Here is an interesting topic as I fit the category myself. Hopefully once you have made it to the ripe old age of 50 you still have good health and are financially grounded. Financially grounded means that you have taken the proper steps for saving for retirement that is looming, in the not too distant future. This also includes college for you kids and any future weddings or large expenses that are to be incurred. You may not be rich by any stretch, but you have done what it takes for your family to be secure. It is time to protect your assets.
So, lets take a look at your home, it may only be the one piece of real estate you have ever owned and you have paid it down substantially over the years. Now you hear the commercials advertising using your equity for things like college and weddings and large family expenses. Is this prudent or a play from mortgage companies to sell you additional financing? Having been in the Mortgage Business for the last 35 years I can tell you it is a play for your business. However, if you need the money and it is the only way then you do have it at your disposal. My advice would be, even though I am in the business of selling you that loan, is to really evaluate your finances and see if there are other ways to get the funds you need. I say this as you home is your family’s shelter the place where your kids grew up and to put additional financing on it may put it in jeopardy.
How could financing a home when I am over 50 jeopardize my home, I have a good job? This is a good question and can be answered by those that have come before you. 50 doesn’t mean that you are not capable of working or staring at your death bed what it does mean is that you no longer will have the energy to keep up with 20 and 30 somethings in the work force. Large employers have traditionally let go people over 50 to make room for the younger more energetic workers. I am not saying this will happen to you but to guard what you have attained in life is important. If something like a loss of a job or an illness were to happen it is a lot harder to find a new job so protecting your assets is super important, even more so when you are over 50.
In addition, if you have been in the private work force your entire career you may not have built the retirement that you may need to have when it comes time to retirement. Your home can be used to assist in retirement if the is the case. When you are over 62 and have equity in your home you can utilize a reverse mortgage to use the equity for additional income or erase your monthly mortgage payment so the income you do have doesn’t need to go to a mortgage payment. You can’t get a reverse mortgage unless you have enough equity (generally you would need about 30-50% equity depending on your age). So, if you mortgage your house to pay for stuff in your 50’s you may not have enough equity to get a reverse mortgage in the future. Another reason why you need to evaluate your finances when getting any financing when you are over 50.
Reaching the age of 50 and being financially stable is a great accomplishment and you don’t want to jeopardize your finances at this age. When evaluating your mortgage when you are over 50 and you have windfall like an inheritance or an insurance claim you may want to consider paying down your mortgage. This I have done for my clients a lot lately and it is a financially smart move. As an example; a 54 year old receives an inheritance and she owes $300,000 on her current home loan with 20 years left to go. She gets an inheritance of $400,000 and she already is financially stable with a good paying job. She may elect to pay off the existing loan, or pay it down, or refinance the existing loan to a lower balance and lower payment with a lower term of the loan. This would be a financially prudent thing to do as she would save tens of thousands of dollars in interest and have a lower payment to allow her to save even more monthly.
Being over 50 and financing stuff should be done with care to make sure you are not risking your home and your assets. Here at MAE Capital Mortgage we can do all the numbers for you and help with the planning of your future. If you are looking for a Reverse Mortgage, we also provide those to our clients and deliver the most aggressive programs available on the market today. As with any financial moves you make you should also consult your Tax consultant or Financial planner to make sure you are making the right decisions with your finances. We are here to help so if you have questions or please give us a call at 916-672-6130.
This is an interesting dilemma, to stage or not to stage? Staging is not for every property but if you have a nice home and want to get top dollar this is something I would strongly recommend. For those of you that don’t know what staging is, it is when an outside company that specializes in making your house look modern, clean and up to date through the use of furniture and accessories. The staging process starts before you list your home for sale. An expert will come to your house and see how many bedrooms and bathrooms you have and will measure the rooms. The stager will be an interior design expert and will get an idea of the flow of the house as well as the style of the house.
Once the Stager has completed the measurements and taken pictures, he or she will devise a plan for furniture and accessories that will accentuate your house. Mind you that you will have to completely take out all of your furniture and stuff from the home and have it cleaned. The stager will give you a price based on the size of your home and also offer suggestions of what you may be able to leave so it can be used it may be just a few items or nothing at all. The price will range from $2,000-$3,500 based on the size of your home. This will have to be paid for before the Stager does anything, so put this in your budget for selling.
The price may seem like a lot of money with no guarantee that your house will sell, but with the right Agent from MAE Capital Real Estate and Loan it will be priced right to the attention of potential buyers. We have done this many times and every time it has been done the house has sold for more than the list price. We can’t guarantee that will happen every time but it sure will give your home an edge on other homes for sale in the same area. The homes we have sold that have been staged have sold on average of only being on the market for 5 days or less. The track record we have of homes that have been staged and those that have not been is far better than you would expect.
The Staging company we use is second to none in the Greater Sacramento and Placer County area. Not only to they do all the set up they also provide us with professional Photos to put in in the MLS listing. The presentation from the inside of the home both in person and on the internet is second to none. As you know most home buyers will start their home search online to see homes that are appealing to them. The interior of the house will look so good that they will most all the time put a staged home on their list of homes to see for their Realtor. Staging will make your home look like a model home and buyers will see a staged home more favorably as the stager has strategically put minimal amount of furniture in a room to make it appear bigger than it is and since there is no clutter a potential buyer will be able to see the house arranged with furniture so they can see that everything they need will fit.
Although staging is not for everyone it is strongly recommended if you can get all of your personal belongings out of the house before you put it on the market. If you are living in the home and have to have your furniture in the home to live a stager can come out to your home and suggest that you put all the clutter in storage and give suggestions on what to leave and they can make your home show worthy with your own stuff in some cases. If nothing else a professional stager consultation may be worth the money just to get suggestions and the cost for a consultation is just a few hundred dollars and could make you thousands of dollars in the sale of the house by just doing some simple tricks to get your home ready for sale. In the end our Agents at MAE Capital Real Estate and Loan can set up the appointment with our stager to give you suggestions before you sell your home. In today’s Real Estate Market you need every edge on your competition you can get. In addition, we will help you with the costs of staging if you bundle our services with the sale and purchase of your next home or the loan on the next home or all 3. Doing business with MAE Capital will save you thousands of dollars and we are here waiting to show the tips and tricks to get top dollar from selling your home and buying your next home. Call us today at 916-672-6130 or click here for a free consultation.
Aging in place is becoming a norm rather than an exception. About 76 percent of people over the age of 50 want to remain at home for their senior years, according to AARP. Aging in place tends to give people a higher quality of life, but also comes with its fair share of risks. Did you know that an older adult is treated in the emergency room for a fall every 11 seconds? Fortunately, many fall injuries are preventable. Here are some critical steps you can take to protect your well-being while aging in place.
Start an Exercise Routine Today
Keeping your body strong, balanced, and flexible is critical for protecting yourself from injury. Get an early start to keep your body resilient. This will help prevent muscle loss and maintain joint mobility as you grow older. In fact, a recent study revealed that long-term exercise significantly reduces the risk that an older adult will experience a fall. Research suggests that about three hours of weekly exercise is your best bet. Exercise at home or head to the gym — it’s your choice! If you're a Medicare subscriber, you may be eligible to access 13,000 nationwide fitness centers through the SilverSneakers fitness program. Certain Humana Medicare Advantage plans include this benefit. So, consider switching your plan during the Medicare enrollment period if you're not already enjoying this valuable perk.
Engage in the Right Types of Exercise
Not all forms of exercise are equal. While aerobic activity has amazing benefits for your heart, digestive system, and mental health, strength training may be the most important when it comes to fall prevention. Core muscle strength will catch you when you start to stumble. If you’re new to weightlifting, talk to your doctor before you begin. Start slow — using your body weight or resistance bands at first — and work your way up to heavier weights as your muscles grow stronger. You can try some of these senior-friendly resistance exercises to get started.
Balance and flexibility exercises will also improve your stability and reduce your risk of falls. Static stretches (held for 20 to 30 seconds) and dynamic stretches (moving stretches) have surprisingly positive effects on overall mobility. This list of stretches from Yurielkaim includes examples of both static and dynamic stretches that are good for seniors. Additionally, try yoga or tai chi for an excellent combination of flexibility and balance practice. These activities are also wonderfully meditative!
Make Some Home Modifications
In addition to key lifestyle changes, you can further prevent falls while aging in place by making some home modifications. Start by clearing clutter from your home and giving each item you own a special storage place. This will prevent things from ending up on the floor and becoming tripping hazards. Remove slippery area rugs and use rubber-backed non-slip rugs in your kitchen and bathroom. Lighting that is too dim or too bright can also be a problem, so set up night lights to illuminate paths you may need to walk at night and install dimmer switches throughout your home. Use curtains to block out disorienting glare from the sun. Also, grab bars by your toilet, bath, and bed can be very helpful.
If Finances are a problem to do the home improvements consider a Reverse Mortgage to utilize the equity in your home to fund these modifications. With a Reverse Mortgage you can use the equity and never make a payment until you move from the residence.
Finally, pay attention to your clothing. Clothes that are too tight may restrict your blood flow and make you lightheaded, while clothing that is too loose can catch on items as you navigate your home. Avoid loose-fitting shoes or those with slippery soles. Try to find shoes that fit comfortably and support your feet properly.
Install Life-Saving Technology
Don’t let your home modifications stop there. Technology can help you get assistance more quickly if you do have an accident in the home. Smart shoes, tracking devices, and fall detection, as well as automated lights and thermostats, will help you maintain your independence and safety while living in your own house.
As with every aspect of health, preventing falls will take some preventive effort. Maintain your muscle strength and flexibility, take special precautions, remain aware of your surroundings, and remove anything from your environment that could become a hazard. By reducing your risk of falls, you’re securing a future for yourself in which you have the independence and confidence you need to live in the home you love.
Take the Financial Worry Out of Staying in Your Home
Don’t let the financial worry of the home effect your health. Money worries can cause health problems. As the price of goods and services continue to rise the income of seniors may not keep up with the rising costs of living and this can cause undo stress and lead to health issues. A Reverse Mortgage from MAE Capital Mortgage Inc. may the answer. These mortgages have come a long way over the last 30 years. The extra income generated from a Reverse Mortgage may be the difference every month in being able to live and enjoy the retirement years instead of worrying about the rising costs of goods and services and medical expenses. There are protections built into these loans to insure the seniors will be able to leave their home to hires when they are gone.
Taking some of these steps will ensure that the “Golden Years” are, in fact, Golden. Here at MAE Capital Real Estate and Loan we know the value of our senior population and hope to make all lives better with our services.
When shopping for a home loan even your Realtor may not know the differences between a Broker and Banker, so even if they recommend a Loan Officer to you, because they have used them in the past, you should do your research as you might be able to save yourself thousands of dollars. Your Agent may think a direct lender is a better deal for you as they underwrite their own loans “in house”, but the fact is it might be in the Realtor’s best interests not yours. “In House Underwriting” sounds sexy, however, in today’s automated world every Loan Officer be it from a Banker/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 Banker or a Small independent Mortgage Broker they all have the same access to an underwriter or underwriting systems. So the myth of having your own underwriter as a selling point is just that a myth and what happens when their underwriters have a bad day, you pay the price. A Mortgage Broker can deliver your loan file to several different underwriters that will have different rules and guidelines to get your loan approved. 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 and if a Banker’s Underwriter declines your file you are done with them. If a Mortgage Broker submits your file to an underwriter and they decline it a Broker can take your file to another underwriter without you having to gather all your information again and again. Most underwriters today use either the Federal National Mortgage Association’s or the Federal Home Loan Mortgage Corporation (Fannie Mae or Freddie Mac) automated underwriting systems to underwrite traditional home loans and those same systems are available to all Loan Officers either from a Large Banker/Direct Lender or a Small Mortgage Broker.
You may say that all of that is good but all I care about is getting the lowest monthly payment and the lowest costs. Although both a Banker and a Broker inevitably get their interest rates from the same sources it is how much that is charged by the company that makes the difference in interest rates and fees that are quoted to you from lender to lender. We have already discussed earlier that Bankers have bigger and shinier offices than that of Brokers and with that comes a larger overhead and more expenses than that of a smaller Mortgage Broker. That all has to be paid for and they do that in the form of higher interest rate and fees. The smaller firms like MAE Capital Real Estate and Loan can keep that overhead low thus being able to offer a lower interest rate and lower fees and can save you thousands of dollars upfront and monthly.
In addition, the regulator in California for Bankers is the Department of Business Oversight (DBO) and they have different laws then that of the Department of Real Estate (DRE) who regulate Mortgage Brokers. We talked earlier about Bankers having a larger overhead and expenses than that of a Mortgage Broker and thus the need to make more profit per loan closed for the company than that of a Mortgage Broker but what exactly does that mean? The Direct lender has to pay more staff, more rent, more insurances making their costs much higher than that of a Mortgage Broker and their Regulator, the DBO, knows this so the Banker has no limit on the amount they can add to the interest rates and fees to maintain their profitability . A Mortgage Broker, on the other hand, is limited to a maximum of 3% of the loan amount they can make on any one loan from the DRE. A Direct lender does not have that limitation and they can charge what they want to be profitable costing you money. The Mortgage Broker has to keep their overhead as low as possible being limited by law on how much they can charge is your benefit with lower interest rates and fees.
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 Banker on every loan transaction. As a Mortgage Broker we can also offer other loan products that a Banker can’t such as Private Money Loans for investors, Certain Bank Statement only loans to qualify borrowers that can’t show enough income to qualify traditionally. Overall we as a small Mortgage Broker can find the best loan for your needs with he lowest interest rates and fees. An example of this is; MAE Capital 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 Banker/Direct Lender and we beat them by .5 in interest Rate and $13,000 fees. We closed the loan a 3.875% and the veteran paid $0 down and $0 closing costs, saving him $13,000 in costs and has a lower monthly 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 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 even lower interest rates and fees. 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. Trying to change this secret into mainstream facts by educating our clients and future clients. 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.
FICO and Finances
It’s an unfortunate reality, but due to fewer work opportunities and high medical debt, ability-disadvantaged individuals tend to hold a lesser share of wealth than the general population. For this reason, it can be harder to save for a down payment and ensure that your credit score is high enough to qualify for a loan. Down payment assistance, housing counseling, and other resources for disabled buyers are available through HUD, the FHA, and Fannie Mae. The Simple Dollar has more information about these and additional resources.
As for your credit, when it comes time to apply for a mortgage, the higher the credit score, the better. It’s possible to obtain a mortgage with a credit score as low as 550, but you’ll definitely get better rates and terms as you inch closer to 700. Try to raise your credit score by paying your bills in full and on time and taking care of any misreported information on your credit report, which you want to get a copy of from each of the major reporting agencies: TransUnion, Equifax, and Experian. Keep in mind that saving for your new home and improving your credit takes time. Neither will be achieved overnight, and you don’t want to rush through either step.
Know Your Needs (and Plan Ahead for Them)
As you get your finances in order, it’s a good idea to identify your needs so that you can maintain an open dialogue with your real estate agent. If you are in a wheelchair, for instance, you may ask them to help you find a home all on a single story and with doorways that have already been widened. Many builders are now incorporating elements of universal design into new construction. If you aren’t familiar with the term, you should know that universal design is essentially inclusive design. It is an approach that strives to address barriers of usability incurred by people of all abilities and in all stages of life.
If your disability requires you make frequent trips to your healthcare provider, let your realtor know this information, too. He or she can help you locate a home where you will have access to public transportation or ridesharing services if needed.
Since not all properties are already configured for those with disabilities, it may be wise to put aside some cash to make upgrades. Good Financial Cents explains that saving money is much easier if you have it set up automatically. The site also suggests stashing any cash windfalls or raises. This advice applies to saving for any specific goal, including home renovations.
Get Ready to Go
When it’s time to finally move, there are a few things you should do before opening your new front door. One of these is rekeying or changing the locks, which will add between $96 and $210 to your moving expenses. If anyone in your family has allergies, it’s also wise to bring in a cleaning crew to get rid of dust, dander, smoke and other potential irritants left behind by the previous owners. Don’t forget to have the utilities turned on and make sure to keep a few boxes of your belongings with you in case the movers get delayed. This should include a weeks’ worth of clothing, basic kitchen utensils and gear, and any medications and toiletries you use daily.
Moving can be exhausting and intimidating, especially if you have special needs. But it’s not impossible, and the sooner you begin planning, the easier the process will be. Here at MAE Capital Real Estate and Loan we understand and can help folks that have special needs for housing. We have the ability to find and finance such housing and are looking forward to assisting you on your journey. Call today 916-672-6130 Special Thanks to Natalie Jones for providing the content of this article.
Excellent, you have decided to pursue the American Dream of home ownership. Now what do you do? Well you need to know how much of a home you can afford with the income and bills you have. This step is the single most important step to your process of obtaining a home. This process is called getting pre-qualified or pre-approved. Although, the thought of shopping for a home may be an appealing one you should not even look at homes until you know for sure what you can buy or if you can buy. The Pre-Approval process is where you will gather all of your financial documents together and get them to a licensed Loan Officer so he or she run the numbers and your credit report and derive a number to which you can qualify for. You can read more about this process on our Pre-Approval page or our Process Flow page. Your Loan Officer will give you a loan amount, a loan program, and a sales price you qualify for based on your finances.
Once you have the Pre-Approval letter in your hand with the terms and amounts you qualify for it is time to find a Realtor to look for homes with. You may ask why you need a Realtor, and a simple answer will be it doesn’t cost you anything to be represented by one that knows the laws, the inspections requirements, contracts, and inventory. Yes, it doesn’t cost anything for you, as a home buyer, to be represented by a licensed Real Estate Agent as the sellers pay the real estate commissions to both the listing Agent and the Selling Agent. If the free service is not enough to convince you to contact an Agent to work for you how about the laws, unless you happen to be a Real Estate Attorney the laws with regards to real estate process and procedures are many. If that doesn’t scare you enough to be represented, how about the contract itself, there are items in a professional Real Estate contract that, if missed, could cost you thousands of dollars. Then there is the inventory, or shopping help an Agent can provide for you. Again you might say I can find anything I need on the internet. Again true, but, the problem with internet data is the updating of the data is old. In some cases like Zillow it requires that the listing Agent actually input the data into the system in order for the world to see it. Whereas the Multiple Listing Service or MLS is required to be used by licensed Realtors for every listing they have or they will be fined.
Now, that you are convinced to find an Agent to represent you, who do you use? I would, of course, recommend one of our qualified Agents, but if you are out of our service area we can always screen Agents for you in the areas you are looking to buy. This is a little know service, again its free to you as a buyer, that we offer to assure our clients are represented by an Agent who knows their stuff. You see, if you go dialing for dollars, as we call it, you will undoubtedly end up with an un-experienced Agent. This is because the experienced Agents are out working not sitting in the office waiting for the phone to ring, the Agents that are in the office waiting for the phone to ring are generally new to the business trying to get call in business. Another pitfall buyers run into is calling the listing Agent on a house they wish to buy and have them represent you. This is called dual Agency, and we as listing Agents love this as we get both sides of the commission, however, undenounced to the un-educated home buyer, the listing Agent’s allegiance is to the seller first, by law. So it can really pay to be consulted first by one of our Agents to have them either represent you or screen other potential Agents to represent you and your needs.
Shopping for the perfect home should not be taken lightly either. You should have a list of items that are “must have” items in a home such as number of bedrooms and bathrooms, updated kitchen, new or existing home, and most importantly location. Making this list is crucial for your Agent as they will be able to search for properties that fit your exact criteria, so you are not wasting your time looking at homes that don’t fit your needs. In addition to the “must have” list you should do a “wish list” like granite counter tops, hardwood floors, a pool etc. You should also do a list of items you absolutely do not want. You Agent has the ability in the MLS system to put in exacting parameters that you can’t get on the consumer version on the internet. Your Agent will put your parameters into the MLS system and put you on an automatic drip of homes in the area(s) you are looking in with the exacting parameters you have. Your first email of homes will be the largest as the initial search will pull all the current listings that fit your parameters. The emails you will get after that are “as they hit the market” emails, in other words you will be the first to see the properties come on the market. This is great if you are in a competitive price range as you will be able to see properties as they come on the market with no delays. This could be the difference of you getting the best home or not.
A great strategy to look at homes is to drive the properties that look good in the listings that you have viewed on line. Driving the properties will give you a real idea of where they are, what they really look like, and how they have been maintained. When driving the properties you don’t have to include your Agent as you are simply doing your own diligence. Make notes of the ones you would like to see and then call your Agent to make appointments to see the homes. Never go up to the door and disturb the occupants it is not nice nor is it safe. To see the homes your Agent will need to make appointments with the listing Agents or the owners directly for you to get inside. Your Agent will put together “a tour” that will include your availability to see them and the seller’s availability to show them. When you go to view the home take pictures and take notes so you can remember the ones you liked and disliked. You may not find the perfect house after several showings, don’t get discouraged homes are coming on the market every day and with patience you will find what you are looking for.
You did not expect to go looking for houses today and find the perfect one, but that is the way it happens, one minute you think you will never find the perfect house the next you find one you can’t live without. You now need to get it tied up so no one else can have your perfect home. Your Agent will write an offer for you and ask you to provide your pre-approval letter and a Ernest Money Deposit (EMD). The offer will be on a 10 page form that has all terms in it from the offer price to the loan amount, to the items that need to be inspected, and it also spells out who pays what. Remember you can ask for anything in the offer and your Agent will go over those details with you. Once you have decided the price and terms you will be offering you will sign the offer and your Agent will then submit your offer to the listing Agent. Within the offer you wrote a time period the seller has to get back to you with a response. When the seller reviews your offer they will either accept it as is or they will counter offer your offer with different terms. This is all part of the negotiation process. Once you and the Seller have reached an agreement and both have signed and accepted the terms you are now officially in contract.
Once in contract you will have certain dates that you must adhere to in the contract such as inspection periods. The inspection periods include your right to get a home inspection, appraisal and any other inspections you and your Agent deem fit. Those inspections periods are about 2 weeks so you should be prepared to start paying for them right away. Your Agent will know good inspectors to use so rely on them to guide you through this time period. A special note about home inspections is that they cover everything from cracks in the driveway to mold in the attic and sometimes it is difficult to determine what items are important to have repaired or if they need repair. You can talk with the inspector directly to determine this or talk with your Agent or both. If you determine you require additional repairs in order to buy the house you will have your Agent prepare a repair addendum, and submit it to the seller. The seller has the right to say that they will or will not do the repairs. If the Seller says that they will not do the repairs you may need to make the decision to renegotiate price or back out altogether. If you do back out during the inspection periods you are entitled to a refund of your deposit. If you miss the time frames in the contract and decide to back out you could very well lose your deposit. Your Agent will work with you to make all of this legal. Another variable inspection is the appraisal. If the appraisal comes in lower than the offering price your Agent will discuss your options with you. Those options will be to give the seller a counter offer with the lower value as the price, or you could pay the difference in down payment if you are so inclined. If you decide to pay the difference be prepared to make the down payment on the lower of the sales price or appraised value and pay the difference. For example if the sales price is $250,000 and you are putting 10% down for a 90% loan to value (LTV) or $25,000, and the appraisal came in at $245,000 you will be required to put your $25,000 down and you will have to add an additional $5,000 for a total of $30,000 and you will still be at a 90% LTV.
Once you have made it through the inspection periods and everything has passed your standards, we are full steam ahead to the closing of this transaction. At this time I would suggest you get back with your MAE Capital Loan Officer and make sure they are on schedule to close and see if they need any more documentation from you or explanations. By now the loan should be approved, and hopefully you are just waiting for the legal paperwork to be delivered to the escrow so you can sign and bring in the remainder of down payment and closing costs. You can always refer to the closing diagram on our Process Flow page to see where you are at in the process. There still may be a few weeks left in your escrow process so be prepared to provide more information for your Loan Officer. Now would be a good time to start preparing to transfer your utilities so you have no interruption when you move.
OK, you signed brought your money in to the Escrow and are ready to close. The lender must review everything before they release funds to Escrow to make sure all signatures are correct and the all the conditions the underwriter put on the file have been met. Once everything is good the lender funds the loan to the Escrow and they then take the Deed to the county to record the transaction to make the house legally yours. Congratulations you are now a home owner and you can move in and do anything to the home you wish. Your first mortgage payment will be due the first of the following month and be sure to make that payment on time or it will affect your credit. I hope this helped you with some basics to buying a home. If you go to our Pre-Approval page and complete the form at the bottom of the page we will contact you are start your process or give us a call we would love to talk to you at (916) 672-6130.
This subject is a little uncomfortable for most people. When the Bank tells you that you don’t qualify for the loan you have applied for it can be very frustrating. If the Bank tells you No not only do you feel defeated you are also left feeling embarrassed. So, what do you do; do you just stop trying, or quit? Or do you move on to alternate plans or search for different options from different sources? We are going to cover the latter and what you can do to be proactive in obtaining financing for a home or an Investment property.
First, we need to determine why you were declined by the bank. Was it due to bad credit or credit that didn’t meet this lender’s standards? Was it due to the fact you did not have enough money to put down? Was it because you could not show enough income, on paper, to qualify? Or a combination of all of these? These are common issues when trying to qualify for a loan, but they can be overcome in most instances. In order to fix the problem, we have to first identify it and that is usually done by analyzing your financial paperwork such as your credit report, pay-stubs, bank statements, and Tax Returns to determine where the problem lies. Then we put together a plan to fix the problems.
Let’s start with the Credit and if you were declined due to poor credit. If you have applied for a home loan and the lender has declined you for poor credit we must look at what that lender’s credit score requirement is. If the lender will not approve loans for people with credit scores less than 640 or 620, 600 or lower then we have to see exactly what you credit score is and that lender should be able to provide you with the credit report that they ordered. The reason this is important is that a lender’s credit report is different than the free stuff you can get online like Credit Karma or a service like this, not to me3ntion if too many people pull your credit it could hurt it even further. A lender’s credit report takes into consideration the 3 major credit reporting bureaus and merges the data into one report that has all 3 credit scores. A lender will look at your middle score or if you are married, they will look at the low-mid score of the two people. It is important to know that there are many ways to view a credit report and how to present it to an underwriter, who will make the decision on your loan. If you are the bread winner in the family and your spouse has the poor score that is dragging you down, you might try applying as sole and separate and adding your spouse to the title after the loan closes. Or you could look to the reasons for the bad credit and see how hard it would be to fix it and how long it would take to fix it and if the transaction you are in today could be stretched out long enough to get it fixed. If your scores are too low for the lender you are with there may be other lenders out there that will take the lower scores. At MAE Capital Mortgage we are a Broker so we have many lender’s we deal with, and we know what lenders will take the lower credit scores. We also show you how to fix your credit and tell you how long it will take. One option might be an FHA loan as many lenders we deal with will go down to a 580 or even as low as a 550 credit score. If you have a large down payment and poor credit, we have sources that can fund that with a little higher interest Rates. There are ways to help and we can surely show you the way.
If your lender has declined you for not enough money to buy a home, there are ways to overcome this as well. We would have to look at the home or property you are trying to purchase to determine what type of financing would fit the Real Estate you are trying to buy. If you are trying to buy a single-family home and you are going to occupy the property as your primary residence, we again might look to an FHA loan as you can get into a home with as little as 3.5% down. With an FHA loan you could also use a gift from a family member, or employer for that 3.5%. This option helps our clients in many situations that they didn’t believe they had enough money to buy a home. If you are looking to buy an investment property and you don’t have enough money for the down payment there are option for this as well. You could negotiate with the seller to carry a second mortgage and you could buy an investment with as little money as $0 down. This would be coupled with a non-traditional loan or a Private/Hard money loan, but it can be done. There are also down payment assistance programs that come in an out of the market that you may be able to qualify for as well for a single family owner occupied home. So, don’t always looks to the lack of money as the deterrent to purchasing a property.
Another common problem when trying to qualify for a loan is the lack of provable income. A lender may have declined you for a loan due to the fact that your “ratios” are too high. This is a lender’s way of telling you that you don’ make enough money to qualify for the loan products they offer. A ratio is the mortgage payment with taxes and insurance and your monthly bills added together then divided by your income that you show on your tax returns, pay-stubs, bank statements or a combination of all. Most traditional financing will require you provide Pay-stubs and your Federal Tax Returns to determine your income. This doesn’t always work for people as income can be subjective especially if you are self-employed. People try hard not to owe the Government taxes at the end of the year and for folks that are self-employed can, and do, show more deductions for the expenses of running a company or their personal business’. This is well known in the industry, but many lenders don’t have any other options for those folks that write off too much on their Tax Returns. At MAE Capital we have several options for those that can’t qualify for a traditional loan with Tax Returns. The most popular is the Bank Statement Loan that uses the deposits made by the borrower each month to determine what they actually make. By averaging the deposits over the last 2 years we can see if a borrower is making enough money to actually qualify. Another type of loan that will not require Tax Returns is the W2 only loan. This loan will use your pay-stubs and your W2s but will not use your Federal Tax Returns. The W2 only loan will help those that make a W2 wage but may write off too much on their Taxes to qualify for what they want. At MAE Capital Mortgage we offer both of these loans from a variety of lenders across the country.
If you are an Investor and the Banks have turned you down or they just take too long, we have great options for you. Our sources of Private Money Loans or Hard Money Loans are second to none. Private money loans allow borrowers with 20% or more down to qualify without providing proof of income. Private Money Loans for Investors will also allow for poor credit. If you are an investor and the Banks have said no look no further, we can help. Learn more on our Private Money page.
You may have a combination of the above issues and there are ways to deal with your problems. If you simply can’t show anything and have bad credit and no money, then it may not be the time for you to purchase. This is not the end; however, you may simply need a plan to work towards. We work with folks every day to plan for their future. Getting into a home or buying a piece of property takes planning and guidance and that is our function. The American dream should not be closed to those that do things a little different or don’t work inside the “the box”. We are here to work you through the maze of financial options. At MAE Capital Real Estate and Loan we have the ability to work with all types of borrowers and home buyers and Investor’s. Call us today to get qualified 916-672-6130.
As we embark into 2019 I enter my 35th year in the industry. Not saying I have seen everything but I have seen enough to know what is around the corner for Real Estate and Interest Rates. History seems to have a way of repeating itself over and over especially with Real Estate and market trends. So as you read this you will see references to the past as that is how the future is formed and it has worked consistently for the last 100 years now as we have become a society of growth and invention. But over time we as humans seem to follow the same trends and patterns in Real Estate and the Stock and Bond markets are no exception and we call this the “Business Cycle”.
The Business Cycle is a repeating cycle of booms and busts or good markets and slow markets. In Real Estate and the Stock markets you can really see how this plays out with increasing home prices and lowering home prices and the Stock market going up then sagging back down over the business cycle. The business cycle in Real Estate starts with investors entering the market picking up good deals (as they perceive it to be be) usually after a bust in Real Estate prices. Once investors have taken a good hold in fixing and flipping or creating rental portfolios you start to see the first-time buyers enter the market. When the first-time home buyers are buying and home prices begin to rise again you will see the move-up buyers enter the market creating more inventory. Eventually, over time the supply from the move-up buyers and the new home builders cools the prices from rising as the supply of housing catches up with the demand for housing. When the supply or quality homes for sale becomes greater than the demand you then get a cooling down of the Prices of homes. You will also see new home builders entering the market when the demand for homes is the highest and the supply is the lowest creating a greater supply of housing. This is the Real Estate Cycle that has existed since the beginning of private land ownership.
This is important to know as if you can pinpoint where we are in this cycle you can formulate a plan to buy or sell Real Estate. As far as interest rates are concerned the cycle is about the same but a little lagged compared to the Real Estate cycle. This is simple economics, as well, when the demand for money is the highest (generally the peak of the Real Estate Market) is when the Federal Reserve starts to see inflationary numbers such as lower unemployment, and rising consumer prices. You see housing drives the US economy as most products and services are designed for your home and when there is a high demand for these goods and services you will see prices start to rise. That will trigger the Federal Reserve to raise interest rates to combat the possibility of inflation and the devaluation of the dollar. I know this is a whole bunch of economic principles here, but this is how the business cycle works. I could go into specific details as I hold a degree in economics, but this would bore you and I want to inform you so you can be ahead of others that are not smart enough to read anymore.
As you see interest rates start to rise you will see almost an instant slow down in the demand for housing and goods and services as people can no longer afford to purchase the high-priced homes with high interest rates. This, in turn, slows the whole economy down. The Federal Reserve (the Fed) can’t possibly know how much interest rates should rise to slow the economy down to an acceptable inflation rate of 3-4%. The Fed will generally raise rates too high initially and slow the economy down too much then rates sag back down until the economy is stimulated again then they raise them to get to the right inflationary numbers. Since it is not an exact science we see volatility and this is where I believe we are at in the business cycle currently. The Fed has not landed on the right interest rate combination yet and thus we are seeing volatility in interest rates and coincidentally the Stock Markets as well. The Stock markets knows this cycle and reacts to it, as well, that is why we have seen record swings in the Stock markets in the last several months.
So, we know where we are in the “Business Cycle” and we have seen the higher rates and the Real Estate Market slowdown in the 4th quarter of 2018. Does this mean we are in for a bust? I don’t think a bust is in order, but I do see a slow down and a leveling off in Real Estate prices and in some cases a decrease in perceived values. Coincidently, this cycle has worked over a pretty consistent 10 year cycle with the slow down starting in the 8th year of each decade and going though the 9th year and slowly picking up with investors coming in on the 10th year. For example 2008-2010 was slow for Real Estate as was 1998-2000 and 1988-1990 and so on, history repeats itself. I am not saying that you should not buy Real Estate during these times I am simply pointing out the business cycle in Real Estate so you can be informed. There are always deals out there and with the right Realtor and Lender partner like MAE Capital Real Estate and Loan you can profit. With our experience you can make a plan to own Real Estate and not worry about the business cycle as interest rates are still low compared to history and there are some really good deals out there to purchase. So, beat the investors to the punch and get in the game with your first home or your 20th home, we are here for you. In our site you can look at properties currently listed on the MLS and get pre-approved all from your chair at home or work. Give us a call and let our experience help you plan your future at 916-672-6130.
So you want to be a Real Estate Investor but have no idea where to start. If you are really serious about getting into Investment property I would advise to start with your budget and how much money you have get started with. The money side of Real Estate investing is the single biggest issue I see people get in trouble with. That said you should also figure out if you are going to fix and flip property or if you are going to acquire long term a rental property. These are two very different strategies and should be understood before jumping into either. The third option is commercial property and the fix and flip market doesn’t really exist for these types of investments as commercial property does not have the demand like housing does, commercial property has traditionally been used to generate income. These are the basic Investments people start with when looking to invest in Real Estate. Not to say there aren’t other options our there but Residential Fix and Flip, Residential income property and commercial income property are the most common Real Estate Investments people want to start with.
Let’s take a look at what a budget should be for investing in Real Estate. To start you should be prepared to be able to make a down payment of at least 20%-30% and if you are fixing and flipping you should also have the money in reserve to pay for the improvements you wish to make. There are some loans that we can arrange for you called After Repair Value Loans (or ARV loans) that will lend you a percentage of the project based on the appraised value of the home after it has gone through your renovation. Generally, these loans will be 65%-75% of the fixed-up value of the property. But if you can put down the required down payment and have the repair money you will see the best gains and not have the worries of overruns and problems that will pop up during a fix and flip project. Some advice I would give for a fix and flip, as I have personally done several, would be to “do the numbers” before even entering into contract to purchase. The numbers are some basic calculations of costs, and as you do more of these the better you become at estimating the costs of repair. Before entering into a purchase contract on any potential fix and flip you should know what the costs to repair will be as well as what you could sell it for once the repairs are done. For example if you are looking at a house that is listed for $200,000 in “as is condition” in a market where is could sell for $300,000 fixed up you need to have an accurate idea of how much it will cost to fix up. In this example if it was going to cost $50,000 to bring the property up to the top of the market you could stand to make $50,000 in profit. Figuring it will take about 3 months of repair before you could put it back on the market. If this is an acceptable profit for your time and energy then it would be a good investment for you. If the costs look like it will be more like $80,000 to fix you have to ask yourself if this is enough for your time and money taking into consideration what you might find when you start demolition. Knowing your costs is the single most important part of the fix and flip investment as it doesn’t make sense if the costs to repair plus the purchase price is greater than what you can sell it for in the end. Also know your market place, if the values are rising due to lack of inventory your project might be worth more when you finish the rehab, but if your market is stagnant or slowing with increasing inventory you need to consider that the project might be worth less when the rehab is done.
If you are buying a property for rental income it is important to note that you should have a realistic income goal you wish to “Net” after all the monthly costs of your rental property. You should also know the tax rules both state and federal with regards to rental property and what the landlord’s responsibilities are. If this is your first attempt at a rental property you may want to explore the cost of having a property manager. A property manager will handle all things to do with the tenant, so you don’t have to, but with that comes with a cost that you must figure in as well. You should be prepared to put an initial down payment of at least 20%-30% down more if you wish to have more return on your money. Again, there are 2 objectives to holding rental property and you should identify what your objectives are. First, are you purchasing a renal for monthly income or are you purchasing and holding hoping for gains on your investment or both? Both plans require you to “run the numbers” to make sure you actually get what you set out to. If you are looking for income after paying a mortgage on your home, you have to ask “how much do you need to make”. For example: You buy a $400,000 single family house put down 30% and have a $280,000 mortgage with a mortgage payment of $1,503 at 5% and your annual taxes for the property are $5,000 a year then divide that by 12 and your monthly taxes are $416, and your insurance is $1,200 annually your monthly insurance is $100. Your base monthly cost before repair contingencies would be $1,716. If the rents you can get on the property are not greater than that you will have negative rent every month which means you will not be making money but paying money. This might be OK if you think the $400,000 property will gain in value over the years at a rate that is acceptable for you. If that is not acceptable then you would have to put more money on the initial down payment to lower the mortgage amount thus lowering the monthly payment to a level where you are receiving the income you want. This example doesn’t take into consideration a work contingency fund for any unexpected problems that may arise with having renters in your property like clogged plumbing, landscaping, broken appliances, etc.. Again this all boils down to your budget if you can afford to pay cash for the property you should look at the return on your investment. That is done by taking your initial investment and dividing the income after expenses into the initial investment. In our example above if you bought a $400,000 house for cash and the rents you could get is $1,800 a month your taxes and insurance are $516 a month and maintenance will average $200 a month you would have a monthly cost $716 a month subtract that from your income and you have a net income of $1,084 times 12 is $13,008 annually then divide that by your initial investment of $400,000 and you get 3.3% return on investment not taking into consideration any increases in value of your property. If that is acceptable return for you then it would be a good investment, if not then do the numbers on another investment where you are getting the return you desire.
If you are considering commercial property as an investment be prepared to be in a much higher sales price environment than residential Real Estate. Commercial Real Estate is generally not a vehicle that the first time Real Estate Investor should be in unless they really understand the market they are in and the rules of owning commercial Real Estate and have the assets to maintain commercial property. A commercial Investor must be prepared for vacancies in their property unless they are an owner operator of the building, in other words you run your business from the commercial property. It is prudent to own the building you run your business from if it is possible as you can pay yourself rents from your company, which is a conversation for your tax professional as well. There is a lot more to owning commercial property that I can get into in this blog but if you are interested before my commercial real estate blog comes out just give us call and we can help you.
There are many ways to invest in Real Estate these are just a few examples. If you wanted nothing to do with the actual day to day operations of owning Real Estate and you have money to invest you might want to look at being an investor in a private Real Estate Note where you lend your money to someone who needs it that can’t qualify under traditional financing. This is where we at MAE Capital Real Estate and Loan would find someone in need of Private money for a project they have, and we would lend your money to them and every month you would get a check for the interest on your investment. This type of investing is a lot like investing in a Certificate of Deposit but with a high yield. You would have to be prepared to have your money tied up for a period of time of 1 to 5 years. With this type of investment, you will know what your yield will be every month with no expenses to worry about. There are other investments in Real Estate such as Real Estate Investment Trusts, Joint Ventures etc. where you are investing but don’t have the management responsibilities. If you are interest in getting started in investing here at MAE Capital Real Estate and Loan we can advise you in both the Real Estate side and the loan side of the transaction, one call all your answers. We can be reached at 916-672-6130 our website at www.maecapital.com.
Holiday Real Estate selling can be challenging at best for Sellers but don’t give up hope with rising interest rates potential home buyers should be looking to jump in before they are priced out of the market. Other than rising interest rates it is not so bad for home buyers this time of year, but a seller has to always have their home ready to show and can be problematic if you live in the house you are trying to sell. With family coming and going from the family home it can be nearly impossible to keep your home “show ready”. However, 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”. Many 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 coming and going from their home doing holiday shopping, 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 decorations 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 home.
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 or after Thanksgiving 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 Monday which makes December 28th the last business day of the year and it is a Friday before a potential 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 Tuesday of the same week making that week only a 4-day or 3.5-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. We know how this works and plan for it the day we list or make an offer for a client. Seeing the future is impossible but panning for it is not and we want to make sure your experience this time of year is the best. Please call us at MAE Capital Real Estate and Loan and we can guide you through the process 916-672-6130.
Interest Rates have been on the rise lately moving up and out of 3’s and 4's and into the 5'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 of a home loan. The reason the Federal Reserve (the Fed) raises interest rates is to slow down 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 consumers have more money to spend with better paying jobs. When you finally hear that the Fed is raising interest rates you, most likely, have seen an increase in pay in one way or another. The increase is a reaction to events that have already occurred and is designed to slow the economy down.
When the Fed raises interest rates they are not raising your interest rates directly they raise the Fed Funds rate which is the rate that banks lend to each other. In turn banks raise rates to consumers on mortgages and on a positive side they also raise the interest rates on savings accounts. With higher mortgage interest rates your buying power diminishes for goods and services and housing. An example of what higher interest rates do to your Real Estate buying power would be; if your household income is $100,000 annually and mortgage interest rates 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 will stop raising interest rates when they see inflation slow. This is not an exact science of regulating the economy through interest rates but it has been policy since the 1970’s. Most of the time they end up over tightening and the economy goes into a little recession then bounces back. This tightening and loosening of interest rates will continue until the Fed can find other quicker ways of identifying the triggers to inflation. With a strong economy currently and with gas prices rising and housing prices rising, and the rising prices of goods and services it looks like we should be in for higher interest rates for at least the near future.
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.