Archive for the ‘Uncategorized’ Category

Pre-qualification vs Pre-approval

Many of you have probably heard the terms pre-qualification and pre-approval.  You may have wondered what these terms mean and how do they differ?


Mortgages: A Real Estate Agent’s Insight into Residential Lending Today – a 6 Credit Course Study in Real Estate Financing

This course will provide the real estate agent with the information they need to make sure that their purchasers are in the best position possible to obtain a mortgage loan.  It will update the agents as to recent programs and requirements in the mortgage industry that will allow more potential homebuyers to purchase a home. It will also equip them with the “inside scoop” as to what lenders are looking for with respect to income, assets, credit and appraisals.

Dates: March 3rd and March 10th
Time: 9:30 AM to 1:00 PM
Location: Conference Room, 120 Bloomingdale Road, White Plains, NY
Continuing Education Credits: 6

The course will cover all aspects of mortgage financing from pre-approvals to closing which will enable the agents to close deals quicker and more efficiently. We will uncover some of the “dirty little secrets” of mortgage lending that will help you help your clients. There will also be guest speakers who will discuss networking, sales techniques and specialized mortgage products. This is a must attend seminar for anyone who is serious about increasing their business this purchase season.

Keller Williams Seminar Invitation March 2015

“Don’t Buy a Home As an Investment” A Faulty Logic and Fuzzy Math

While I was reading the Sunday paper I came across this article from The Wall Street Journal and got intrigued by the title. Don’t Buy a Home as an Investment: After Costs, It Typically Doesn’t Yield Much. Think of It as a Place to Live.

I always enjoy the Wall Street Journal’s columns and generally agree with them. However, in this column listed above, the author came to his conclusion first and then tried to justify it. He neglected to include several important factors and then he discounted his extraordinary return on his Manhattan apartment for no apparent reason. Read more here: Don’t Buy a Home as an Investment


The investment return for real estate is not always as high as it looks. But, the beauty of this investment is the leverage that you get from mortgage financing. Photo courtesy of

Dear Mr. Clements:

As for your NJ house, while including some operating expenses, you failed to properly account for the cost of renting a similarly situated home for your 12 years of home ownership. You indicated that you were not counting the $106k in interest for this purpose. But, $106k/144 mos. would only give you a house rental of $736 per month (which is not even remotely possible).  In addition, you did not apply the same 25% “tax  benefit” to this that you did to the real estate taxes, which would lower it further. The adjusted real estate tax of $90k/144 or $625 per month should have been ADDED to the cost of housing as opposed to the cost of ownership and not been taking into account as to your investment return. Even adding $736 for interest and $625 for taxes would only give you $1,361 per month for rent which would not have covered a house rental in NJ which would have been $2,000-$3,000 per month.  If not left out of the analysis as it should have been, then $1,000 or so should have been added when looking at the value of living in a house, not subtracted.As for the actual investment in your house, it was NOT $165k unless you bought it for all cash, which I doubt.  You should only be including the original down payment you made (plus closing costs) and any principal payback that were paid in your 12 years of ownership.  So your investment would be reduced by the existing principal amount of your mortgage debt at closing (because this was not your money used for the investment, it was the bank’s).  So, though the payoff amount on your mortgage was not included (i.e. deducted from your investment) in your analysis, it should have been.  Only when taking these other factors into account can you determine your actual investment return.

As for your Manhattan apartment, it was a “home run” in any way you look at it. We can disagree as to the amount of the investment return, but not as to the overall picture of a huge gain in two years.  Again, was this apartment purchased for 100% cash?  You neglect to include this very important fact which affects your investment return (I.e. you did not invest the full purchase price of $570k plus $7k of closing costs, only a certain percent of this).  Therefore, your net sales price of $750k (i.e. $800k minus $50k in closing costs) gets compared to your investment (whatever amount that might have been). Once we know that number, we can determine the investment return.

All that said, I will agree that the investment return for real estate is not always as high as it looks. But, the beauty of this investment is the leverage that you get from mortgage financing (which is my business).  To fail to properly include this information on your analysis of your two home purchases is, if inadvertently omitted, at a minimum, a disservice to your readers. If it was done intentionally, then it is just another example of improper journalism where the facts were manipulated to support the conclusion.  I am hoping that it was the former. If so, please provide a follow up so that your readers can get a more complete picture of the situation.


Networking Do’s and Don’ts for the New Year

As 2014 comes to a close, I wanted to provide some networking tips that will hopefully help make 2015 a more profitable year. Note that this list is not designed to be exhaustive or objective (i.e. these are my own tips) so feel free to disagree.

Networking Do's and Don'ts for the New Year

At a network event, be open to meeting everybody and anybody who is either introduced to you or who comes up to speak with you. You never know whom somebody knows or where the conversation will go.

I originally intended to write 4 do’s and 4 don’ts for the 8 days of Hanukkah. But, because I had more to say, I am now going to write 6 do’s and 6 don’t for the 12 days of Christmas.  But, whichever you celebrate (or if you celebrate both, neither or something else), these tips are designed for you!

The 6 Don’t (i.e. “Don’t be naughty”)

1. At a networking event, don’t hand out your card unless somebody requests it. If they want your card, they will ask for it. If not, it comes off pushy and desperate. Even better, create a v-card on your smart phone and offer to email or text it. Most people will say yes to that and appreciate that your information can be easily added to their Contacts.

2. If you meet somebody for the first time and get their card, contact them first and ask their permission before adding them to your mailing list. Don’t just collect cards and add people to your mailing list. At best, they will likely unsubscribe and think of you as a pushy salesperson.  At worst, they will note this as Spam which hurts your relationship with your email marketer and may be against the law unless you offer an Opt Out option.

3. (Note. This one, though timely, is going to be controversial.) Don’t send out the identical “canned” Holiday e-card to your entire mailing list.  These e-cards usually get deleted since they show almost no thought; are clearly a “lazy attempt” at getting your name in front of people and everybody knows they involve no effort when they are mass emailed. It is more effective to skip this entirely or send out a separate email or text message (even if you “cut and paste” the wording) to 25-100 people. Of course one or two personal lines is always the best.

4. When you meet someone at a networking event, try to find out about them and see how you can help them.  Don’t look at them as a sales opportunity and try to sell them your product or service at the event.  It is a bad form and doesn’t generally work. Find out what their “pain is” (i.e. what they need) and see how you can ease that pain through your contacts, advice or, sometimes, through your product or service if appropriate (e.g. they need help with social media and you are a LinkedIn expert).

5. Remember that the second part of Network is “work.” Have fun socializing with people at a networking event or holiday party and eating and drinking.  But, do not do too much of the latter.   The reason for attending the event is to try to grow your business in one way or another, not to load up on the food or booze.

6. Make introductions (even email introductions) that are valuable to both people not just the person being introduced. That way, people will see you as a good networking resource as opposed to just a “lead generator.”

The 6 Do’s (i.e. “Do be nice”)

  1. In your “elevator speech” at a networking meeting focus on what you are best at and what distinguishes your product or service. Try to convey why you are different and which area in your business is your sweet spot rather than trying to be all things to everyone (i.e. avoid the meaningless term “full service”).
  1. Send an email or make a phone call to thank everybody who you met in person or who sends you an article or invitation (See 5 below). First, it shows that you value their time and company.  Second, it gives you another opportunity to further the relationship.
  1. Ask people you meet and who you see at a networking event who they would like to meet. It demonstrates your willingness to help the person build his or her business and it also gives you the potential opportunity to make a referral. It is even better if you actually come up with a suggestion for a referral first based upon what the person told you since it reinforces that you were listening.
  1. At a network event, be open to meeting everybody and anybody who is either introduced to you or who comes up to speak with you. You never know whom somebody knows or where the conversation will go.  It is great to meet your natural referral sources. But focusing on them to the exclusion of somebody else can be shortsighted and often detrimental. (A shout out to the great networker Tony Celano for this one).
  1. If you see an interesting article or event that you think would be useful for one of your contacts, email a copy of it or an invitation to the event (as the case may be) with a short, personal note. They may not read it or attend, but they will appreciate you thinking of them.
  1. Try to be a valuable resource to your contact list, as well as their friends, relatives, etc. by trying to assist in any way possible even when there is no money to be made by assisting. Answer every question and respond to every inquiry. If one of your contacts sends you an email introduction, even if it is not somebody you are interested in meeting, respond to it anyway. There is no need to set up a meeting or a phone call but an email acknowledgment is required.

Have a great holiday season and a very Happy New Year. Feel free to follow me on Twitter for my frequent mortgage updates and news @mortgage_dan.


New Regulations Make Life More Difficult and Expensive But Mortgage Lending Goes On

The Consumer Financial Protection Bureau “(CFPB”) is a new federal agency which is in charge of protecting consumers in financial transaction. Since it was formed in 2011, they have spent a great deal of time investigating and then fining mortgage banks for violations of various lending laws. Unfortunately, the CFPB has spent a lot of time fining banks and mortgage loan originators; this has not really ended up helping consumers.  It also has not hurt the lending business as much as people thought it would. Though, it did result in driving many small mortgage companies out of business which left us only with the larger companies in a Darwinistic “survival of the fittest” (in this case, financial) way.

Though these CFPB regulations make it more expensive for lenders to do business by necessitating additional staff to comply with these regulations much more paperwork to document this they have not really resulted in less access to credit. What these regulations have done, however, is increase the costs tremendously to originate each loan. As a consequence, it has raised the cost of borrowing to individuals who want to purchase a home or who want to refinance their home. Closing costs are higher now than they have ever been as all providers from credit companies to title companies to settlement services charge more their services due to the increased work to comply and risk for non-compliance.  Similarly, even though the interest rates right now are very low, they would probably be significantly lower if all of these extra compliance costs did not need to get built into the profitability of each loan.

Presently, interest rates are about 4% on a 30 year fixed and about 3.25% on 15 year fixed. But based on the state of the economy and the mortgage markets they should probably be lower. Hopefully at some point, the government will ease off some of the restrictions that they placed on the lenders and allow the market to correct itself, which it has already done. A lot of the regulations were implemented to consumers protect against some risky loan products such as sub-prime loans, negative amortization loans and stated income loans. This was a very worthy goal.  However, once these loans began to unravel with lenders facing huge losses for making them, the lenders themselves stopped offering these products.  In fact, none of these loan types have been made for the last several years because the banks realized that these loans are too risky to make.  Moreover, by making them it cost the lenders hundreds of millions of dollars to settle lawsuits resulting from these loans.

Right now lenders are a little fearful of lending to people who are not quite as credit worthy as they could be but who might otherwise be able to buy homes.  These people may have enough money for a small down payment and good jobs that will allow them to pay back the loan. But, lenders are concerned that if the borrowers do not satisfy all of the lending requirements or if discretion is used in approving a loan that later goes bad, the CFPB or the consumer may bring a claim for a failure to comply with the Ability to Repay rule. Under the Ability to Repay Rule, lenders have to make sure that the borrowers have sufficient income and have sufficient assets to pay their loans back. Even though there are “Safe Harbors” if loans are made in compliance with Fannie Mae. Freddie Mac or FHA guidelines, there could still be some risk in making these loans.

The good news though is that, the banks are trying to create additional revenue and they are now starting to loosen up their guidelines. As the bank’s balance sheets have improved, they are starting to ease up a bit on their credit requirement. Lenders also realized that in order to continue to make profit in the mortgage business, they going to have to find additional borrowers to lend to. There are just not enough borrowers with perfect credit, perfect income and perfect asset. So lenders are easing up just a bit on the guidelines though not yet on the amount of the paperwork. There’s still a tremendous amount of paperwork required to get a loan approved.  But, if a borrower can provide it, there is definitely mortgage money available.

In conclusion, I think that the lending market has gotten better for people who are looking to buy a house and for people who are looking to refinance. Even though it is a tough environment because of all the new government regulations, the lenders are finding a way to work with it and to bring our market back towards a normal functioning one.

Giving Thanks for 7 Things that Surprised Me in Housing and Mortgages in 2014

Has it really been nearly a month since Halloween?  Apparently so since traffic on the highways, near the mall mecca of Paramus, is reminding me that holiday shopping mode is in full swing!  However, before we get there, we need to fulfill the American rite of giving “Thanks” for the overabundance of food in our country by gorging ourselves on turkey, stuffing and sides. We then leave room for dessert pies, including the season bellwether, pumpkin pie on which with we will “gourd” ourselves!

Like the variety of side dishes on Thanksgiving, some of which are tasty and satisfying such as stuffing and others which are sour and kind of mushy like cranberry sauce, there are many choices today in finding a mortgage lender.  We try to be a popular choice like the stuffing by providing consistent, quality products at a reasonable cost. Though for some reason, many consumers who always enjoy the smaller, side dishes better when choosing a lender tend to go for the bloated, overstuffed Big Banks! It is ironic since the result will make you sleepy with their slow processes and poor service (as per reviews on But, I would urge you to avoid these “Turkeys” when shopping for a mortgage and find a mortgage banker who works for you and has great interest rates and excellent service.  And, now on to our list…

As 2014 comes to a close, I am amazed about so many things in the housing market in general and the mortgage industry specifically.  A few of the things that I want to give “Thanks” for are as follows:

  1. That despite predictions for higher interest rates by year-end, interest rates are actually the lowest they have been this year.  The 30 year fixed rate loan is hovering now right around the 4% mark while ARMs are in the upper 2s and low 3s.
  1. The never ending and overreaching federal government regulations have not prevented banks from lending to qualified borrowers. The mortgage lending environment now is as friendly as it has been at any time in the past 5 years (albeit, with a LOT more paperwork and scrutiny).
  1. Low and middle class families are able to buy a house with low downpayments (i.e. 3.5% on FHA loans) and with less than perfect credit. They can even buy if they had a short sales or foreclosure which occurred more than 2 years ago!
  1. The Manhattan and Brooklyn real estate markets continue to move higher than anybody thought possible.  It is still the engine for job growth and should, at some point, push housing prices higher in the nearby suburbs.  Because the reality for most of us is that there are a limit to the number of people who can spent $1M on an “average” apartment and many millions more on larger apartments!
  1. Despite their later entry into the housing market, and their desire to remain in and around cities, the Millenials are finally reaching the point in their lives where home ownership is both necessary and desirable. Over the next few years, this should help the housing market continue to rebound.
  1. The new immigration policies announced by the President should have a huge impact on housing once all the specifics are sorted out. With millions of people eligible to remain in this country, they will want to own a piece of the American Dream by buying a house.  And, you can bet, with a veritable “pot of gold” in front of them, lenders will find a way to make mortgage loans to these folks.
  1. Health and family.  If you have these, and a roof over your head, then it is time to give Thanks.  For without those, items 1-6 above are just a meaningless list!

I wish all of you a very Happy Thanksgiving holiday.  Also, I am now on Twitter and plan to tweet several times a week on mortgage trends.  If you are interested, please follow me for the latest news and updates.

Gobble, Gobble.

Halloween: What is Scaring Me?

It is that time of year when the leaves are falling; the weather is turning just cold enough for a jacket; and our children are getting ready to trust perfect strangers (who they are warned against speaking with the rest of the year) to give them free candy. That alone should spook us all!  But, that is not what is scaring me!

An entryway decorated for fall and Halloween.

This year, some of the most popular Halloween costumes are Elsa and Anna from Frozen and a Hazmat suit inspired by our current Ebola scare. The dichotomy of the innocence of Disney princesses with the macabre of a terrifying and, IMHO (ask your kids for translation) not very funny healthcare worker’s protection suit, can be an analogy for this holiday, this season and, as applicable to this email, the housing market.

In the housing arena, there are the Annas who see beyond the isolation that many have felt in losing their homes to foreclosure or seeing their equity stripped by the collapsing property values. Like Elsa in the ice castle, these people had been forced to relocate to a new home uprooting themselves from the former comforts they enjoyed. However, they persevere and begin a new life and see promise in the future. After several years on the sidelines either waiting for their credit to improve or the market to recover, they are ready to jump in again.

There are others, who are donning the Hazmat suit and think that this will protect them from the Ebola crisis (and analogously from further economic harm).  Though appearing optimistic about their prospects for survival, they are actually demonstrating a victimization and pessimistic view of the future.  They are giving into fear (perhaps by ironically pretending to poke fun at it), but not ultimately finding the way to thrive and move beyond their isolation.  So what is scaring me is that I would like to be like Anna and get joy out of just wanting to build a snowman. But, I find myself preferring to don the Hazmat suit and avoid the fall-out that I am afraid may be coming.

Many will argue that the housing market is doing well. They will note that the stock market has never been higher and that jobs are coming back.  They will also point out that interest rates are back at 4.0% now for a 30 year fixed and teasing us about going lower, which is true.  However, what I see other than at the very upper end of the housing market is an overall lack of either ability or inclination to purchase a house.

Many of those who are interested in purchasing a home are still suffering the effects of the past 6 years of the Great Recession.  This week alone, I spoke with half a dozen people whose credit scores were damaged by their inability to get a handle on their debt after job losses, foreclosures or a decrease in income.  For the past majority of people, they are doing better than they were 4 years ago (Ronald Reagan, where are you when we need you?), but a lot worse than they were 6-8 years ago. This is not a recipe for a strong housing recovery.

Recent statistics are showing that the average age of a homebuyer is now 31 years old This is several years older than it has traditionally been.  This is partially the result of choices being made by this younger generation after seeing what happened to their older co-workers, friends and parents. It also can be a lifestyle choice by those who prefer to stay flexible and unencumbered. But, it is also the result of the next generation not having the ability to save enough for a downpayment (even though we offer loans with only 3.5% down); the income necessary to support a home they would like to purchase; or a stable enough job to allow for a home purchase.

I believe that we are certainly in the upward swing in the housing market. But, the tepid recovery in most areas is not strong enough to bootstrap the rest of the economy and lead to the increased consumer confidence that we need.  I am afraid that if this does not change soon, the stock market gains will reverse themselves and we will be faced with a bit of a stagnant (though not necessarily declining) economy.  I am very concerned that the housing recovery is not nearly as deep nor as wide as it needs to be at this point.  But, to try to be positive, I will channel my best Elsa and hope that this will be the case as she sings in “Let It Go” :

                    And one thought crystallizes like an icy blast

                    I’m never going back, the past is in the past

                    Let it go, let it go

And Now for a Word from our Sponsor: At Classic Mortgage, a NY/NJ/CT mortgage banker, We have the same great loan products as the Big Banks with better interest rates and without the bad service and delays! Let me know how I can help you refinance to lower your current rate; consolidate your debt or finance the purchase of your dream house.