Timing is everything, from as long as I can remember this cliché it has always reminded me of the days I was into network marketing and some successful guy in the so called “up-line” (opposite of downline) would try to sell you on why you should buy into the business now. The tactic was used to scare you into thinking if you waited to make your decision that you would miss out on all of the people they would recruit into the business in the next 24 hours. After learning my lesson not to make impulse decisions and to start doing my research ahead I then grew wiser. Oh well, live and learn right? Years into the mortgage business I am now using this cliché about timing being everything, and what’s funny is that I have learned this from the new demographic of homebuyers that are starting to approach me.

A step up buyer is what I am referring to, this is someone who currently owns a primary residence who now given the right market circumstances can qualify to buy another home to call their primary residence. “What do I need to do to qualify to buy a new primary residence” you ask? Well to be honest it’s not really all that complex, and my answer to a potential step up buyer begins with a really basic question. “What is your motivation to buy a new primary residence”? This question serves a very good purpose and helps me to structure the new loan in order to sell it to an underwriter. I can say that the most common reason my clients give me is that they bought their first primary residence when they got married. Add 5 years two kids and a couple dogs they have now outgrown their home. This makes for an easy sell to an underwriter because this is a very make sense type of deal as this happens ALL OF THE TIME! As far as the qualification side of this, to become a step up buyer you must have a decent income. What I mean by this is you will usually have to qualify for both of the mortgage payments (current and new) and still have a low enough debt to income ratio for the approval. The other qualification is to have a large enough down payment to cover the requirement for the new purchase. Typically the down payment for a step up buyer can range from 3.5-5% however depending on credit scores and debt to income ratio a larger down payment may be necessary.

To elaborate a bit more on the “timing is everything” concept, let’s remove all of the sales pitch and get down to the basics of the idea. Take a look at the home prices right now and then have a glance at the interest rates. I personally have locked people as low as 3.75% on a 30year fixed in which 3 years ago would be unheard of. If you don’t see where I am going with this I will just flat out tell you that the combination of both home prices and historically low rates causes your new mortgage payment to be extremely low allowing you as a step up buyer to easily qualify to buy a new primary residence.

If you would like to speak with one of my previous “step up buyer” clients I can gladly get you in contact and I am sure that they would agree that now is the time to make the move. If you would like to get qualified to buy a new primary residence you can contact me now, and if you think that this article would be beneficial to someone please share it!

-Justin, Electric Loan Officer

Hope for underwater homeowners rises as the president announced in October of 2011 (last year) that the Homes Affordable Refinance Program will be revamped and the loan to value limits will be lifted. This is fantastic, as a Phoenix Loan Officer many people come to me asking about the initial Harp loan and as soon as I run the comparable sales in the area I find out that they are more than the maximum allowable loan to value and I am unable to refinance them and lower their payments. We are talking about good hard working honest people who just bought in the wrong time, who even knew it was going to be the wrong time to buy? Heck even the real estate professionals in the business at the time thought it was a perfect time, boy were they wrong. BUT, the government has finally realized that if they can devise a program that will allow underwater homeowners to refinance their mortgages to lower household monthly debt that there would be a better chance that the homeowner would stay in their homes for the long term thus preventing as many foreclosures.

Because the first Homes Affordable Refinance Program could only help so many I believe big bank executives as well as the president saw this flaw and went back to the drawing board. Now, back to what I was originally writing this article for. Now is the time to get your ducks in a row, the Homes Affordable Refinance Program 2 is only going to work for homeowners whose mortgages are owned by Freddie Mac (FHLMC) and Fannie Mae (FNMA).. You ask, “well how do I find out who owns my mortgage”? My response to you is that I have provided the links to look your property up to determine who owns it. Yes, we have a few tools that come in handy every now and then. Here is the Lookup Tool for Freddie Mac and here is the Lookup Tool for Fannie Mae . Also, if you have any trouble looking this up you can contact me and I will help you.

I have read a lot of blogs online about people who are talking about the 6.25% rate they have and cannot refinance into the 4’s (today’s market rates) and are a bit frustrated. Matter of fact I have had my very own family members contact me and I am unable to do anything for them. Normally I am not a fan of any type of socialism in any type of economy however I don’t feel that they should be left out especially with all of their tax payer dollars that have gone to bail out Fannie and Freddie. Homes Affordable Refinance Program 2 rolls out in March, I expect you will be prepared for this if you are in that type of underwater high interest rate situation. When you are ready I would be happy to get you prequalified for this program. In the mean time stay tuned for more Homes Affordable Refinance Program 2 as this is a hot topic and I will write more articles as information comes my way.

If you know an underwater homeowner who is on time with their payments and cannot refinance due to their equity position please forward this Homes Affordable Refinance Program 2 information to them as you see fit. Thanks!

-Justin, Electric Loan Officer

The stars have aligned and this is the time to build real estate wealth, or is it? A few months back I attended a Real Estate Investment seminar to learn about purchasing “buy and hold” type income properties and was intrigued by the numbers that I was seeing. Return on investment; this is a term that refers to what percentage you are earning off of the money you invested into the deal. In this case I am not going to focus on any other so called “deal” but real estate. You can purchase a single family residence as an investment property to rent out and make a decent profit. Pretty simple right? The idea behind this is to rent the property to a tenant and over the next 15-30 years the house will be paid off, and not only are you generating a bit of income in the mean time but you will eventually have a free and clear asset to retire with. Strength in numbers is the philosophy and in case you are wondering why I keep emphasizing 5-10 property financing it’s for a great reason. Not many companies are able to offer this so I figured I would spread the word that my investors love to lend.

Since this seminar I attended, I have started to see a few of my clients purchase investment properties. It’s a real make sense type of deal, from low home prices to historic low rates (I know you’re tired of hearing that cliché) and an extremely high rental market the income generated is fantastic. There are a couple of tricks I as a Phoenix Loan Officer have up my sleeve when buyers are concerned about their debt to income ratios being too high to purchase multiple financed properties. When we provide 5-10 property financing for an investor we order two different schedules in the appraisal to help offset the cost of the new mortgage payment. These two schedules we refer to are called the 1007/216 schedule, and I am able to see what the comparable rents are for the property I am financing for a client. The number we use is 75% of the potential rental income and with the low home prices and rates coupled with a inflated rental market this becomes a breeze. The end result: On average my clients were generating an income of $250-400/mo in rents above what their mortgage payment is.

Archimedes was a Greek mathematician in 250 BC (and we all know how smart these guys were) and he said “Give me a lever long enough, and a prop strong enough, I can single-handed move the world” The key to investing is about leverage, use the rental income from your tenants to pay down your mortgage, take advantage of the tax benefits from mortgage interest and acquire a free and clear asset. Plain and simple, we will provide you the 5-10 property financing so that you can utilize this leverage principle effectively. If you are ready you can Get Pre-approved now, otherwise if you feel this information would be valuable for someone please feel free to forward it!

-Justin, Electric Loan Officer

We have all heard the term at some point or another, mortgage bank, mortgage broker blah blah blah, but what’s the real difference and why should I even care? Actually, there is a HUGE difference as I am about to explain and you should absolutely care if you are in the market for a purchase or refinance mortgage. Years ago when I first started my business as a Phoenix Loan Officer I was welcomed aboard a small mom and pop shop mortgage broker where I began to learn the business and how I could help people achieve their goals through mortgage lending. I considered myself very green when I got into the business and had no idea what a mortgage bank was nor had I ever heard this term, but as times have changed over the past couple years it became a much bigger deal to me and my clients.

To give you a basic understanding, growing up in the mortgage broker world I can give you a quick explanation as to how this type of company operates. As a mortgage brokerage you did not have your own funds to lend to your borrowers nor did you have your own underwriters, doc drawers, funders or any of the operation staff in house. Basically, after you put the file together you submitted it to a mortgage lender (totally different company) who then took complete control over the file and with your fingers crossed and weeks later you hoped that your borrowers loan would be approved. A couple years later, still in the mortgage broker world, came the Financial Collapse of 2008, and boy was that a rough year. My business had grown quite a bit and soon to realize it was going to turn into a complete disaster. The mortgage lenders we were sending our loans too started tightening up their mortgage lending guidelines and it became a complete nightmare for my clients and I to close. Conditions on top of conditions to satisfy, extra appraisals and sometimes even a loan denial I slowly started to lose my mind.

About the same time I was losing my mind a good friend of mine was telling me all about the success he was having at this company he was working for. Quite intrigued I met with him to see exactly what was going on as I wanted to get to the bottom of it. He explained this concept where you had your own underwriters along with all of the operation staff that touches the loan files just down the hall as well as your own money to fund the loans. I was sold on the spot as I now had this sudden hope that I was able to deliver what I had promised to my clients. After a short transition period I was up and running, I could not believe how much a mortgage bank made a difference in what I was able to do for my clients. With these strict lending standards there’s always something that could cause an issue with a loan file but having the opportunity to be around your IN HOUSE underwriters and operation staff gives you a chance to build a great relationship with them and understand what they look for in a loan in order to approve it. I can say that there has been times where I have had a client whose file needs that extra attention and that quick pit stop at Starbucks for a Latte to bring your underwriter as she helps you put together a deal comes in quite handy! Across the board if you look at the Loan Officers that have the largest clientele and referral base whether it be here in Phoenix, Az or across the country 95% of them work for a mortgage bank, I have a hunch that this is not just a coincidence.

-Justin, Electric Loan Officer

I must say I am completly appalled right now, I had a client who I started working with to help them purchase a home about 8 months ago. I go through my normal routine with them, employment, addresses, income assets etc etc you get the picture. Well then we get to the fun part and thats pulling the credit, as we take a look at the credit we realize we are quite a few points away from having the required credit score for an FHA loan. The borrowers had all pieces of the puzzle; 17 years on the job, low debt to income ratios and enough assets for the down payment however the required credit score was going to hold up the approval.

The borrowers reached a conclusion after our meeting and decided they wanted to go ahead and proceed with a “credit repair” company in Phoenix, Az (whose name I will leave as anonymous for now) in hopes that they would provide the results that are needed to obtain the approval. The credit repair company then schedules the client and gladly meets for a consultation and accepts the borrowers payment. Today I get a phone call from the credit repair company and they say hello “Justin we have completed the credit repair for your client and you client should be ready for financing”. I call the borrower and tell her the great news, or not so great news as we are soon to find out, and we proceed to pull a new copy of the borrowers credit report. I see the end result, which is somewhere along the lines of what we had expected. The borrowers scores had jumped 50+ points from all three bureaus which is fantastic news as they now have the scores they need to qualify.

Upon further investigation I go through the credit report in detail and find out that the credit repair company really didnt do anything at all. The way they had improved the scores was by calling each collection company and “disputing” the collection account. If you recall from a previous blog I wrote it clarified that when you “dispute” an account this OMITS or excludes the account from the credit scoring model causing you to have an in-accurate score. I then asked the borrower how much they had paid for this, she replied “7 months later my total bill came to about $800″. I could not believe what had happened, unfortunately she will not get any of her money back and this is a lesson learned for everyone.

I guess what you can take from this is that if you have credit issues I think that its a great big waste of time and money to work with a credit repair company in Phoenix, Az. If you want know more about this story you can contact me now, and if you are facing credit issues my team and I are here to help.
-Justin, Electric Loan Officer

If you are a potential homebuyer and took the first step of talking to a Real Estate agent you have probably heard the agent say that getting prequalified for a mortgage is the first step. Not being in the industry we would never expect a potential home buyer to understand right off the bat why it’s so important but I thought I would share a few tidbits of why getting prequalified for a mortgage is so important. I have been in the mortgage industry for over 5 years now and I have seen just about every type of market. Short and sweet, I learned a lot and I learned it fast. When we were all in high school they taught economics classes where we learned all about supply and demand. Here in the Phoenix, Az Real Estate market we use the same principles only we call it either a buyer’s market or a seller’s market. A buyer’s market is defined as a market with few buyers (small demand) but full of people/banks trying to sell homes (large supply). Typical things you will see in a buyer’s market are writing offers below list price, and houses that have been on the MLS listed for sale for quite some time.

In my professional opinion and I am sure every Phoenix, Az Real Estate agent that is knowledgeable would agree that the tables have turned and we are now in a seller’s market. There are a TON of buyers out there (Large Demand) but very few properties (low supply) which allows the sellers to cherry pick the offers that are going to net them the highest profit in the shortest amount of time. Because of this getting prequalified for a mortgage BEFORE you go out and preview homes is a necessity. It’s not the fact that the agent doesn’t want to waste their gas driving a buyer around that may not even qualify, it’s the fact that as soon as these homes hit the market there is an offer or even multiple offers. The days of coming in lower than the sales price are over I’m sorry to say! If you are working with an agent who is writing offers like this I can tell you from experience either they do not know what they are doing or that they are a fan of wasting everyone’s time. If you are trusting someone to represent you and guide you through a legal binding contract you need someone good, if you are having second thoughts about your agent contact me and I will refer you to someone that I endorse and trust with my own personal clients.

Now that you know the importance and the significance of getting prequalified for a mortgage your next step is to do it! Its FREE and it doesn’t take much time, it will also give you a good idea of what type of payment to expect on your new purchase!

Share this with anyone who can benefit! -Justin, Electric Loan Officer

As a consumer shopping around for a home loan you want to get a good deal right? Well what exactly is a good deal? Most people would say that it’s low rates and low fees as well right? I personally think that’s not all there is to it, read on as I explain what happened to an unsuspecting home buyer and it cost them a pretty penny.

Basically it started like this, it was a young couple recently married and expecting their first child. They decided to buy a home as this was the most economical decision given the fact that the Phoenix, Az rental market is seeing their “rental boom” and rents are through the roof. The couple had never done this before and being that they had both checking and savings accounts with a big bank (I’m not inclined to say who) they decided the mortgage company that they were going to move forward with was the same institution that had done so well with their personal banking needs. Heck, the buyers were even able to walk right into their local branch and get a “pre-approval” within minutes, how convenient right?

All seems fine and dandy, they then pick Joe Blow realtor and find the home of their dreams and return to the mortgage company with the accepted offer. Excited and still nervous the borrowers are instructed to pay for and order the two lender required appraisals (roughly $350 each) and the home inspection of $335 to satisfy the mortgage company requirements and things continue to move right along. 25 days later and 5 days before the 30 day closing period they were allotted by the seller the mortgage company declines the mortgage loan. In shock and awe as things were going so smoothly the buyers started to panic. How could this be they thought to themselves? Not knowing what to do Joe Blow Realtor calls his preferred lender, this happened to be me, and gives me the low down and tells me that if I can get the loan approved that he will ask the sellers for an extension.

Ready to rock and roll on the loan file I prep my team for a quick close, take an application, pull the borrower’s credit report, and 5 minutes later I see a problem. Not good, this borrower was NEVER approved, this was a complete oversight! The borrower had a bankruptcy less than 24 months ago, and there is no financing available to them, period. The borrowers could not believe they had gotten so excited to become homeowners and now their dreams were shattered. Not only that but they threw a whopping $1035 down the drain on appraisals and inspections that they will never get back.

This takes me back to what I originally wanted to talk about, how to find a good mortgage company. I know that everyone wants the lowest possible fees and rates but it must come as a fine balance. You must look for someone who gets good client reviews, someone who not necessarily has the “best” rate available but someone who is competitive, someone who has a license as they are a professional and do this for a living (Note* All FDIC Big Bank Loan Officers are exempt from Licensing). And back to the rates and fees talk, in my opinion for companies and loan officers that are starving for business they only have one way of getting business and that’s to advertise ridiculously low rates… Remember you get what you pay for, don’t ever walk into a Mercedes dealership on a Kia budget. You can also take a referral from a great Real Estate agent, they know that it doesn’t do their business any good to have a terrible loan officer who can’t close, matter of fact if the transaction doesn’t close the realtor doesn’t get paid, so naturally they gravitate to the good loan officers.

That’s my advice for the evening, if you need some guidance you can contact me now!
-Justin, Electric Loan Officer

Having someone that has been in the power seat for FHA throughout the past few years was crucial to understanding the housing market and what needs to be done to help revitalize it. The fact that ex FHA commissioner David Stevens left his post in April this year (2011) we were left hoping that the next person coming to office would know how to pick up where Stevens left off. The news that I just got on this beautiful Friday morning was that the new FHA Commissioner Carol J. Galante just extended the FHA Flip Rule or also know as extending the FHA flip waiver. The old FHA flip rule was set to expire in just a few short days on 12-31-11, where that would lead us we are uncertain but what I can tell you is that the fix and flip type transaction here in Phoenix, Az has been quite common and a neighborhood savior in my opinion.

The fix and flip transactions I have seen here in Phoenix seem pretty basic, a smart investor purchases a property that needs a bit of work at a discount via auction or some other source, gets his contractors involved to remodel the place and after the house is finished its remarketed for a higher sales price to not only cover the cost for rehab but to allow a small profit to the investor. Not only does this help bring up values due to higher sales prices for comparable houses in the neighborhood it also gives those families who may not be able to afford to remodel a worn out home after purchase an opportunity to have a house that feels brand new. In my opinion I think that this fix and flip idea is a fantastic business model but unfortunately has been a bit shunned by mortgage lenders.

Now that we are on the same page about the definition of a fix and flip out here in Phoenix, Az lets change our focus back to the financing aspect. “Shunned” by mortgage lenders, this is exactly what I am talking about.. Fix and flip financing was few and far between not long ago and now as the heads of government agencies like FHA and the executives of mortgage insurance companies start to see the value of the fix and flip model, guidelines have been loosened. I want to focus a bit on the FHA loan for a reason, that reason being that it’s the most popular type of loan in my book of purchase business due to the fact that it’s the easiest to qualify for. Low credit score requirements, highest allowable debt to income ratio requirements and one of the smallest down payments out there we absolutely need this FHA flip rule extension to keep our housing market headed into the right direction!

For any other questions about the FHA flip rule, please feel free to contact me now and I will shed some more light on the topic !

-Justin, Electric Loan Officer

As a Loan Officer in Phoenix, Az I have seen it all and throughout the years many loan programs have come and gone. When I started in this business in 2006 I remember having 100% Stated Income Stated Asset programs for Investors up to $417,000! Now you can see exactly the reason why we are in the housing market debacle that we are presently enduring! Guidelines over the past few years have definitely tightened quite a bit however I think very recently there have been a couple new programs that have come out that have actually been quite beneficial and a bit more lenient in their lending guidelines. Fannie Mae introduced their Homepath loan in which a buyer would get qualified for a conventional loan and would then find a specific Fannie Mae foreclosure that was Homepath qualified. The Fannie Mae Homepath loan would not need an appraisal and as many of us in the industry agree that the appraisals have been one of the biggest headaches there is in a real estate transaction making this program much more desireable.

Around the same time Fannie was rolling out the Homepath the Freddie Mac Homesteps program was introduced to the Phoenix, Az Real Estate Market. Because a lot of people associate Fannie and Freddie with playing very similar roles to the secondary market consumers and many real estate professionals were under the impression that the Freddie Mac Homesteps program was Freddies version of Fannie Mae’s Homepath. WOW, say that 10 times fast I bet you couldn’t. This is exactly the misconception I am referring to. Freddie Mac’s Homesteps program is not a loan program at all! The Freddie Mac Homesteps program is found on specific Freddie foreclosures and has to do mainly with seller concessions meaning what the seller is going to give the buyer. This is just a marketing pitch to peak interest for potential homebuyers in my opinion as you can negotiate seller concessions on ANY property! The homesteps program entails an automatic contribution of 3.5% concessions to help pay the buyers closing costs as well as an $1100 2 year home warranty. These are definitely beneficial to homebuyers, especially those that are scrounging up the cash to close however you can negotiate these same type of terms in many transactions.

You may or may not qualify for all 3.5% of the concessions and the home warrnaty on this program as it is based on the occupancy status, and to find out your best bet is to contact me get approved for the financing and we can take a look at your scenario to get a better idea of what you would qualify for.

As always if you find this information useful please feel free to share with anyone who can benefit. –Justin, Electric Loan Officer

Harp 2.0, as currently dubbed, is congresses latest and greatest idea for helping current homeowners better their financial situation. Homes affordable refinance program (Harp) was originally designed to help homeowners that were less than 25% upside down refinance their mortgages into current market rates to lower payments and improve the financial position. This Harp concept was rolled out to Fannie Mae and Freddie Mac as the DU Refi Plus and the Freddie Relief refinance. The idea makes sense because if you are the current owner (lender) of a note on an upside down asset (homes in Az) making the home more affordable for the borrower would give them a slimmer chance of default (getting behind on payments). In my opinion the first Harp was a bust, yes it helped millions however being less than 25% upside down wasn’t reality for most homeowners.

The new program is now removing the maximum loan to value limit of 125% allowing everyone to qualify for the program (granted you meet all the other requirements like credit income etc) which will open many doors for people. My job is to restore reality when new programs arise so that the expectations are properly set from the beginning. The program is being rolled out to the big banks/servicers this month and we on the correspondent non-servicing bank levels will not have access to the program right away. This is always how it is, Chase is servicing your home loan they are the ones taking the majority of the risk they usually like to test the waters first. Unfortunately in my opinion all of the “outsourcing” to save money has taken a huge toll on their service and it will be a bit of a gamble trying to close one of these until they really have the process perfected. Word on the streets right now is that we will have access to this program in March 2012, I would imagine there will be a few other guidelines that we will have to follow on top of what is currently there however this is a step in the right direction!

As more information on this program is released I will keep you as much in the loop as possible as well as provide any guidance I can. For more regular updates you can “Like” the Electric Loan Officer Facebook page by clicking HERE.

-Justin, Electric Loan Officer