Norman Calvo's Blog

We've moved!

2010-02-19T10:10:00.003-05:00

Please visit the blog at its new web address http://www.universalmortgageinc.com/blog.asp.

Enjoy!

Prices/Values have Stabilized

2009-06-23T09:37:00.005-04:00

For the past year (and in some markets over the last two years!!), we have been satiated with reports of falling real estate values and general weakness in the marketplace. So many buyers decided not to purchase because of their fear of a further decline in real estate prices or made incredibly low offers on homes they DID like, thinking that their incredibly low offer was the true value.

Over and over again, I have been suggesting to all of my potential customers that New York and Brooklyn are simply NOT representative of the nation as a whole.   I am not so naïve to think that we’re not experiencing quite a significant market re-adjustment and recession. At the same time, though, it’s been clear to me that we are (thankfully!!) not suffering as dramatic a deduction in prices as much as the rest of the nation. Put simply, when the media discusses general trends in home prices, we MUST take a look at the local indices rather than national ones. Each state, city and even neighborhoods within each city are clearly defined markets of their own and need to be treated as such. Housing prices in Park Slope, as an example, simply can not be put into the same category as housing prices in Miami.

In light of the above, it appears that even though the rest of the nation may still be having some challenges with falling prices/values, we may have turned the corner. I am quoting, WORD FOR WORD, the analysis from an appraisal that I just received late last week on a property here in Brownstone Brooklyn. Since the deal hasn’t closed yet, I am not at liberty to give the address. The message directly from the bank’s own appraiser is clear: prices have stabilized in our area. Here is the quote:

“While prices have declined an average of 2% to 5% over the past 1.5 years, there is evidence that that the market is stabilized and no longer declining. First, according to the active listings in the neighborhood, the sales prices over the past 2-3 months are lower than the list prices and the list prices have not continued to be lowered. Second, the pending sales are also correlating to similar prices levels with the closed sales over the past 2-3 months. Third, there has been a decrease in the number of listings within the subject neighborhood and there are more contracts pending closing currently than in prior months. All of these tend to support the basis that prices have stabilized over the past 2-3 months. As a result, we are indicating that the prices have stabilized and inventory levels are showing signs of improvements.”

The appraiser then goes on to state categorically that while national trends may be different (and still falling), he is required to report local neighborhood trends and that these have stabilized.

It’s interesting to note that I witnessed the same stabilization of our local marketplace in 1991, just at the tail end of the last major recession.   Thankfully, our marketplace is truly one of the strongest in the nation and I believe will continue to strengthen and improve even further over the rest of this year.

Interest Rates Move Upward A Little

2009-05-29T12:27:00.000-04:00

I was quoted in a Bloomberg News article out today that discusses rising interest rates (link below). The article infers people may have missed the boat on the low interest rates. Just to offer some perspective from our experience, while rates may be going up a bit, it hasn’t been as bad as people think. It's just that everyone sees these 'magical' low four percent rates, but the reality is these rates aren't available for most people – many factors need to align to get these rates. That said, we have experienced a huge uptick in loan applications in the last few months and continue to close virtually all of our loans.

The factors that make up what rate a buyer ultimately receives are many, and having all your ducks in a row and good consultation to maneuver through the maze and details of the current situation is critical.

www.Bloomberg.com

An important note from a very satisfied customer

2009-05-01T13:59:00.011-04:00

I just wanted to share with you a note of thanks from one of our customers, David & Naama Bloom. Their confidence in us as mortgage brokers, despite going directly to a lender in the past, is not only flattering but also shows the advantages of using mortgage brokers over banks. With new restrictions, guidelines, and programs changing daily, we can help you get the very best financing options for your own unique situation. We take pride on being a valuable service to the Blooms, and we hope we can be just as valuable to any of you.

Recognized in Top 200 BY Mortgage Originator Magazine

2009-04-24T14:18:00.003-04:00

Great news! I was recognized as one of the top 200 loan originators in the United States by Mortgage Originator Magazine. I ranked 50 out of the top 200 in loan volume of loans closed.

The 13th annual list announced in the April 2009 issue acknowledges loan originators from throughout the country, appearing in the Top 200 loans/volume and FHA/VA originator categories. A loan originator had to personally close at least $30 million and/or 175 loans of personal, residential volume in 2008 to meet the criteria for this award.

I am not only happy to have made this list, but delighted that two others on the list trained under my tutelage. Service in this industry is critical and I attribute our continued success to our unsurpassed level of customer service. I hope to push even further in the 2009 year- we are already at a great start! Thank you to all who made this possible.

Norman

Streamline Refinancing Fannie Mae and Freddie Mac

2009-03-30T16:20:00.007-04:00

For homeowners looking to refinance their mortgage, this spring the government is introducing two exciting new programs created with the recent economic stimulus program that make refinancing easier. Through Fannie Mae's DU Refi Plus program and Freddy Mac's Relief Refinance Mortgage program, banks will have the ability to be more flexible with homeowners seeking lower monthly payments. Specifically, this program will offer the following incredible parameters and leniencies:

1) In most cases a new appraisal is not required.

2) Credit scores as low as 620 will be allowed

3) Stated income/stated asset (meaning no income verification) might be allowable, although the bank still reserves the right to check with the IRS for filed returns).

4) Debt to income ratios can go up to 50% in most cases (whereas the current limit is far, far less).

5) Investment properties are allowed.

6) Second homes, co-ops, condos, and 1-4 family houses are all allowed.

Call Norman Calvo (718-210-1140) or his loan coordinator, Isaac Shalom (718-210-1147) right away to see if you will be eligible for the program.

Fed Plans Mean High Volume: Here’s How You Can Help Make it a Smooth Process

2009-03-20T11:34:00.003-04:00

With the Feds' announcement the other day of their willingness to purchase over $750,000 billion dollars worth of mortgage securities, it is evident that interest rates will be heading lower over the next few weeks and months. All of our customers will benefit tremendously from the drop in rates.

A few things to keep in mind, though, during the upcoming several weeks and/or months:

1) Banks (and nearly everyone in the mortgage industry) will be overwhelmed with the volume of applications. This means that appraisers, credit agencies, title companies, pay off services, etc. will be completely inundated with work. Delays will be inevitable.

2) Rates never follow a straight line path. As a matter of fact, even intraday, rates can change any number of times. Over the upcoming weeks, expect rates to be a bit turbulent, but the general trend is likely to be down.

3) It is best, in this environment to NOT lock in a rate until just prior to closing. Banks are giving quite excellent rates for those who take the chance to lock in for a very short period of time. This means that loans MUST be cleared for closing in order to lock and get the best rates. Since it will take about 50 to 60 days to get to that stage, we are URGING all customers to apply right away.

4) Expect the process to be BRUTAL (!!!!) Sorry to say it this way, but it is no surprise to anyone that lenders are being ultra conservative. Although the vast majority of customers will ultimately be approved, the process will be slow, tedious and time intensive. While we will try to bear the brunt of this, expect challenges in the process and frustrations. Unfortunately, it is just the way it works in the mortgage banking world these days.

5) Not everyone qualifies for the very best of interest rates. Factors such as credit scores, appraised value verses loan amount, property type, etc. will all affect scores. Be very aware of this. We will always endeavor to place your loan with the lender that gives us the best rate.

The Elusive 4% Mortgage Rate

2009-03-12T16:16:00.004-04:00

As many of you probably know, most of the recent news has focused on how hard it is to get a mortgage. In contrast, the following article from Bloomberg is one of the best that I've seen recently - mainly because it highlights how it is virtually impossible to get a 4% mortgage rate. While it is very true that some of our customers are closing at rates as low as 4.625%, for the most part, those rates simply don't exist.

Our major focus as mortgage brokers is consulting with our customers to find the very best bank, offering the very best rate and program that suits their needs. The factors that make up what rate a customer ultimately receives are many, and our consultation and ability to maneuver through the maze and details of the current situation is what makes us amongst the best brokers in NYC. We continue to close virtually all of the loans that apply with us at interest rates that are very favorable.

Enjoy the article: http://www.bloomberg.com/apps/news?pid=20601212&sid=aCJ._cUIv6dc&refer=h

NEVER BELIEVE WHAT YOU SEE & HEAR (in the news)

2009-02-13T10:51:00.000-05:00

I’ve been in the mortgage industry for over 25 years now, and I have generally been disappointed with the articles that I read about real estate in New York publications. While incredibly well written, articles oftentimes display a fair degree of sensationalism and negativity about market trends and property values. While I clearly understand that “bad news” sells newspapers, I never realized until last Sunday how “ bad news” can be misinterpreted and how, without understanding the full story, things can seem far more exaggerated and dire than they really are.

While I am honored and very pleased to be interviewed for a publication in last week’s real estate news, I simply don’t want to add fuel to the fire of what disturbs me about journalism in general. So let me set the record straight about the background of the story and what I said in “Roadblocks for Home Buyers” (NY Times, Sunday, Feb.1):

Let’s start with the story’s happy ending: The co-op loan in the eight unit building mentioned in the article, closed successfully on Wednesday, February 4th. The closing took place within a week of the anticipated contract date and all parties to the transaction were incredibly pleased with the outcome. The borrower received an amazing 30 year fixed rate of 5% with no points. THIS CLOSING WOULD NEVER HAVE TAKEN PLACE WITHOUT THE ASSISTANCE OF A SEASONED, PROFESSIONAL MORTGAGE BROKER!!!!

Now let’s review what happened starting about two weeks prior to the successful closing. The bank insisted that they get a $2,000,000 full replacement cost insurance policy on the building, and the bank underwriter stated categorically that without it, the loan would be denied. The underwriter wouldn’t reason with me, nor admit to any other option BUT a $2,000,000 policy. Not more than five minutes after my pleading and screaming at the lender about how crazy this was for an 8 unit building , I received a phone call from the NY Times reporter from the New York Times asking me for an interview about insurance policies on small co-op buildings. Her timing was perfect. I was agitated beyond belief and incredibly angry at the ignorance of bank underwriters. Not the perfect time to give an “unbiased” interview.

Over the next several days, I was able to speak at length to the insurance broker about insurance rules and regulations and maximum policy values. I wanted to have all of the right information to present to the bank so that I could plead my case and convince them that the building’s current policy was adequate. Fortunately, the insurance company was incredibly helpful and together we drafted a letter indicating that an insurance company can not, and will not issue a policy for replacement cost coverage that exceeds the actual value of the structure. The letter stated that since the value of the structure of the building was $796,000, this was exactly the face value of the insurance and therefore it was totally adequate. I sent this letter to the bank’s underwriter, who, although skeptical, agreed to send the letter on to the most senior co-op and insurance expert at the bank. After much follow up and discussion, the bank finally agreed with the insurance company and cleared the file for closing.

In reading the Times article, one would be led to believe that we didn’t get a loan for this customer. The paragraph that describes this loan ends, “but the bank wouldn’t budge”. Well, the bank DID budge, but it took quite a monumental effort to get them to do so. I truly believe that no direct lender or clerk at a bank would have followed up, insisted, and persevered to make sure that it would close. Only a mortgage broker would have been so persistent.

There are other misconceptions and untruths in the article. Mortgage brokers have a vast array of national lenders to chose from and Wells Fargo and Citibank are clearly two national lenders that have incredibly strong mortgage brokerage programs (contrary to the articles contradictory assertion). Consumers are NOT better off going directly to the lenders themselves because all too often, especially for co-ops and condos here in New York, going directly to them means risking a loan declination. If my customer mentioned in the article had gone directly to a lender, her loan would have been flatly denied and she would have no way to intervene. Case and file closed. Incredibly upscale, perfect borrowers are routinely declined by banks such as Bank of America, Wells Fargo, Citibank, and Chase. Then, in coming to me, I obtain approvals for them, oftentimes with the very same lender that had declined them just a few weeks before!

Here’s the bottom line: No one denies that we are in a credit and banking crisis and that it is harder than ever to get a loan approved. The news media has reported this correctly. What they have NOT reported correctly is that most seasoned mortgage brokers are real pros at what they do and the chances of loan approval, even despite the “roadblocks for Home Buyers’ are far greater with a good mortgage broker than with a bank clerk or representative.

Im in the New York Times!

2009-02-03T10:15:00.003-05:00

Hey everyone! Check me out out in the New York Times.

Norman

Common Misconceptions about Our Lending Environment

2008-11-11T12:33:00.000-05:00

Now is a bad time to purchase property

Now is actually an excellent time to buy! The current market challenges have forced sellers to reduce their asking prices from where they would have been 6-12 months ago. Usually when we see lower asking prices, interest rates are high (and vice versa). Right now, we have the perfect storm of circumstances – lower asking prices and low interest rates – which presents lower monthly payments than we’ve seen in a number of years. If you’re a foreign investor or have overseas investments, these benefits are compounded by the fact that exchange rates are working strongly in your favor. Now is the time to take advantage of this opportunity because it likely won’t last long. From an investment standpoint, the best time to buy property is when other buyers are “sitting on the fence”, so better deals and lower than usual monthly payments are available now and should be acted upon when you find the right opportunity.

It’s better to get a loan directly from a bank in this credit environment

This couldn’t be further from the truth! We’ve seen bank guidelines change on a daily basis over the past 12 months. In this ever changing lending environment, you need to have as many options at your fingertips as possible. If you go directly to a bank for your financing, you’re limited by whatever that bank has to offer. What happens if the bank you choose suddenly changes their guidelines and you no longer qualify to finance your property through them? You’re likely going to be left scrambling to find new financing and will be starting completely from scratch, which will cause you to experience delays and additional costs. By doing your financing through a skilled broker such as myself, you will have all of the lending options at your fingertips and we can easily switch your loan from one bank to another with no additional cost. This ensures that you get the best available terms and that you avoid complications resulting from changes in a bank’s guidelines.

Banks don’t have any money to lend

While certain lenders have fallen out of the market, most of them are still lending as much as they were a year ago. The guidelines may have gotten more strict, but we have not seen a slowdown in how much tri-state lenders are willing to lend. Moving forward, we expect that these lenders will be ready and willing to finance properties for qualified buyers without interruption. The trick is to know which lenders to pursue based on your circumstances and that’s the expertise that we provide.

I have to put at least 20% down regardless of the purchase price

Not true! There are still lenders that are doing 90% financing (sometimes as high as 97% financing) for well-qualified buyers. While it is true the down payment guidelines have gotten more strict, there is not a steadfast rule that you have to put 20% down on every transaction. While many lenders will require 20% down in the higher price ranges ($1 million +), there are various lenders that are lending 90% financing on lower loan amounts on a regular basis.

Media Over Exaggeration

2008-09-05T12:28:00.000-04:00

Last week the New York Times printed an article on the front page of the Real Estate section titled “For Buyers, Many Roadblocks” which basically discussed how tough mortgages can be to get these days. Having read the article on Saturday, thanks to home delivery, I was well prepared for Sunday’s open house rush of questions.

I usually spend my Sunday’s at an open house or two, to assist with traffic low and any questions potential buyers may have. In my 27 year career I have never seen such a disparity between what the buying public perceived as reality, and what is really happening out there. Most of the buyers seemed to be focused on their in-ability to get financing rather than focusing on falling in love with the property. It seemed that the NY Times article unnecessarily heightened people’s fears about their personal finances. Most of them really had so little confidence in mortgage-ability that that even if they DID love the property, this skeptical attitude could possibly prevent them from making an offer.

Here are the situations I ran into. Please note that ALL of their fears were unfounded and based on media over exaggerations:

Scenario #1

A couple looking to upgrade their condominium were skeptical on their ability to get a mortgage. She had just started a new job last month and had student loan debt she had been carrying. He was in a steady job earning a 6-figure salary for 3 years. A portion of their down payment was coming from a gift from their parents; the rest was coming from the sale of their cooperative. .

They had read the article and were quite dismayed when they read about a 5 year history required at their job to qualify, or needing to have no debt to get the best rate.

I explained that although she started her new job last month she had a 4 year verifiable history in her field. The student loan she carried was fine because their combined income was more than enough to offset any payments they were making. They were thrilled to learn that they were qualified.

Scenario #2

A young couple was looking to purchase their first apartment. This was their first day shopping and they had seen approximately 10 properties. The last open house they attended was where we met. They, too, had read the article and were convinced they would need to wait 3-4 months before they could afford to get any type of financing. The only reason they were shopping was to get an idea of what was available on the market so they would be confident when the time came to buy. They fell in love with this last apartment but were very disappointed because “it was out of their price range and they couldn’t afford the apartment”. I stepped in and suggested that we review their finances to determine if they could possibly afford to purchase the apartment. To their astonishment they were over qualified for the purchase and put in an offer on the spot. Within an hour they had an accepted offer and were excited at the notion that they were able to buy such a wonderful apartment despite what the article had dictated to them earlier that day.

Had I not been there to explain how qualified they were, the realtor would be hosting another open house this weekend at the same apartment

While there are difficulties with certain transactions, most buyers are not clear on what can or cannot keep them from qualifying for a mortgage. The media is constantly playing down the availability of financing to well qualified buyers, which puts doubt into their minds. It is VERY important to make sure any and all of your potential buyers are well aware of the availability of financing. I am available to attend any open house or answer any questions for buyers who feel they are not adequate for financing. While some borrowers may not qualify, the majority certainly will.

Success Stories in a Tough Market

2008-08-20T12:23:00.001-04:00

Its no surprise to anyone that we are experiencing outright difficulties and maddening frustrations with banks these days. Loan and mortgage applicants that would routinely have been approved a year ago are being turned down, and buyers even with excellent credit ratings and work history are having very tough times in getting the mortgage they want. It is almost as if only the super wealthy can get the “right” loan with relative ease.

Here are two examples of challenges and issues that we have solved for our realtors.

Example #1:

One of our buyers in Park Slope was purchasing into a fully sold and owner occupied 4-unit coop building. About two months ago, one of our major NY lenders indicated to us that they would have no problem in doing a jumbo loan for this coop. We sent the file to them and the underwriter promptly rejected it saying that they could no longer do a 4-unit coop under the jumbo program. The guideline had changed only three days before their receipt of the file and there was nothing that they could do.

We then went to lender #2 (another major NY lender) and we were elated when our account rep indicated that this should be a “no brainer”. Excitedly, we sent the file there only to receive a similar rejection a week later. This time, though, the reason was that they could have done a 5-unit building but not a 4-unit building. This is despite the fact that from the get-go we told them that it was a 4-unit building.

Then we tried a third major NY lender and, you guessed it, a third rejection. A fourth major NY lender kept giving us assurances of an approval. At the end of two and a half weeks, the underwriter finally declined the file based on “market conditions”.

Finally on our fifth try we found a small niche lender who gladly said yes. We always knew about this lender but because their rate was higher than all the other lenders, we wanted to make sure that we tried all options before sending the file there. The buyer and realtors and everyone involved in this transaction were absolutely thrilled. Had the buyer gone directly to any of the original four lenders, the deal would have been dead.

Example #2:

We had a buyer who wanted to go directly to the bank on a 90% condominium purchase in a 3 unit building where he was the ONLY buyer in contract. We warned him over and over again that going to a lender directly would be disastrous. Despite our concerns, he went to Wells Fargo on the advice of a cousin of his good friend. We called regularly to check the status of his approval. Over and over again he said he had locked in the rate and got an approval and would be closing shortly.

Six weeks later we got a panic stricken call from him indicating that Wells Fargo rescinded their commitment because he was buying into a 3 unit condo with 1 unit in contract. Didn't they know this from the beginning? Immediately, we were able to resurrect the file and we closed it with the very same lender (Wells Fargo) within just 8 short days. EVERYONE THOUGHT THIS WAS A MIRACLE. Of course our buyers and realtors and the developer were incredibly grateful.

The two examples above are just the tip of the iceberg of what is happening out there with banks and most mortgage applications at banks. To protect your deal, insist as best as you can that your buyers use a mortgage broker that you know and trust. Otherwise, your chances of closing the transaction, at this in this market place, are greatly reduced.

The Return of the PMI

2008-08-12T16:36:00.002-04:00

Yes, PMI is back and coming on strong! Even in this crazy, wild and challenging marketplace, mortgage insurance on files with just 10% down is READILY AVAILABLE!!!! Yes, that’s correct, old fashioned mortgage insurance with just 10% down for loans up to $729,750!!! And believe it or not, this applies to co-ops as well.

Why the sudden interest in 90% PMI? It’s simple: for many years banks thought that their home equity type loans and lines of credit would be their golden cow. What has turned out however, is that defaults and delinquencies on those HELOCs are FAR higher than ever expected and the losses and write-offs are monumental. There’s no insurance company or agency to protect the banks from these losses AND in many cases the banks can’t even foreclose because all HELOCs are in second lien position. So, what had been considered as a huge profit center for them is turning out to be a huge drain on revenue.

Mortgage insurance, on the other hand, is totally different. The banks are completely protected against default (that’s what the “insurance” is all about) and there is no secondary loan to worry about. The PMI company sets the guidelines as to the minimum standards that the borrower must meet in order to obtain approvals. Although the standards vary somewhat between PMI companies, most of the time the standards revolve around the following parameters:

Generic PMI Standards:
· Minimum FICO scores apply
· Maximum debt-to-income ratios can’t exceed around 38%
· Employment history must be strong
· Self employed allowed only as long as there is a two year history
· Appraisal scrutinized carefully
· Borrower must show at least 5 of their own assets in savings.

Since each bank and each PMI company has different nuances to approval guidelines, it is essential that your borrowers call me right away if they are planning on putting less than 20 percent down. Either I or my loan coordinator, Isaac Shalom, can quickly determine eligibility and then we will let you know about approvability. Since guidelines are constantly changing on both the bank and the PMI ends, it is crucial to insure that your customers call us for more information. My direct dial is 718.210.1140 and I am here to make every deal work.

Market Timeing is Everything

2008-07-17T13:11:00.003-04:00

Take a look at the attached phenomenal article from Barron’s Magazine this week. It is BY FAR, the most intelligent, articulate, and realistic assessment of our nation’s real estate situation that I have read in over two years. And, most importantly, instead of the usual gibberish about how horrible the market is, the article tells a far different tale and one that we, here in Brownstone Brooklyn and Manhattan have known all along:

HERE IS THE ESSENCE OF THE ARTICLE:

Things simply are NOT as bad as the media would like to make them out to be AND,
most importantly, areas such as ours simply did not and will not suffer hardly
at all from our current mortgage and real estate tribulations. The article
points out clearly that the national statistics about housing price declines are
skewed horribly by the Florida condo mess and the sub-prime fallout –ISSUES THAT SIMPLY DO NOT AND WILL NOT APPLY TO US.

As a veteran in the real estate and mortgage industry now since 1982, I have witnessed and participated in some very major market swings. The four that I have witnessed were firstly the wild and horrible recession of 1982 to 1983, then the aftermath of the stock market crash of late ’87, (and the subsequent horrible years of 89-91), the problems after 9/11 and now our most recent travails. Here is what I can tell all possible buyers out there (and this is the reason why I am sending this article to you):

From my experience: the people who bought right after the first optimistic article like this one realized appreciation and price increases WAY BEYOND THEIR expectations. Many of them were able to leapfrog from one property to the next with the profound appreciation in value gained by their buying BEFORE THE MARKET IMPROVED and BEFORE EVERYONE REALIZED THAT THE MARKET HAD TURNED!!!! Good, qualified buyers, can negotiate nice deals for themselves, precisely at this point in time because everyone is so darn pessimistic about the market and because NO ONE REALZES that the market is about to turn. Speak to your realtor and make an offer! In my estimation, we have about 6 to 9 months before sellers and the general public realize that the market is turning. It is precisely during this timeframe that your negotiating power as a buyer is at it’s highest and precisely at this time when the deals are the greatest.

My customers in late ‘83 and early ‘84, bought starter apartments and then houses in ‘85 from the equity appreciation during those few years. The ones that took a chance at buying in late 1990 and 1991 (and I still have customers from then) in the Park slope and Brooklyn Heights areas were amazed at how properties appreciated in the ensuing years. People who bought in Tribeca and Wall Street areas anywhere form Oct. 2001 to Oct. 2002 were simple astounded at what happened to their values.

The honest truth in purchasing real estate is to BUY when others are NOT buying. This is a fact that most savvy investors have realized for quite some time now and I happen to know many investors who are now gearing up to purchase properties at bargain prices, only to renovate and resell within a few years.

Many of our local newspapers and the national media will NOT pick up on the contents of this article for quite some time, so get out there and find a property and negotiate!!! The time to buy is NOW!!! Read the attached article and you will see very clearly why.

Barrons Article

2008-07-17T13:05:00.000-04:00

Barron's Article (Click on the link to view)

Getting a Co-Signer Can Save A Deal

2008-07-11T13:10:00.000-04:00

With the ever increasing underwriting restrictions these days, it is no surprise that many of our mutual customers feel that they can’t qualify for a mortgage. Then, if we factor in slightly higher interest rates as well, quite a number of possible buyers get dismayed that ownership of even a small apartment is beyond their reach.

In reality, things couldn’t be further from the truth. For nearly everyone with a decent credit rating, qualifying for a mortgage and purchasing the home or apartment is not daunting at all. As a matter of fact, approvals are still easy to come by; especially with under the guidance of a good mortgage broker. Virtually every bank has special niche mortgage products designed to meet even the most challenging of deals. With all sorts of first time homeowners programs, and PMI financing, it is rare to find a deal that can’t be done.

Most of the time, the easiest solution to a seemingly impossible deal is merely to recommend that the buyers get a co-signor for their loan. Here is a prime example of when it is a great idea to suggest a co-signor. Let’s say you are showing a young couple a one bedroom apartment for $400,000. They tell you that they haven’t saved much, but they can get a gift from their parents. They also tell you that their incomes are great and that combined they make over $150,000 per year. You have a great deal on your plate and then, all of a sudden, the bombshell hits: the husband missed two car payments in a row last year and he is currently late with Macy’s. His wife’s credit is excellent, so you try to explain this to the bank that she will “correct” his ways, but this, of course, simply doesn’t work. The wife, however, only makes about $15,000 per year, and it is part time as well.

Dead deal? Absolutely not!!! Guidelines at a number of our banks allow the occupying borrower to make just $1.00 (that’s right just one dollar) per year and parents or siblings to guarantee the loan. This is called co-borrowing where they actually take title to the property and co-sign on the loan as well. The parents are called non-occupying co-borrowers and as long as they can carry the loan (and have a good credit rating) the loan is approved, the deal closes and your on to your next commission. It’s as simple as that!

Here are other examples of where a co-borrower works perfectly to save a deal:

· A recent college grad making a very low starting salary
· A college student who, instead of dorming, wants to buy
· Newly commissioned or self employed borrowers
· Professionals with extremely high student loan payments
· Borrowers with minimal or no credit history

The list goes on and on. The most important thing to remember is that there is a loan out there for virtually EVERYONE. Give us a call and we will make it happen.

Co-ops Now Eligible for FNMA High Loan Program

2008-06-19T16:54:00.002-04:00

We’ve just received the phenomenal news that one of our major national lenders is now allowing coops as part of the temporary “FNMA” jumbo/conforming economic stimulus program. What this means is dramatically lowered fixed rates and 5 year ARMs on coop loans up to $729,750!!

Take a look at the incredible and the amazing difference in interest rates between the NEW coop program and the regular fixed rate pricing with most major lenders. Let’s use this as an example: $900,000 purchase price with 20% down and a loan amount of $720,000. On the new coop stimulus program the fixed rate 30 year would be an incredible 6.875%. This (“conforming temporary loan limits”) gives us a monthly payment of $4,709.89. Up until just a few days ago that interest rate would be a whopping 8.75 % for the very same loan giving a monthly payment of $5,644.24. Essentially then, the savings to our customers on this type of transaction is a phenomenal, $934.35 per month!

One of the nice things about this program for coops is that it allows for not only 30 and 15 year fixed rates loans but also 5/1 ARMs and interest only products as well. Cash out refinances or cash out refinances to pay off home equity lines of credit are also available. Generally speaking, a minimum credit score of 660-680 is required, and we must always verify that any previous mortgage or rent payments in the last one to two years have always been paid on time.

Here is a quick review of some of the guidelines for the program:

CO-OP Guidelines with Wells Fargo
· Fixed Rate and 5/1, and Libor ARMs are available
· Primary and Second Homes
· Must Have at Least 5 Units
· No Ground Leases Allowed
· No Helocs Allowed
· 51% Owner Occupancy
· No more than 10% owned by a single entity (except for a sponsor)

Currently only one lender is allowing coops under these programs. We are hoping that more and more lenders will see the value in offering coops and will jump onto the bandwagon on this great program. It is essential that we obtain preapprovals way before customers sign their contracts for anyone who wants to apply for this program. The reason for this is that although it is an incredibly wonderful program, the lender will be incredibly strict with all approvals and will adhere tenaciously to their underwriting guidelines.

For more information don’t hesitate to call me at 718-534-5600 ext 140.

Thanks,

Norman

Mortgages and Tax Deductions

2008-06-12T16:03:00.008-04:00

Owning a home and having a mortgage will clearly give borrowers a substantial tax deduction every year. Most people, especially first time home buyers, don’t know that all of the interest and property taxes paid in a given year can be deducted from gross income to reduce taxable income. Even though it is a bit complex, I am going to try to break the numbers down step by step and show you how this great savings opportunity works. Let’s use a real example that happened in the office this week.

The scenario is a purchase of a condo for $870,000 and a loan amount of $729,000 at 6.25%. The yearly real estate taxes are $3,000 and the borrower has a yearly income of $168,000. (All numbers are rough estimates)
Step 1 : Calculate the amount the borrower pays the government in taxes. This is simply approximated by taking the yearly income and multiply it by the tax bracket percentage.

$168,000 Income
X 30% Tax Bracket Percentage
$ 50,400 Current Estimated Yearly Income Taxes -Without Having a Mortgage (meaning for people who are renting or who have no mortgage payments on their home)

Step 2 : Calculate the yearly interest paid by the borrower on his new loan.

$729,000 Loan Amount
X 6.25% Interest Rate on Loan
$ 45,562 Interest on loan for a year

Step 3 : Now we take the original income and subtract all the deductions, to get the net taxable income.

$168,000 Income
- $ 45,562 Interest that is tax deductible from loan
- $ 3,000 Yearly taxes on condo that are tax deductible
- $ 5,000 Deductions (Estimated “other” legitimate itemized deductions such as charitable contributions)
$ 114,438 Net Taxable Income

Step 4 : Take the new net taxable income and multiply it by your new tax bracket percentage to find out the taxes you are really going to pay the government.

$114,438 Net Taxable Income
X 25% New Tax Bracket Percentage
$ 28,609 Estimated New Yearly Taxes

Step 5 : Finally, subtract your estimated new yearly taxes from the taxes that you would have paid had you NOT have mortgage.

$50,400 Current Estimated Yearly Income Taxes -Without a Mortgage
- $28,609 Estimated New Yearly Taxes With a Mortgage
$21,791 Yearly Tax Savings. This Represents A Monthly Savings of $1,815!!! (That’s 21,791 divided by 12 = 1,815, sounds dumb, but there is a lot of stupid people out there)

Essentially, then, because your tax bill is so much lower, your net saving’s by having a mortgage is $1,815 monthly. This means that your NET mortgage payment looks more like this (assuming the same 6.250% interest only loan)

$729,000 loan at 6.250%

$3,796.00 Monthly interest payment
+$ 250.00 Real Estate Taxes (Estimated)
$ 250.00 Insurance (Estimated)
$4,246.00 Total Regular Payment

$ 4,246.00 Total Regular Payment
-$ 1,815.00 Minus Tax Savings Because of Having a Mortgage
$ 2,431.00 Net Mortgage Payment

This is incredible. The REAL net payment on a $729,000 mortgage is only $2,431!!!!! No wonder everyone argues that the mortgage interest deduction is a pleasant benefit to everyone with a mortgage.

HAVE A GREAT WEEKEND!

Guest Writer Bob Dubno: Avoiding a Very Expensive Oversight

2008-04-11T15:53:00.004-04:00

For this week’s blog post I have decided to take a break. No, not a break from rate locks, pre-approvals, and processing loans, but just a break from writing about mortgages in general. Instead, I’ve recruited some help from my good friend and colleague, Bob Dubno. Being a prominent Real Estate attorney in the New York area, Bob has come across many clients who have gotten themselves into tricky situations because they just weren't informed. Below, he addresses some of these issues head on, and gives valuable advice to potential buyers who are looking to avoid some heavy costs.

Avoiding a Very Expensive Oversight
By Bob Dubno, Esq.

As most informed buyers have learned in their research into condominiums (as well as the less common new coops), one of the major closing costs to anticipate is the mansion tax. On any purchase of a condo, coop, or house where the purchase price is $1,000,000.00 or more, the buyer has to pay a tax of 1% of the purchase price. This, of course, is in addition to all the other closing costs associated with the purchase.

As those same informed purchasers have learned, in a strong real estate market there are some typical “seller’s costs” that can pass on to buyers by contractual agreement. Specifically, these are the New York City and New York state transfer taxes that amount to 1.425% and $4.00 per thousand of the purchase price.

As a Real Estate attorney, I’ve come across many cases where purchasers were excited that they dodged mansion tax because they negotiated a price just under $1,000,000. However, here’s how it got interesting! Once transfer taxes are computed, the forms require the inclusion of the buyer-paid transfer taxes in the consideration. What this means is that taxes will now be calculated on the combined sum of the purchase price and the transfer taxes. In other words, the buyer is taxed on the tax. No big deal, right? Wrong! Now, when you add the transfer taxes to the old purchase price (which was only just short of $1,000,000.00), the “new” consideration is now well over 1,000,000.00 and subject to mansion tax!

Therefore, an aggressive purchaser, who is reluctantly expecting to pay NY City and State transfer taxes, and also wants to avoid paying mansion tax, must negotiate a price to at least $19,000 below the $1,000,000.000 “magic number”.

Bob can reached at 718-789-7777 or at Bobdubno@gmail.com for any questions, comments or concerns.

What Makes a Good Mortgage Broker?

2008-04-04T15:53:00.007-04:00

New borrowers never know what to expect with mortgage brokers. They hear rumors of unscrupulous brokers, transactions that have gone haywire, and fees that spring from nowhere. It is in times like these that I find it essential to clarify not only what good mortgage brokers do, but also the very characteristics that I pride myself in. I ran across an article of the same title in Yahoo Finance that explains in detail what to look for in a good mortgage broker. What I’ve done below is taken some of the ides on that list and added my own ideas taken from my knowledge of this industry for over 25 years.

Good Brokers Are Financial Planners:

When applying for a mortgage we will ask borrowers some financial questions such as:

How much are you looking to put down?
What type of price range are you looking in?
What are your assets? Debts?

We’re here to guide borrowers on all available mortgage products that fit their situation. Conditions such as loan amounts, down payment, loan purpose, type of property, credit score, and employment type all affect the mortgage process.

Good Brokers Are Good Listeners
This goes hand in hand with good brokers being financial planners. Each borrower has his/her own unique situation, and it’s up to me as your mortgage broker to figure it all out so that you can get approved. What this also means is that you should be able to talk to me honestly about your financial situation and don’t hold back. We don’t want to have to scramble to get your loan approved.

Good Brokers Will Act In Your Interest In Dealing With Lender And Approved Third Parties:

This means no hidden fees! During the application process, you will sign a Good Faith Estimate that will disclose a thorough list of estimated closing costs due at the closing and a Fee Agreement indicating the amount the bank will pay us for our services. Additionally, we work with various different lenders to search for the best rates that suit your needs.

Good Brokers Will Not Quote Low-Ball Prices:
The author of What Makes a Good Mortgage Broker?, Jack Guttentag, said it perfectly:

Accurate pricing depends on a number of borrower, property, and transaction characteristics. If these are not known or used, the price cannot be accurate. Loan originators who quote the best prices possible -- and sometimes even better than the best possible -- with the intent of roping in the customer are low-balling.

Avoid any broker who quotes a price without first quizzing you about loan size, down payment, loan purpose, type of property, use of property, state, credit score, and documentation of income and assets.

Don't tempt a broker to low-ball by requesting a price on the telephone.

─Jack Guttentag, What Makes a Good Mortgage Broker?

Good Brokers Are Experienced
In this turbulent market, it’s vital to work with someone who knows his stuff. Like Guttentag said, “mortgages are complicated”, and you need someone who is going to be on top of your mortgage 24/7. This is something that my company and I pride ourselves in, and when handling your loan, we treat it as if it were our own. With my over 25 years of experience, I’ve been through it all. So, call or come on down to my office in Park Slope to get started.

* this newsletter was based on the article What Makes a Good Mortgage Broker? by Jack M, Guttentag

Welcome to my blog!

2008-03-27T18:54:00.012-04:00

About two years ago, I had no idea what a blog was until my kids came home one day and talked excitedly about this new online world of interactivity, connectivity, and dissemination of new ideas. As a veteran of over 26 years now in the mortgage industry, there hasn’t been one second of my career that I haven’t absolutely loved. And now, thanks to my kids and especially my daughter, Adele, I have a new means of connecting, educating, entertaining, and providing the most update mortgage education for all of my trusted friends, business associates and business partners.

I’ve honestly never been more excited about the opportunities that this new electronic media will provide for all of us. In my upcoming blog posts, I will be introducing some exciting new content that I’m sure all of you will love. Here are just a few of the ideas that my daughter and I have been discussing:

· List of weekly open houses with pictures and “insider” info
· Highlights from articles in the news
· Congratulations to our weekly closings.
· Featured Listings
· How-to guides to the mortgage and real estate markets

The list goes on and on.

Since this is meant to be interactive and fully participatory, I encourage all of you to respond to any of the ideas that I address with your comments, feelings and questions. Hopefully this blog will become a community forum for the brownstone Brooklyn neighborhoods and for parts of Manhattan as well. For right now I’ll start by sharing with you a number of my best weekly newsletters and other informative articles about our mutual industries. I hope you enjoy it, and read through it, and I look forward to enhancing the content of this new media with your help.

I look forwarded to "blogging" with you soon,

Why mortgage rates are still heading higher

2008-03-18T13:20:00.000-04:00

Click on the link to read an interesting article on why long-term fixed-rate mortgages may go up.

Why mortgage rates are still heading higher

FNMA’s New Jumbo - Conforming Loans

2008-03-18T12:02:00.001-04:00

Phenomenal news!!! We've finally received, direct from FNMA, the new guidelines for the economic stimulus package that was just signed into law. Mortgage lenders will begin to implement the guidelines in about one to two months, so get ready for the phenomenal boost to sales! For everybody in real estate, this will usher in a tremendous selling season for single family homes and condominiums. With the dramatically increased loan sizes, virtually everyone in the mid price range will now be able to obtain the much lower FNMA rates.

Here are the parameters of the new guidelines:

1) No Coops allowed.
2) No multi-family properties allowed.
3) No cash-out refinances allowed (also can’t combine first and second, even if the second was for purchase money).
4) Only programs offered are 30 yr fixed, 15 yr fixed, 5/1 ARM and 5/1 interest-only.
5) 45% maximum debt to income ratio.
6) Only full doc (no stated income or no income loan).
7) Properties with values over $1 million will require a full appraisal AND a field review if LTV is above 75%.
8) No limited condo review allowed. Must be full review (offering plan, questionnaire, insurance, etc. must be provided).
9) There is a 0.25% hit to pricing for fixed loans and a 0.75% hit to pricing for ARMs.

News Flash: We just heard from JP Morgan Chase and Wells Fargo that they will start accepting loans for this program effective this coming Monday, March 17th.

Please remember that these guidelines are for single family home and condos ONLY. It will NOT apply to co-ops or 2-4 family houses. A few other fine print items to keep in mind: In order to be eligible for the new higher loan amounts, borrowers must be able to prove full income and assets (meaning that the stated or no income loans will not be available). Debt to income levels will be limited to 45%. Secondary financing will NOT be allowed (what this means is that if borrowers wish to obtain 90% financing, we will have to obtain the old fashioned private mortgage insurance for them.

Expect the new guidelines to be available to your clients as early as April 1st (estimated time frame). The new loan level amounts that are eligible for the MUCH LOWER FNMA rates will create a surge in sales activity in the New York area. Much more affordability will be ushered into the marketplace and this, of course, will create more sales. -Norman Calvo

The Return of the ARM

2008-02-21T13:39:00.005-05:00

The Return of the ARM
“The Fed is your Friend”

With the financial markets and mortgage interest rates zigzagging day in and day out, people are wondering where the much hyped “stimulus” is to be found. Though the Fed has aggressively cut rates numerous times to make borrowing cheaper, long term mortgage rates have been creeping up in the past few weeks. What gives?

Most people assume that all interest rates move together. This is far from the truth. In fact, short term investors have very different motivations than long term investors, and oftentimes, rates on short term bonds and long term bonds can move in different directions. In our particular market, with the Fed infusing the markets with cash and lowering short term interest rates, investors park their money into short term bonds, sending short term rates downwards. On the other hand, long term investors worry that too much financial stimulus will be a harbinger of inflation- a disaster to long term value. So, they sell long term bonds, causing long term interest rates to rise. This phenomenon, where short term rates fall while long term rates rise, is known as the steepening of the yield curve. So, what we currently have is a phenomenal opportunity for much cheaper mortgages on the 3, 5 and 7 year adjustable rate mortgages (i.e.. Short term money).

The Fed cannot directly change long term mortgage rates, but it can and does directly affect rates on the shorter end of the yield curve. The Adjustable Rate Mortgages are directly tied to this area of the curve. Though the credit crunch all but wiped out riskier mortgages, safe ARM’s are making a big comeback because their rates are coming down fast. And, as the Feds continue to cut rates to save the economy, the adjustable rates will continue to fall lower and lower.

Currently, the spread between 30 year fixed rates and the 5 year Adjustable Rate mortgage is approximately 3/4 of a percent. On a typical 600k mortgage, the difference is $390 per month- a HUGE amount that can help your clients purchase their dream home or apartment in an environment where every dollar counts. Even though the ARM’s (especially interest only) are harder to qualify for than they were a few years ago, the payments and essential loan programs remain the same: Great rates, Extremely low payments, and perfect for those clients who, like most New Yorkers, move on average every 5-7 years.

Take a look at the following grid which shows the difference in monthly payments between fixed and adjustable rate mortgages:

When showing apartments or houses, if your customers are concerned about high mortgage payments, make sure to tell them about the adjustbles. Give them my phone number, 718-534-5600 x140, and I would be more then happy to walk them through the benefits of the far lower interest rates that the adjustables can provide.

Introductory Video

2008-02-18T12:58:00.002-05:00

Take a look at this introductory video about our goals and our philosophy at Universal Mortgage that will help you with all your mortgage and financing needs.

Let's Celebrate!!

2008-02-01T14:07:00.001-05:00

Though the end of 2007 brought us pessimistic headlines and doomsday predictions for real estate, hardly a month has passed by and we may already be turning the corner. Refinance applications are surging, the phones are ringing nonstop, and the environment is starting to remind me of 2002-2004. What's going on?

With two consecutive unprecedented rate cuts (and with expectations of more on the way), Congress seems willing to do anything to save the housing industry. It appears that our lawmakers, politicians and economists want to shower homeowners with cash/easy money to fuel a lagging economy.

Lower rates are usually enough to spur a rebound in housing. But this time, with Congress planning to increase the Fannie Mae conforming limits to over 700,000 from a current 417,000, a new wave of cheaper and easier credit is being ushered in. What all this means is that even in the higher-priced neighborhoods of New York, borrowers will be eligible to refinance their jumbo loans into conforming rates, and will benefit from the streamlined process, looser guidelines, and from lower interest rates that conforming borrowers typically enjoy.

According to one economist quoted in the Wall Street Journal, this could mean savings of $3000 - $5000 per family per year. The incentives to refinance are HUGE.

I predict that the new guidelines and lower rates will also provide a huge stimulus to Real Estate sales in our area. Those buyers who may have previously been shut out due to the higher jumbo rates or strict lending practices may once again be able to confidently bid on homes they can now afford. Sales in the $500,000 - $1,000,000 range will spike up tremendously and we will have an unprecedented amount of sales transactions because of these changes. This may be the panacea we've all been looking for.

Let’s all keep our fingers crossed! While the passing of the legislation is not certain, most analysts feel it is very likely. But borrowers need to act quickly- the Congressional stimulus may be available for a year or two only and extremely low rates may not last forever. Call me today to find out how the new guidelines will benefit your clients.

Let's make 2008 the new 2003!

The Worst Is Over

2008-01-24T12:07:00.000-05:00

NPR Interview: Mortgage Lenders Look to Tighten Purse Strings

2007-08-18T12:52:00.002-04:00

Listen to my NPR interview discussing the upheavel in the mortgage market on Augest 15, 2007

Mortgage Lenders Look to Tighten Purse Strings : NPR

Dramatic Changes in the Lending Environment

2007-08-01T15:12:00.000-04:00

What is happening?
The sub-prime lending environment has been in turmoil over the last six months, but recently that turmoil has spilled over into the prime mortgage market. As a result, we have started to see a trend of major tightening of lender guidelines in the past couple of weeks. Many major banks are cutting programs and some are even shutting their doors completely.

Some of the guideline changes we’ve seen include:
· Significant tightening of credit, income and asset requirements
· Reduction of stated income/stated asset financing options
· Larger down payment requirements (even on fully documented loans)
· Complete elimination of sub-prime and Alt-A lending platforms at major lenders
· Second mortgage guidelines are tightening faster than first mortgage guidelines

How do these changes affect your transactions?
· Some of the buyers that were on the borderline of being qualified a few weeks ago may no longer be qualified to obtain mortgages. As a result, some of your clients will need to be re-qualified to ensure that they meet the lenders’ new underwriting guidelines.
· The time required to market a property could lengthen as it may take longer to find qualified buyers. This may result in higher property inventory levels and a shift toward a market where the buyers have more control and negotiating power.
· Loan approval and closing timelines could get longer due to increased scrutiny of borrower documents and appraisals.

How can you ensure that your transactions go through smoothly?
Make sure your buyers are very well qualified: With the new lending guidelines, borderline buyers may have a difficult time obtaining financing. Therefore, it may be better for brokers to accept a lower offer from a more qualified buyer (i.e. larger down payment, better credit score, etc.) rather than a higher offer from a less qualified buyer.
Ensure that your clients go to a reliable source for their financing: With lender guidelines changing by the day, mortgage professionals are faced with the challenge of hitting a moving target. Therefore, it is crucial that you have your clients contact my team for pre-qualifications that you know you can trust. We will complete the necessary upfront research to ensure that our mutual clients will close without a hitch. If you’re concerned about pre-qualifications you’ve received from other banks or brokers, I recommend that you call us to verify the authenticity of the pre-qualification based on the new guidelines.
Plan for additional time to market and close your listings: Transactions will begin to take longer to close than they have in the past. If you prepare your buyers for this eventual reality, it will save you the frustration of explaining it to them during the loan process.

Contact us today to discuss how to help you and your clients prepare for these changes

Back to Basics

2006-10-20T14:30:00.000-04:00

50 Year Mortgages

2006-08-04T14:12:00.000-04:00

We are always searching for newest loan programs and the very best loan programs for all of our borrowers. With nearly 100 different loan types available, borrowers oftentimes find it difficult to determine for themselves which program best suite their interests and budget.

Of course, one of the most important, if not the most important goals of all our customers is to get the lowest possible monthly payment on their mortgages. Throughout my 20+ years in the mortgage industry, I’ve witnessed all sorts of unique loan programs designed by lenders to give borrowers low payment options.

The most popular programs have been interest only loans and “option” arms. Each of these program types are generic, meaning that there are at least a dozen different types of interest only arms and almost the same number of "option” arms. While both of these program types are still considered excellent low-payment alternatives to the standard 30 year fixed loan, they do have their drawbacks as well. Interest only loans, for example, are excellent in that they typically have rates that are only fixed for a short period of time, usually 3, 5 or 7 years. The payments on these loans are MUCH lower than standard loans because only interest is due (NOT principal) and on a $400,000 loan, for example, the payment on the interest only loan ($2,041) is about $487/month lower than the generic fixed rate that requires principal and interest ($2,528). The drawback, however is that after the fixed period ends, the rate can fluctuate by up to 6% above what the initial fixed rate was. Furthermore, by paying the “minimum payment due” each month, you’re only paying for the interest portion of the loan and the balance of the loan will not decrease at all unless you pay more than the minimum payment.

“Option” arms, while very flexible when it comes to payment choices, also have their drawbacks. An Option arm has a start rate as low as 1.0%, which in turn calculates into a low, low monthly payment. For example, the same $400,000 loan mentioned earlier would only cost $1,287 per month on the option arm. But in order to cover the interest due on the loan, a borrower would have to pay a higher rate each month (usually the start rate + a margin). If the borrower chooses to just pay the 1.0% payment each month, his loan balance will actually INCREASE each month, which is known as “negative amortization”. Depending on the scenario and type of borrower, this can become a very dangerous program.

Recently, several lenders that we have relationships with have released a new program that may prove to be the best alternative for a low-payment mortgage: the 50 year fixed loan. This program works just like the standard 30 year fixed mortgage that we’re all familiar with, but the payoff of the loan is spread out over 50 years instead of 30. The monthly payments are therefore much lower —similar to what an interest only payment might be, but the 50 year mortgage pays both principal AND interest. The interest rate is fixed for the full 50 year term of the loan as well, so there is no risk of the rate and payment ever changing. Please note, though, that with the 50 year loan, the balance is due in full at the end of 30 years. We don't consider this risky, however, because virtually NO ONE keeps their original loan for this time period.

With the new 50 year mortgage, more buyers can afford the higher-priced homes of their dreams. With up to 100% financing and No-Doc options available as well, there is almost no reason why a prospective buyer would not be able to get approved for financing on a high purchase price.

Don’t Gamble on Interest Rates

2006-07-07T16:01:00.001-04:00

I always advise my clients to lock in their interest rate at the earliest opportunity. Gambling with a their interest rate is never advisable. In my business, I have a standardized system in place that we adhere to for all of our clientele.A mortgage loan cannot be closed without locking in a rate, and there are three main elements to take into consideration:

· Interest Rate
· Points
· Length of the lock

Locking in on a rate does not obligate the client to commit to the loan until the loan is actually closed. The lock simply eliminates any risk of the borrower being exposed to market volatility. It provides the security of having time to complete the mortgage and real estate transactions with some sense of order. The lender must disburse funds to complete the transaction within the rate-lock period, or else the original commitment to provide a loan at a certain interest rate will “expire”.

When a lender permits an extended lock-in period, the borrower will usually see either a higher interest rate or more points associated with the loan. The lender does this to minimize their own exposure to market volatility; hence the borrower pays for the lender to take on this risk.For example, a 30-day rate lock commitment may cost the consumer one-half point, while a 60-day rate lock commitment could cost 1 full point. If the borrower did not want to pay points, the lender could make up the difference in the interest rate. In this case, typically, a 60-day lock would have a higher interest rate than a 30-day lock.In my business, our standard procedure is to lock in a rate as quickly as possible once we have received the loan application. My team and I let our clients know that while interest rates fluctuate daily, most lenders do not want to lose any business. We know that in many cases, if there is a significant rally in the market that causes interest rates to drop .25% or more, we can ask the lender to renegotiate the rate, or understand that we will take the loan to another lender. Often the lender allows for a renegotiation of the rate to avoid losing the loan to another lender.If we allow our clients to sit on the fence and not lock in a rate quickly, we would leave them exposed to market volatility. Then, if rates do increase, the borrower may be unable to qualify for the loan they want, which is a situation we try to avoid at all costs. By knowing our clients' needs and working intimately with them to make the right decisions, my team and I are proud to say that we have many clients who simply refuse to work with anyone else but Universal Mortgage!

Long Term Lock-ins

2006-05-19T16:18:00.000-04:00

We are constantly bombarded these days by media reports of interest rate increases. It’s been nearly two years now since Greenspan started this incredible march upward in rates and Bernanke seems to be continuing in his footsteps. Sixteen times in a row, we have witnessed the same statements from the Feds about the necessity of higher rates and it appears, at least in the short run, that they will go even higher still.

In this environment, it is no wonder that many of our mutual customers lock in their rate immediately upon application. They do so, however, only if they know for sure that they will be able to close their loan within the standard lock period of 60 days.
But what about all of our customers who go into long term contracts to purchase either houses to be built or new high rise condominiums. True, there are “long term locks” available, in many cases for a year or more, BUT they are incredibly expensive. They cost, generally speaking, anywhere from 1 to 2 percent of the loan amount, UP-FRONT AND NON-REFUNDABLE and there are additional fees in an already high closing cost transaction. On a typical $900,000 purchase with 20% down ($720,000 loan), the borrower would pay anywhere from $7,200 to $14,400 to keep his rate locked in for the long term. This is in addition to the approximately $35,000 in other closing costs that he would have to pay.

It’s no wonder why virtually NO ONE pays for these long term locks. The reason is simple: they are way too expensive and generally speaking, benefit only the lender. Statistically speaking, less than 2% of borrowers in long term transaction even bother with this because of the following factors:

1) High cost.
2) Non-refundable, up-front fee.
3) They prevent shopping around for the best rate, bank, and loan program later on.
4) What happens if the locked-in rate is higher than the market rate at closing? “Float down” premiums generally only benefit the bank.

I have, however, found an excellent long term lock (for adjustable rates only) that is probably the best option in the marketplace. Here are the parameters and how it works:

1) It is available for the 5 or 7 year ARM (either interest only or fully amortizing).
2) This is a one year lock with a 6 month extension provision.
3) 1% of the loan amount is paid up-front, BUT it is credited to the closing costs and NOT an additional fee.
4) If for whatever reason, the borrower needs an additional 6 months beyond the initial one year, then the 1% that he had previously paid is no longer credited to closing costs (it becomes merely an up-front fee).

This one or 1.5 year long term lock is unquestionably the best, cheapest, and most borrower “beneficial” option out there in today’s marketplace. It is especially attractive for borrowers who are new construction condo buyers, who, statistically speaking, will only be keeping their apartments anywhere from 5 to 7 years.

Please don’t hesitate to call me with any questions that you or your customers may have about this excellent program.

Commerical Loans & HELOCs

2006-03-31T15:22:00.000-05:00

Get Pre-Qualified Online!

2005-10-28T16:08:00.000-04:00

Almost all of you are familiar with our pre-qualification services. Normally, you tell your customers to call us so that we can review their credit rating, employment history, and net worth and savings.

Sometimes, though, despite your strong encouragement, they just don’t always get around to doing what you recommend. It might be that they’re just too busy at work, or that they can’t talk because of lack of privacy, or something as simple as the fact that they’re not working anywhere near a phone. Others simply either don’t want to be bothered with “mortgage homework” and wait until the weekend to do this mortgage homework, only to find that getting in touch with someone over the weekend is oftentimes impossible.

We now have a second option for all of our customers. Take a look at the screenshot of our pre-qualification page from our web site (www.universalmortgageinc.com). It asks all of the standard fact gathering questions we need to make a valid judgment on mortgage eligibility. The requested information is so basic that anyone can fill it out easily and quickly.

Some of your customers only want to speak directly to one of us on the phone and “talk” their way through the pre-qualification. Others want to do it electronically - fast, easy, simple, and most importantly for them, doing it over the internet gives them complete flexibility to do it whenever they want.

Either way, of course, is perfect for us. The most important thing is to make sure that all of your customers take that very crucial first step of getting pre-qualified.

Please feel free to direct your customers to our web site. It takes less than a minute to fill out the form. Once they hit the submit button, we will review the information immediately and contact both you and the customer with the pre-qualification results.

The City That Never Sleeps

2005-10-07T15:17:00.000-04:00

Over the past year or so, my newsletters have constantly advocated that the New York real estate market is the greatest in the country, despite literally hundreds of articles to the contrary. I predicted that we will not experience a “bubble” here, and in fact, I gave reasons why values will continue to go up. Many, if not most, of my peers in real estate circles doubted me, not because any of us has any definitive proof of our opinions, but simply because literally everywhere you looked, the media was predicting a crash.

Then, just this last Sunday, almost out of nowhere, the New York Times (see the article “Reading the Signposts”, October 2, 2005) seems to be changing its tune. Finally, after nearly two years of predicting a bubble or a “correction”, the newspaper finally seems to be getting it right. Those of us who actually work in the real estate industry in New York know very clearly what the New York Times is finally admitting - namely that New York is completely and totally unique in the country. It can’t be compared to and analyzed along with other national statistics simply because the market here truly has nothing in common with the rest of the country.

Here are some of the most important highlights of the article:

· Flipping apartments for quick re-sale is only a very small part of the market (1.3 to 4.9% since the mid 1980’s). Compare this to over 40% for Miami or Las Vegas where much of the “doom & gloom” comes from. Hence, there is no “speculation” bubble occurring here in New York.
· Real estate in Manhattan (although Brooklyn is not mentioned in the article, we can extrapolate the data to include much of the Brooklyn Heights to Park Slope areas) is actually more affordable than ever before. Statistics can be misleading - when you analyze all wage earners, your numbers are skewed by the lower end of the spectrum. If, however, you take just the top 20% of wage earners (ie. those most likely to purchase in our marketplace) you can clearly see that their income has increased by 87% in real terms since 1981, whereas average prices are up 50% or so in real terms over the same time.
· There’s no glut of apartments for sale, nor will the new condo construction cause excess supply to dampen price. On the contrary, census information shows that currently the city has a shortage of at least 135,000 homes. Adding this to the fact that New York City officials are predicting another 200,000 new residents by the end of the decade, it is likely that despite the over 25,000 new units being built, we will still have a housing shortage (and hence, upward pressure on prices).

Hopefully, this article is the beginning of a new wave of understanding by the media. I am sure that other publications such as Business Week, Fortune, Money Magazine, etc. will pick up at least the “mood” of this article and start reflecting in their two year tirade against real estate. Maybe they will at least understand that New York City is clearly unique and that the best that we can hope for is further articles extolling the greatness of this grand city and grand real estate market.

Have a great weekend!

The Housing Market is Booming, Not Busting!

2005-09-16T14:57:00.000-04:00

Quite a number of Wall Street analysts and experts always maintain that one should be a contrarian when it comes to choosing investments. They say that a truly great investor should do exactly the opposite of what the media is currently churning and spewing day by day in radio, newspapers and magazines. When Money Magazine, Fortune, Business Week etc. all tout specific stock picks, for example, you can be sure that those stocks are the ones to avoid purchasing. Likewise, if the media is telling everyone (as they did in the late 1990’s) to buy as many tech stocks as possible, you know for sure that the party is almost over.

The very same holds for a “don’t buy” pessimistic attitude. With all of the incredible negativity regarding housing prices about to tank and about the imminent bubble, one wonders whether all of this sentiment is merely journalism at its worst - a mere attempt to “sell” newspapers and magazines, rather than present true information. Just yesterday, for example, the Office of Federal Housing Enterprise Oversight reported that “house prices registered the biggest price leap in 26 years” throughout the second quarter of 2005 (MSN money, 9/15/05). Furthermore, David Lereah, chief economist for the National Association of Realtors, predicts that due to the overall inventory of homes, and due to the dramatic increase in demand for new construction materials caused by Hurricane Katrina, housing prices nationally are bound to keep rising even further. This fact, in combination with the strong probability that interest rates will remain at current levels, will surely keep the market going for quite a while to come. Unfortunately, I have yet to see the mass media report on these facts and upcoming trends.

There’s plenty of anecdotal evidence of a great number of New Yorkers who naively assumed the media was right about the “housing bust” and sold their homes or apartments 2 years ago, last year or even last month. They mistakenly believed in the idea that the should sell their home before the bubble bursts. Truth be told, some of them had to sell for many other reasons, but the ones who sold because of the above premise are sorry indeed! They couldn’t possibly re-purchase their own home that they sold a mere 12 months ago unless they are willing to pay 25% more than what they sold it for. This indeed is a crying shame.

I am clearly one of those contrarians. Having just closed on a 2 family home in Brooklyn myself, I for one am putting my money where my mouth is. New York real estate is going to continue to go up!! Please make sure to repeat this (and you can quote me as well) to your prospective buyers. There’s nowhere but UP, UP, UP for prices to go. As far back as my earliest newsletter this year (see the one I sent out on January 21, 2005) I predicted that the 2005 industry outlook was for sales this year to be incredibly brisk and for prices to go further up. I listed there over 10 incredible factors that will propel prices higher. They were accurate then and they remain accurate now.

For those of you who may not be able to reprint the newsletter from January, call or email me and I will gladly send it out once again. The bottom line is that housing is NOT overpriced now and it will continue to go up in the foreseeable future,

Have a great weekend!

Getting a Co-Signer Can Save a Deal

2005-04-01T16:09:00.000-05:00

With the ever increasing cost of homes these days, it is no surprise that many of our mutual customers feel that they can’t qualify a mortgage. Then, if we factor in slightly higher interest rates as well, quite a number of possible buyers get dismayed that ownership of even a small apartment is beyond their reach.

In reality, things couldn’t be further from the truth. For nearly everyone with a decent credit rating, qualifying for a mortgage and purchasing the home or apartment is not daunting at all. As a matter of fact, approvals are extremely easy to come by; especially with under the guidance of a good mortgage broker. Virtually every bank has special niche mortgage products designed to meet even the most challenging of deals. With all sorts of no income check loans, “no doc loans”, first time homeowners programs, 100% financing, etc. etc. it is extremely rare to find a deal that cant be done.

Most of the time, the easiest solution to a seemingly impossible deal is merely to recommend that the buyers get a co-signor for their loan. Here is a prime example of when it is a great idea to suggest a co-signor. Let’s say you are showing a young couple a one bedroom apartment for $400,000. They tell you that they haven’t saved much, but they can get a gift from their parents. They also tell you that their incomes are great and that combined they make over $150,000 per year. You have a great deal on your plate and then, all of a sudden the bombshell hits: the husband missed two car payments in a row last year and he is currently late with Macy’s. His wife’s credit is excellent, so you try to explain this to the bank that she will “correct” his ways, but this, of course, simply doesn’t work. The wife, however, only makes about $15,000 per year, and it is part time as well.

Dead deal? Absolutely not!!! Guidelines at a number of our banks allow the occupying borrower to make just $1.00 (that’s right just one dollar) per year and parents or siblings to guarantee the loan. This is called co-borrowing where they actually take title to the property and co-sign on the loan as well. The parents are called non-occupying co-borrowers and as long as they can carry the loan (and have a good credit rating) the loan is approved, the deal closes and your on to your next commission. It’s as simple as that!

Here are other examples of where a co-borrower works perfectly to save a deal:

· A recent college grad making a very low starting salary
· A college student who, instead of dorming, wants to buy
· Newly commissioned or self employed borrowers
· Professionals with extremely high student loan payments
· Borrowers with minimal or no credit history

The list goes on and on. The most important thing to remember is that there is a loan out there for virtually EVERYONE. Give us a call and we will make it happen.

2005: Industry Outlook

2005-01-21T14:16:00.000-05:00

Despite so many dire predictions of housing bubbles, higher interest rates, falling stock prices and a sluggish economy, the real estate market is still sizzling. No matter where you look in the metropolitan area, prices keep on going up, bidding wars are still rampant, and the inventory remains at very low levels. Given these facts, anyone in real estate, even for a very short period of time, can easily predict where the market is heading - only up!

Headlines in all of the major national newspapers state, what to us in the real estate trenches, seems obvious. An article from the New York Times (January 15, 2005) entitled, “What Goes Up Keeps Rising” reported that real estate in New York City appreciated about 14% on average. It further stated that “These increases, even in the face of sluggish job growth on Wall Street and an overall economy that lags the nation's, indicate that "the rules of real estate have changed" as several factors have combined to keep pushing prices upward. Several years of historically low mortgage rates, coupled with the continued migration of new residents to the city, have kept demand high, and the market hot. “Other articles such as, “House Construction Reaches Highest Level since 1978 (The Washington Times, 1/20/05) report that 2004 was the “fourth year of an unprecedented housing boom that shows little sign of letting up” and that “the market should get a boost again this year from rising employment levels and incomes”.

We are witnessing a phenomenon that has never been seen in our lifetime - a housing market that just keeps on setting records year after year. Of course, low interest rates have been a catalyst for much of the record breaking sales. But interest rates are only the beginning of the story. Other equally important factors have contributed to the housing boom, and many of them have been predicted by demographers and sociologists in the recent past. Trends such as:

· “First generation children of immigrants now buying homes like never before
· Baby boomers buying not only second homes in New York City, but also in resort areas
· Retirees trading up and buying luxurious new homes in urban areas
· First time homebuyers are now starting to buy at ages 21 -25 instead of over 25.
· Middle age parents seeing that it is MUCH cheaper to buy an apartment for their college age
children (“kiddie-co-ops”) than to pay for university dorms
· Individuals, flush with cash, sensing that the only safe investment is real estate
· People of all ages, sensing that yields and returns from Wall Street stocks and investments,
are flocking like never before to buy homes to rent out.
· The pairing up of non-married individuals has created a buying boom that is completely un-
precedented in our country’s history.
· Foreigners, with the incredibly cheap dollar, are buying homes in this country in massive num-
bers, especially in New York, Florida, and California.

The list goes on and on. A minor rise in interest rates (as everyone is predicting) simply cannot and will not change these incredible social, demographic, and international trends.

Let’s all get ready for another incredible year in 2005!!!!!!

Credit Repair Tactics

2004-11-11T15:49:00.000-05:00

Over the years, I received a number of calls from customers and from my Realtor associates on all sorts of issues about credit
repair. Questions such as the following constantly come up:

· What makes a credit score rise or decline and what can I do about it?

· What can I advise customers to do to help get their credit score to a level
that is acceptable to lenders?

· What is the best way to remove late payments, collections and charge-offs?

· How long does it take for the credit score to go up?

To answer some of these questions, take a look at the chart below. Most credit agencies “score” and rate consumers based on the categories listed, and weigh the scores according to the percentages listed. I will go through these categories and highlight just a few of the most important variables in the scoring process.

Payment History — 35%
Probably the most important thing to realize about credit scores is that delinquencies that occurred within the past 2 years have a far greater negative impact than much older delinquencies. This means that late student loan payments from 1999 will have very little effect on your rating, whereas a 30 or 60 day lateness to Macy’s a few months ago (even if it was for only $50!) will surely lower one’s rating. Similarly, if one has a collection account from 2001, it is generally not wise to pay it off prior to or during the mortgage application process. The reason for this is that if you do, then the “delinquency” gets “updated” and considered delinquent during the current 2 year window that is most crucial. Just leave it as is! After loan approval, the lender may ask you to pay it off.

Amounts Owed — 30%
This category is the second most heavily weighted part of the scoring process. The ideal amount to owe in credit cards is ZERO. That’s most often than not, impossible, of course. If one does carry balances, then share balances across multiple credit cards and try not to have your credit cards or credit lines maxed out to the “limit”. Let’s say, for example, you have two separate credit cards each with a $30,000 credit limit. All else being the same, Customer A with a $29,900 balance on one card and zero balance on the second card would have a lower score than customer B with a $15,000 balance on each card. The trick is to lower the proportion of amount owed to the credit card limit as low as possible, because it shows that you are capable of managing your debt.

Length of Credit History — 15%
The longer your credit history, the better. This includes activity on your accounts, to make sure to use the credit card you have, even if you pay in full every month. If you go too long without using credit, the account may show up “unrated” because the creditor really doesn’t have any basis to judge whether you actively pay on time or not.

Types of Credit — 10%
Many of our customers see a major improvement in their scores within the first 6 months of paying their mortgage on time. This is because a mortgage payment or a car payment carries a greater weight than a credit card (which is even better than a store card). For recent college grads, their score may be quite low simply because they have only one of two credit cards and nothing else; for those with a perfect student loan repayment history, the score would be much higher.

New Credit — 10%
This category, despite only representing 10% of one’s credit score, has a surprisingly large impact on one’s rating. The reason for this is because it includes inquiries to one’s credit rating and also “new credit”, which encompasses the following:

· Number of recently opened accounts
· Number of recent credit inquiries
· Time since recent account openings and type (ie. car, mortgage, credit cards, etc.)
· Re-establishment of purchase credit history following past payment problems

What people don’t realize is that someone with derogatory or mediocre credit (or very little credit) will be penalized much more (ie. their score will go down) than someone who has great credit. Day after day, we are questioned by our borrowers on this issue and I generally tell them that if their score is 680 or higher, they have really nothing to worry about with multiple inquiries. As a matter of fact, multiple auto or mortgage inquiries in any 12 day period counts just as just one inquiry.

For any of you who are curious about your own credit scores, visit www.myfico.com. You can get greater details and analysis of your credit scores and parameters. Although the site really tempts you to buy certain products, it also contains a great deal of free information. Always feel free to give me a call anytime with any credit-related questions.