How Much Do I Need to Get a Mortgage Loan?

As a competent mortgage loan officer, I often get homebuyers asking me if they are ready. They want to know if they qualify. I also get the same question asked over and over internet sites. The first question is often “How much income do I need to qualify?”. The second question is often if I can get them into the house. Congratulations on starting your home. You have made the decision to buy a home and now you want to get through the door. Call me as a buyer’s agent, if you have no idea what is more important… qualifying or buying. I am always happy to discuss either issue with homebuyers.

First of all I want to stress that getting a mortgage is not as simple as posting on the computer and picking out a random lender. Not only does it take a complete application, but there is a procedure to the entire process. Unless, you have a preferred lender that you trust and have a complete wish list with you – you can’t just walk into the door and buy. Not without qualified.

Fees- I am going to say some very important things about fees. First of all, please be aware of the fee structures etc. You’ve heard the advertisements “no cost” mortgage. Yes it is possible to close on a no cost mortgage. But generally the costs are built into the rate you are paying. So if it an “No cost” mortgage, the broker or lender must give compensation (and usually the borrower gets a “free” trip around the world to the island of fame) to compensate the mortgage broker/lender. These are also called “discount points”. How do you know about these and if they are a good deal? Here’s how…. “Discount points” are basically an instrument that equals 1% of the loan amount. On a $300,000 loan, the “Discount point” that you pay is $3,000. Many lenders will gladly waive it for you (to avoid giving up the interest you should be paying). Another way to get a reduced rate is to agree to pay an extra point (per 100K) in the form of a higher interest rate. For example, if you were offered a 15 year fixed rate loan with a 1.5 Discount point, your rate and closing costs would be about $30/month higher, than with a rate that was based on a 30 year fixed rate. The Concord is reconsidering the Rules, Data and Fee Required approach to its Home Loan programs. If that is something you are interested in, crunch the numbers with your loan officer.

Fees- Again, going back to Fannie Mae and Freddie Mac policies, the fees you pay for borrowing the money range from 3 points, on up to a 15% charge on the front end to the back end. While that is certainly a substantial cost, keep in mind that the federal government is NOT in the mortgage business and as a result when you walk away from the table YOU Scores WILL LOSE. More than likely, your closing and the title company. Why? I’ll tell you why in a sec. Here’s why… on a $300,000 loan, the borrowers payment would be $3,500. If we take that same $300,000 (lets say 30% of the total loan amount) and apply that as a formula to the 15% charge on the back end…we can stretch that to $5,500…in other words the FHA charges 16.5%. Add these costs together and your typical buyer is now looking at $10,000. Just put the 14.5% rate in the financial context of your loan and performs a factoring exercise using your knowledge of the deal – it is a no-brainer. The borrower doesn’t want to pay any more on the front end. A quick calculation will show that the lender is way ahead in the loan math than you, the buyer. Consider this and remember it again.

Interest Rate- The lender will quote different rates. They all want your business so they are willing to give you a loan at a 5.0% interest rate. They all want you to “lock-in” at a lower rate and they may quote on a rate + payment (you can actually forget about for 5 years). Those interested in paying down the principal first, preferably at a much lower interest rate but you can “float” the rate for a short term (say 5 years)

Closing, Title Fees- A separate item that can either be charged as a “point” or if you are refinancing the interest rate is the higher of a.5% or 2% of the quote from the broker. The broker will reduce their commission by directing you to their preferred mortgage broker/bank.


How to Save Money on Your Next Rehab Project

How to Save Money on Your Next Rehab Project Č The first thing we learn in school is to get along with our class and to be nice to others. A lot of lessons are learned that way, maybe that’s why some people are so successful and others are not. But if you’re going to do a rehab and you have a choice of contractors, would you rather fix your own thing or hire a rehab contractor?

To answer this question, I asked Robert why he did his rehabs by himself and whether he would have done it any other way? He replied, “When I rehab a house, I have a team of guys behind me – and I fix the whole house myself. There’s no shortage of labor.” He continues, “People like me are pretty smart and we know what we’re doing, so that’s why we can do it. If you get someone who hasn’t set foot in a challenge-based (structural, electrical, plumbing, etc) industry before, and isn’t as knowledgeable as I am, then I will probably do the rehab – ‘cuz I’ll do it right.”

Sounds logical, right? Now we’re going to see why this might not work for a lot of people.

Most investors will rehab for the satisfaction of doing it themselves – and adding the knowledge to be able to rehab other properties. But that’s unlikely to happen anyway – after all who wants to spend $50,000 on plumbing contractors and electricians when you can do the rehab yourself and use the same tradespeople for the rest? Robert rails, “Speaking from experience, I’d sooner take a hammer to an wiring fixture than to a nail. I know how to cut pipes and I can identify a breaker with aritten head.”

Robert accumulate his handyman skills by watching things that other professionals are doing. He says, “The real handymen out there are people that look after houses. If they get a job on a house, they still get the house. If they’re not repairing houses, they’re working other trades – so I know what other trades people are out there and I’m not afraid to do them. You do the work and they get paid, that’s how it works.”

Now, let’s drive back this conversation somewhere in the past. We’ve got the first of our rehabs. All the hard work, sweat and lost money is finally coming together and the money’s rolling in.

The “rehab had gone slow” problem loomed the entire time but yet he had the satisfaction of gratefulness that his hard work was paying off on the property. For this reason he wondered, “How am I going to do this next one?”

But then a thought struck him, “I haven’t done any rehabs, in fact I’ve only done a few. I just want to get this thing off my plate and move on to new things.” He knew, deep down, that this rehab would be the hardest thing he’d ever do and yet he was doing it. He didn’t have to ask himself, “Which is the hard part in rehabbing? Turning ugly houses into beautiful ones or there Trees/Structures into assets?” He just winged it. That’s what we call burning to the point ofbecoming reality.

From the first property he bought, heKNOWANCakes freely of his can-do attitude,the bad deal never even occurs to him. He realizes that he’s entering into the bad part of rehabbing because it’s there. But, once he takes possession of the house, it’s too late to start over. Once he takes possession he accepts it as real, it’s his. No feelings, no remorse, no Madrugation. He accepts rejection, as a reality because he’s already made it. Consulting his team, Robert offers, “The idea here is to maximize shifts.” Scarily, his team consists of a landlord, repair man, part-timer with 6 months on the job and a handyman. He knows his team’s limitations and does his own work. Over a rehab project, he estimates approximately $35,000-60,000 worth of repairs.

Please don’t get muscle sicky when we say he spends $55/hour instead of $75/hour and six months later you could have a $600/house which was completed in 6 months. That’s a cool $200,000 profit! He’s got the job down to a science and he had no choice except to go along and if he didn’t he wouldn’t have been able to profit. Beware of an “Owner Builder” and go into any pocket deal with your eyes wide open!

You can be part of the 1/56th of the 1/56th. Like Robert Kiyosaki by example, you can go into a project without excepting any contingencies, and without having to worry about money.