Three Sensible Indicators Before you Refinance Your Mortgage
December 29, 2009
When my brother (a Marine) came home from his one year tour of duty in Iraq, one of his agendas was to re-finance his house. So we set out to do some research and get the best deal possible. We found out the Re-financing makes sense if the following factors work to your favor.
The first Factor is the Interest Rate.
The three banks we looked at were requiring at least a credit score of 700 or above. We had gotten a free copy of his credit score from all three credit bureaus. These are credit TransUnion, Equifax and Experian. Using this free report the banks can give you a preliminary report on what the lowest interest rate would be and it does not lower your scores.
The second factor is the Point associated with the refinances.
Points are fees paid up front to the lender in exchange for a lower interest rate on a mortgage loan. Each point is equal to one percent of the total mortgage loan amount. To determine if point are going to lower your interest rate, you will need to consider the certain indicators. These includes what you can afford to pay up front, how long you plan to keep the home, and how long it will take you to recover the cost of paying points. We decided we did not want points
The third factor is Closing Costs.
These are the fees incurred when preparing the re-finance. Theses included things like the application fee, appraisal fee, title search and title insurance and the like. We found out that this could add up and be a figure. Now l had learnt from the Clark Howard show that, to justify your closing cost in a refinance situation you need to recover that cost in 30 months or less. So we come up with a figure that we determined not to go below.
We also learnt that the banks were also looking at the equity of his house. This was very interesting. My brother had only owned this house for one year however he had two things working for him. One we had really searched for this house and got it at a great price hence buying it at way below market value (the trick we agreed to do some repairs and used that to lower the price substantial) or we were just lucky either way it worked.
Second my brother got deployed and used the extra money he made to pay off his mortgage. Hence he turned out to have great equity in his home. Thus the three banks were eager to do his refinance.
The end result, we did not use the three the lending institutions. Instead we had the bank he currently had the mortgage with. It turned out that they had the best deal. He now has a 15 year fixed loan at 4.5%. His monthly payment only increased by 50 dollars his closing costs were only 800 dollars which he paid of cash. The research however paid of
Faster Relief for Struggling Homeowners through Loan Modifications
July 28, 2009
The top officials of the current administration met with the servicers participating in the Making Home Affordable loan modification program to discuss ways to improve effectiveness and efficiency of the program. Their meetings resulted in three recommendations.
The first move is to begin publicly reporting results under the program based on servicer-specific performance. This is to include the number of trial modification offers each servicer has extended to eligible borrowers. Also in the report will be the number of trial plans that are underway, the number of final modifications, and eventually, the long term success of those modifications. The first report will be released by August 4th.
Second, the committee looked at wait time involved from the application process to the modification approval. They determined to set more exacting operational metrics to measure the performance of the program, such as average borrower wait time for inbound borrower inquiries, the completeness and accuracy of information provided applicants, document handling, and response time for completed applications.
Third, was to ask lender conduct a thorough review so as not to overlook or deny a modification. The Administration asked Freddie Mac, in its role as compliance agent, to develop a “second look” process pursuant to which Freddie Mac will audit a sample of MHA modification applications that have been declined. Freddie Mac will coordinate with servicers to address specific cases that arise and to address general operational weaknesses where errors prove more systematic.
How this changes works remain to be seen. The Administration has established a goal of reaching half a million trial modifications begun by Nov. 1, 2009.
Marketing, Its Essence In Real Estate
July 8, 2009
May be l say this in self defense as l realized that as my marketing effort reduced so did my sales reduce. I now know that the adage “marketing is the lifeline for any business” to be true. You see for a while l was doing so well in my real estate and related businesses, that somehow l assumed that the trend will continue. When it did not l asked myself why. This blog looks at some of the answers that l found to be true.
1. The real estate market is an evolving market. Even with the recent decline some areas are doing quite well in this market. One has to keep up with changes. In the marketplace they are new families who become new prospects. The lifestyles also changes and one can easily miss an evolving opportunity.
2. People do forget quickly. My real estate agent will sends me the same houses over and over especially it meets my criteria. When l finally settle on one she will point out that she had sent it much earlier that when l mentioned it. With the constant bombardment of information, it is easy to forget. Hence market as often as you can.
3. The Competition is step. With new technology especially now with the era of social media, completion is even more intense. The web enables one to make transactions right from one home. There if you stop marketing your completion won’t quit.
4. Identity of your business. Marketing is the one great way to identify yourself in the market. In my real estate network group l can tell immediate what some of our members do because of their consistent marketing, not only in the networks meeting but also network groups.
5. Lifeline of the business. Especially in real estate as it is now, how will you sell your house without marketing? Putting signs, putting it on the website and other strategies should be done on a continuous basis.
I believe that no business can make it without some form of marketing. Marketing is in its very essence, letting the word out that you have some product or service that you want to offer. It is a cost with which a business cannot afford to negate.
Five reasons why real estate investing is ideal
June 10, 2009
Many people are looking into investing in real estate most if not all because they believe it is ideal. I belong to three biggest networks in my area. In the latest network that l attended ,the guest speaker Don Derosa from Atlanta could not have reinforced more why real estate is ideal. This reminded me why l invest long term when it comes to real estate. This blog discusses the acronym ideal as relates to real estate investing.
Income
The I in the word Ideal stands for income generated from real estate. They are various ways of generating income this could be from wholesaling, lease options, holding rental units. Real estate provides a good source of income. This could be both short term or long term.
Depreciation
The letter D stands for depreciation. Depreciation makes real estate a favorable investment choice because it’s also treated as an expense for tax purposes. While only an expense on paper (since the owner actually pays nothing for it), it can nonetheless offset or shelter other income from taxation. Thus each year depreciation reduces the yearly income tax that l pay by reducing the reportable net income.
Equity
The Letter E stands for Equity.Equity is the financial interest or cash value of your home, minus the current loan balance(s). If selling the home, this would also be minus any costs incurred in selling the home. Every year am l pay down my mortgage my equity increases. So if l hit a hard time and wanted some moneys all l would do is get a loan against the equity in my property and the tenants are paying for my loan
Appreciation
The A is for Appreciation. Appreciation is the increase in value of a property over time due to inflation, supply and demand, capital improvements and other factors. Most real estate investors purchase income property for cash flow and capital appreciation. The real estate investor should therefore have a good understanding of the factors that cause real estate to appreciate in value. Understanding why real estate goes up in value can help you make more profitable investment decisions.
Leverage
Last but not least L is for leverage.This is the use of borrowed money to increase your profits in an investment. Building wealth via real estate requires the use of leverage. Real estate is the only investment vehicle that you can build wealth by using borrowed funds. Most investors use borrowed funds to invest thus having the ability to acquire more with less .
Five reasons why real estate investing is ideal
Two Alternatives To Loan Modifications
June 7, 2009
Two Alternatives to Loan Modifications
Loan modification is one of the affordable ways to keep your home. This is usually so for families that have children going to school in the area and really love and want to live in that neighborhood. However for those who do not qualify what are their options? This home owner may have two options. The current administration has encouraged troubled borrowers who don’t qualify for loan modifications or can’t keep up payments on a modified loan to pursue a short sale or deed their property to their lender in order to avoid foreclosure.
The first alternative is a Short sale Short sales often represent the best chance for distressed borrowers to avoid foreclosure. In a short sale, the seller arranges with their mortgage lender to accept a price that’s less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn’t have to go through a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property. However this process takes 30 to 90 days and requires patience.
The other alternative to loan modification is deed in lieu foreclosure. A deed in lieu is where a deed is given back to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure. … The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.
Recently, the federal government announced new incentives for lenders to work with troubled borrowers. They include a $1,000 payment to loan servicers who complete a short sale or a deed-in-lieu of foreclosure, in which the borrower simply relinquishes ownership.
The program also is offering payments of $1,500 to distressed homeowners to help with relocation expenses after short sales or deed-in-lieu transactions. It will offer payments of up to $1,000 toward the cost of paying second lien holders to release their loans. The U.S. Treasury will pay $1 for every $2 paid by the investors to the second lien holders.
Before one decides on a foreclosure on their home and the related long term consequences, it is to exhaust all the three alternatives first. This in order are the loan modification programs, the short sales and finally deed-in-lieu.
Two Alternatives to Loan Modifications
Loan modification is one of the affordable ways to keep your home. This is usually so for families that have children going to school in the area and really love and want to live in that neighborhood. However for those who do not qualify what are their options? This home owner may have two options. The current administration has encouraged troubled borrowers who don’t qualify for loan modifications or can’t keep up payments on a modified loan to pursue a short sale or deed their property to their lender in order to avoid foreclosure.
The first alternative is a Short sale Short sales often represent the best chance for distressed borrowers to avoid foreclosure. In a short sale, the seller arranges with their mortgage lender to accept a price that’s less than the amount they owe on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn’t have to go through a foreclosure, the buyer picks up a property at a discount, and the lender avoids taking on the burden of unloading the property. However this process takes 30 to 90 days and requires patience.
The other alternative to loan modification is deed in lieu foreclosure. A deed in lieu is where a deed is given back to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure. … The deed in lieu of foreclosure offers several advantages to both the borrower and the lender. The principle advantage to the borrower is that it immediately releases him from most or all of the personal indebtedness associated with the defaulted loan. The borrower also avoids the public notoriety of a foreclosure proceeding and may receive more generous terms than he would in a formal foreclosure.
Recently, the federal government announced new incentives for lenders to work with troubled borrowers. They include a $1,000 payment to loan servicers who complete a short sale or a deed-in-lieu of foreclosure, in which the borrower simply relinquishes ownership.
The program also is offering payments of $1,500 to distressed homeowners to help with relocation expenses after short sales or deed-in-lieu transactions. It will offer payments of up to $1,000 toward the cost of paying second lien holders to release their loans. The U.S. Treasury will pay $1 for every $2 paid by the investors to the second lien holders.
Before one decides on a foreclosure on their home and the related long term consequences, it is to exhaust all the three alternatives first. This in order are the loan modification programs, the short sales and finally deed-in-lieu.
Three Cash Management Areas That Led To Business Failure
June 2, 2009
Statistics has it the 50% of new businesses fail within the first year. And out of the 50% of business that remain 95% will fail within the first five years. This is not very encouraging however it is the realty. Since am within the first five years of my business, am always researching into areas that will improve my business. This blog looks at three areas of cash management that lead to failure of start up businesses.
Lack of cash.
Any new business will need operating income and sustaining income before it generates profits. This is what is commonly referred to as initial capital. They tend to be an underestimate of how much will be needed to run the business. Other incidental costs that were not provided for surface that led’s to cash shortages. Hence it is advisable to have various lines of credit. Even in real estate where one can buy property for no money down. Some capital is needed for marketing these properties.
Inadequate cash flow
Three to four months later the inadequately financed business lacks money for daily operations. This is commonly referred to as cash flow. A cause of inadequate cash flow is when the outgo exceeds income. This can be overcome by having reserves in lines of credits. Optimizing cash flow management is one of the most important tasks in achieving overall financial health. It is also a leading cause of business failure in the first year of operation
Not protecting yourself
This occurs when someone finally makes it and is now attracting unwanted guests. This unwanted guests come in form of lawsuits. It is no wonder they are more lawsuits now more than ever. To best protect what one has worked so hard for. Business should be in business entities such as: in limited liability companies, s corporations, c corporations limited or limited liability partnership. Note that l have intentionally left out sole proprietorship as it does not protect you against laws suits.
Having understood the three cash management areas that cause business failure, it is important to educate oneself on how to best be prepared before the inception of a business endeavor. The best time to have cash is when you do not need it.
Four Keys to Successful Blogging
April 22, 2009
The time is ripe for getting into blogging. With over 12 million American Adults maintaining a blog, one need to constant be learning and improving on their blog postings. The other day we mentioned that the four keys to successful Blogging includes content, traffic, monetization, and technical. We discussed content in great details. Today l want to discuss the remaining traffic .
Traffic
Traffic is the blood line of your blogs. learning the art of increasing traffic is crucial for serious bloggers. They are three ways of increasing traffic that l focus on
a Search engine traffic. to rank high on the search engines one needs to develop quality content around their keywords and get a lot of link around the contents.
b social traffic. The power of social media is taking over. Network on sites like facebook, twitter, Diggs and the like.
c. Link building. link popularity refers to the number and quality of the incoming links that are pointing to your site. These other sites consider your site important enough to link to. So, in the engine’s view, your site is considered important as well.
As you increase you traffic stay tuned to learn about monetization and technical aspect of blogging
Three keys to the Loan Modification Program
April 20, 2009
They is much confusion about how the recent loan Modification program works. This program was established to help home owners who are about to facing foreclosure. This modification programs aims at keeping the mortgage payments at 31% of the monthly gross income. This affects those mortgage loans that are about to reset to higher interest rates and therefore make it unaffordable to the owners. The way this payments are kept at this percentage is by
A. lowering interest.
The mortgage companys will lower the interest to as much as 2% as keep the payment at the 31%. This payment is inclusive of the principal interest taxes and insurance. However this new interest rate will remain in place for five years, after which it will increase by 1 percentage point a year until it reaches either the original rate or the prevailing mortgage rate at the time of the modification, whichever is lower. This should prevent borrowers from suffering the “payment shock” that sent many borrowers with adjustable-rate mortgage into default in recent years.
B. Extending the time frame of the loan
If rate reductions aren’t enough to get payments to 31% of income, a lender can extend the term up to 40 years, or shift part of the principal to the end of the loan at no interest.
C. Mortgage banks have also have the option of reducing the loan’s balance.
It is very important to note that the ultimate decision is with the bank. They get to decide whether it will be advantageous to them to modify the loan or foreclosure on the home. However the home owners need to relentless contact the mortgage companies to see what options they will be offered and hopeful one that will be a win win situation for both the home owners and the lenders
How The Stimulus Benefits Home Owners
April 2, 2009
The home stimulus bill has created an extraordinary opportunity for millions of homeowner to save their homes. This is being done either through the loan modification or loan refinancing programs.
Most people are not able to take full advantage of this opportunity. This is because the first place they turn to is the mortgage lenders who created this mess in the first place. While they may get help they are other options that almost ensure 100% success. They offer a free evaluation and are in constant touch with any new changes in the home owners stimulus laws.
Some of the home owner who will benefit from this loan modification and refinancing programs are those who situations include
- Someone whose ARM has not yet adjusted but will
- Someone suffering from the reset of an Adjustable Rate Mortgage (ARM)
- Someone who has a Negative Amortization (Neg Am) loan that has or will reset soon, because they have drained the equity from the home.
- Someone whose home is worth less than what is owed
- Someone who is having difficulty with their mortgage payments because of a hardship
- Someone who has had to care for a family member in a capacity which affected their income potential for a period of time
- Someone who has been attempting to sell a home for an extended period of time and simply cannot gel it sold.
Those who may be interested or been denied by their mortgage company, and feel that their situation warrants them loan modification may get in touch with us by writing in the contact us
Passive Income From Rental Real Estate
March 29, 2009
They is no doubt the rental real estate can be an excellent source of passive income. This is true if the rental property is well managed and all factors put in to consideration. With so many people losing their home renter are on the rise. This blog looks at how some of the advantage of owing rental real estate. However being a landlord is not for everyone so as in all investment do a thorough research before embarking on this route.
Rental income
Rental properties that cash flow provide an excellent source of income. Like all real estate purchase you make money when you buy these properties. To find out what the rental price are l use website like craigslist, rentometer, mapskreig and l call and ask other landlords in the area. To find out what the cash flow will be l factor in maintenance and repairs, 5% vacancy rate, utilities, and management fees.
Depreciation
This is also referred to as Phantom income. For rental property, the depreciation cost is recovered over 27.5years. Only the cost of the structure is allowed as a depreciation deduction; the value of land cannot be depreciated. Rental Property can be an effective tax shelter due to
DepreciationBe sure to Depreciate your Rental Property because the IRS assumes that you take it! If you don’t take the Depreciation, you will have to pay taxes on the property when you sell it through Depreciation Recapture!
Amortization
This is the gradual elimination of a mortgage by having the renters pay the mortgage. This covers the principal, interest, taxes and insurance. This can be considered as good debt as you have a property and someone paying for the mortgage.
Appreciation
Appreciation is the increase in value of a property over time due to inflation, supply and demand, capital improvements and other factors. You can increase the value of real estate by making cost-effective improvements. Improvements such as siding, a new roof, a new addition, new carpeting, landscaping, paint, etc. can increase the value of both personal residences and income property. You should plan carefully and make improvements that result in the highest level of appreciation for the dollars that you spend.
