First Tuesday they will look at what education you have already and let you know what you need to take to get the license, they also provide test preparation courses which I would strongly recommend. Once you have taken the online courses you need you can then apply to take the Real Estate Exam from the BRE. You can go to the BRE site to follow their instructions as you will need to be finger printed, and not have been convicted of a felony and pay the necessary fees and for sites where the Exam is held. Click here to see the detailed steps you need to take to get to the Exam. Then take the Exam when you are ready, it will require you to study hard as it is not easy if you are not prepared. Once you pass the exam you will be notified by the Bureau and when your license has been issued you can now work as a licensed Agent. But since you know nothing about how the real world works you will need to find a company like MAE Capital Real Estate and Loan to train you in the Art of Selling which will revisit in a minute.
Moving on to getting the NMLS license or Mortgage Loan Originator (MLO) License. The test will be the same whether you want to have both licenses and sell real estate and do loans. To get your NMLS license you will need to have 20 hours of prerequisite courses that can also be obtained from any California Approved Licensing Agency and again First Tuesday can also provide the necessary courses required to obtain the NMLS License. I would again, stress that you take an Exam Preparation course that has practice tests and if you use First Tuesday they also have these courses. You will need to follow the steps on the NMLS site as well as signing up online. You will also need finger prints and no felonies to apply. Once you have completed all the steps to take the exam make sure you are ready by taking preparation tests and classes if necessary and take the test. Once you have passed the test you will have to know what you want to do with your new license as you will need to be trained in the art of Mortgage Lending. If you only have the NMLS license and have no desire to offer both Real Estate services and Loan Services you will have to pick a Mortgage Banker regulated by the DBO. Then, in order to start work, you must pay the $300 to the DBO. If you have your BRE license already you have the option for working for a Mortgage Broker that can offer both Real Estate Services and Loan services, like MAE Capital Real Estate and Loan.
Once you have the licensing you desire you will need to be trained in real life practice. You will need to choose a company that offers training like MAE Capital Real Estate and Loan. We will train you as a Realtor and as a MLO, so if you have one or both licenses you can utilize both licenses to their fullest. It has baffled me as to why if you have a BRE license and an MLO license you would work for a company regulated by the DBO where you are restricted to only doing loans. If you have the ability to offer your client a one stop shopping experience where you can “Bundle” your services and save you client money and make commissions on both the loan and the Real Estate why wouldn’t you choose that rout. Yes, you will have to pay your dues to the Association of Realtors but that gives you the opportunity to know the inventory in your area and become more professional in both fields as they have to work hand in hand in most every Real Estate transaction. Your dues will give you access to the Multiple Listing Service (MLS) where you can view all the details of property offered for sale or what has sold. YOur dues also gives you access to Zip Forms that are the online Real Estate Contracts and forms. Even if you have a client that just is requesting a refinance you will have the ability to log on and determine the value of the home prior to ordering an appraisal taking the guess work out of the equation and potentially saving your client the cost of an appraisal. With both licenses working for a Mortgage Broker you will have more products to offer than working for one Mortgage Company under the DBO as a Mortgage Broker has the ability to use many different lenders that offer many different products. At MAE Capital Real Estate and Loan we also offer the ability to Broker Hard Money Loans, thus further opening the doors to more commission possibilities.
Once you have obtained both licenses and you want to be trained in both fields or if you have been a Realtor and just got your MLO license and need training what do you do? Training opportunities in Mortgage business has always been costly or self-done and there are very few companies that offer extensive training prior to going out in the field . Here at MAE Capital Real Estate and Loan we have developed a training programs from the over 30 years of mortgage experience. We combine mentoring with classroom and homework to get the details needed to be a professional Loan Originator. If you would like more information please click here to be directed to our employment page and complete the form or simply call us (916) 672-6130 and we will show the benefits and the opportunities that you may not have known about before. Our training program will take 4-6 weeks where you can be working at the same time. You will learn all the ins and outs of the business from how to take a loan application and write a contract to how to close out a transaction and get referral business and all the marketing that you will need to know. I hope this has helped with your quest to enter the Real Estate and Loan business we are here to help as MAE Capital Real Estate and Loan has developed a reputation of being smart and innovative and are always looking for individuals that want to have the opportunity to expand their career to limitless possibilities.