Wednesday, July 15, 2009
10,000 lenders set their own standards
Some loan advisors claimthat the big nationalmortgage companies,Fannie Mae and FreddieMac, set underwriting standards for nearly all mortgage loans. Fannie and Freddie actually account for less than 40 percent of the residential real estate financing issued throughout the United States. A big number, yes, but hardly all-powerful. Moreover, Fannie and Freddie do not perfectly mirror each other. Both Fannie and Freddie publish underwriting guidelines, not edicts. Lenders who sell loans to Fannie and Freddie remain free to apply a reasonable degree of flexibility.
Summing Up: You Control Your Buying/Investing Power—Not the Lender
The “tell you exactly howmuch you can afford” approach to “preapproval” gives a snapshot photo of your property buying power—but only with that lender’s camera. Instead, think of your life as a moving picture. You not only star in this movie, you write the script, direct, edit, and determine the
ending. Do you want to own your own home? Do you want to own investment properties? Do you want to structure the best way to finance your acquisitions? Would you like to seriously improve your net worth? Would you like to live free of destructive debt? Would you like to achieve financial
independence? Yes. Then start now. It’s your movie. It’s your move.
ending. Do you want to own your own home? Do you want to own investment properties? Do you want to structure the best way to finance your acquisitions? Would you like to seriously improve your net worth? Would you like to live free of destructive debt? Would you like to achieve financial
independence? Yes. Then start now. It’s your movie. It’s your move.
Envision the property(ies) you would like to own 5, 10, or 15 years from now
At age 21, I bought my first “home.” It was a large old house that had been converted into four apartment units and the garage converted into a fifth unit—which is where I lived. It was owner-financed with 10 percent down and a 5 percent interest rate land contract. At the time, my friends had fun kidding me about the “dump” and my “slumlording.” (Actually, the property wasn’t that bad.) However, six years later, while enrolled in my PhD program at the University of Illinois, I owned (among other properties) a four-bedroom, two-bath, brick house that had previously belonged to the professor who chaired my doctoral dissertation. (Incidentally, he even financed it for me at 7 percent interest and 10 percent down.)Where weremy friends living? Most lived in rental apartments. None lived in (much less owned) a home anywhere near as nice as mine. (I am not bragging—just trying to show the power of knowledge, goals, and action.)
What’s the Moral?
As real estate prices throughoutNorthAmerica (and throughout theworld) have skyrocketed during the past five years, many potential first-time buyers and investors feel frustrated. They hesitate to buy and invest. But if you hesitate, you will only lag further behind.
Renters: Make Ownership Your First Priority
Had I continued to rent when I was age 21, I would not have been able to own the upscale house I bought at age 27. Your best chance today to own the home you would like in, say, 5 or 10 years is to first become a property owner as quickly as possible. Weigh carefully the advantages of buying a property that makes you some quick cash (rental income, fixer-upper, bargain-priced foreclosure). Do not complain that prices have gone through the roof (remember, push aside the self-denying, goal-defeating self-talk). Instead, create a financial plan that places you on the fast track to the property(ies) you really want.
Gain a Great Tax Break
Since 1998, tax law has permitted homeowners to sell their homes every two years and pocket their profits tax free (up to $250,000 for singles and $500,000 for married couples). This tax break means that you can buy a bargain-priced fixer-upper, renovate as you live in it, and then sell for a profit (the economy willing) in two years; then repeat as necessary or desired. Want to earn an extra $100,000 to $250,000 (more or less) in tax-free gains during the next four to six years? Weigh buy, renovate, and resell fixer-upper properties.
What’s the Moral?
As real estate prices throughoutNorthAmerica (and throughout theworld) have skyrocketed during the past five years, many potential first-time buyers and investors feel frustrated. They hesitate to buy and invest. But if you hesitate, you will only lag further behind.
Renters: Make Ownership Your First Priority
Had I continued to rent when I was age 21, I would not have been able to own the upscale house I bought at age 27. Your best chance today to own the home you would like in, say, 5 or 10 years is to first become a property owner as quickly as possible. Weigh carefully the advantages of buying a property that makes you some quick cash (rental income, fixer-upper, bargain-priced foreclosure). Do not complain that prices have gone through the roof (remember, push aside the self-denying, goal-defeating self-talk). Instead, create a financial plan that places you on the fast track to the property(ies) you really want.
Gain a Great Tax Break
Since 1998, tax law has permitted homeowners to sell their homes every two years and pocket their profits tax free (up to $250,000 for singles and $500,000 for married couples). This tax break means that you can buy a bargain-priced fixer-upper, renovate as you live in it, and then sell for a profit (the economy willing) in two years; then repeat as necessary or desired. Want to earn an extra $100,000 to $250,000 (more or less) in tax-free gains during the next four to six years? Weigh buy, renovate, and resell fixer-upper properties.
Reprogram Your Thoughts to Deliver Self-Fulfilling Messages
Reprogram your self-talk. Erase your self-denying complaints. Never describe your behavior in self-demeaning ways. Give yourself a jolt each time you let self-denying assertions short-circuit your search to improve. As you eliminate self-defeating self-talk, replace it with goal-promoting
self-talk. Ask yourself questions. Brainstorm answers. Adopt attitudes and habits that advance you toward the life you would like to live. For example,
self-talk. Ask yourself questions. Brainstorm answers. Adopt attitudes and habits that advance you toward the life you would like to live. For example,
- What are six ways that I can save more?
- What are six ways I can cut spending?
- What are four ways I can stop running up credit card bills and start paying them down?
- What are four ways that I can work toward a $1 million net worth within 15 years?
- How can I use real estate to help build wealth?
Self-Defeating Self-Talk Destroys Wealth-Building
Dr. ShadHelmstetter explains that we create our own difficulties (financial and otherwise) through self-defeating self-talk (What to Say When You Talk to Yourself, Pocket Books, 1987). Do any of the following statements creep into your self-talk?
results you really want.
- I can’t remember names.
- I’m always running late.
- I can never get organized.
- I’m always short of money. I just don’t know where it goes.
- No way could we ever save enough for a 20 percent down payment.
- No way could we ever afford a property in that neighborhood.
- Get qualified for a mortgage? Not with my credit.
- At the rate we’re putting away money for retirement, I’ll probably be working until I’m 75.
- I don’t believe that infomercial hype. I know that I could never raise enough cash to invest in real estate.
- I just can’t seem to lose weight.
results you really want.
Align self-talk with your priorities
Are you reading Mortgage Secrets to learn how to deal with shaky credit, lowcash, affordability, and so on?Good! You’ll findmore creative financing ideas here than anywhere else. Yet to focus on creative financing begs the ultimate question: Why do you confront such financial issues? Are you managing your money as well as you could?
Tuesday, July 14, 2009
Personal versus Financial
Did you quickly dismiss the idea of buying a fourplex? Was it a gut emotional decision, such as “I don’t want to call an apartment building home-even if I amthe owner”?Or, did you look at themoney that you couldmake and decide that even with an extra profit of $100,000, it’s not worth it?
Subtle Distinction
Emotional decision makers quickly decide an issue according to their whims of superficial likes and dislikes. They pass by future fortunes for present comfort. For example, do you know people who drive new or nearly new cars with big loans but can’t afford to save or invest in property? How many people turn down bargain-priced fixers because they don’t want to make the repairs? How many renters remain long-term renters because buying would give them a longer commute or place them in a neighborhood that seems less desirable than where they currently live?
Just recently, I erred along these lines. (Yes, even pros can make mistakes—especially when they forget to follow their own buying rules.)
Emotional Delay (or Withdrawal)
In this case, the pro was me. I evaluated an investment property (a singlefamily house).The owner agreed to finance the propertywith just 5 percent down. The property was located in a neighborhood of professionals; it suffered no problems of disrepair or deferred maintenance. However, notwithstanding these advantages, a couple of features in the house turned me off. I hesitated to make an offer. Rather than quickly weighing all advantages and disadvantages, I focused only on what I didn’t like. That was a big mistake. The next investor who looked at the property bought it.My failure to quickly size up the opportunity costme an excellent property that was offered with terrific seller financing.
Avoid Mistakes Similar to Mine
Separate the financial from the emotional—only then will you judge fairly whether the decision exposes you tomore cost than benefit. As humans,we seemto be hardwired with emotional response. Yet, to build your financial future you can’t let emotions control. Persistently weigh and consider. Yes, identify what you like and don’t like, what you want and don’t want. Then attach a dollar price tag. Don’t think here and now. Think of your future returns. Throughout Mortgage Secrets you’ll discover dozens of property purchase and financing techniques. Each of these offers trade-offs. Some require effort, inconvenience, or discomfort that at first glance may seem unappealing. Please, though, leave that possibility in view until you’ve examined it closely. Do now what most people won’t do. In 10 years, you’ll do what most people never can.
Subtle Distinction
Emotional decision makers quickly decide an issue according to their whims of superficial likes and dislikes. They pass by future fortunes for present comfort. For example, do you know people who drive new or nearly new cars with big loans but can’t afford to save or invest in property? How many people turn down bargain-priced fixers because they don’t want to make the repairs? How many renters remain long-term renters because buying would give them a longer commute or place them in a neighborhood that seems less desirable than where they currently live?
Just recently, I erred along these lines. (Yes, even pros can make mistakes—especially when they forget to follow their own buying rules.)
Emotional Delay (or Withdrawal)
In this case, the pro was me. I evaluated an investment property (a singlefamily house).The owner agreed to finance the propertywith just 5 percent down. The property was located in a neighborhood of professionals; it suffered no problems of disrepair or deferred maintenance. However, notwithstanding these advantages, a couple of features in the house turned me off. I hesitated to make an offer. Rather than quickly weighing all advantages and disadvantages, I focused only on what I didn’t like. That was a big mistake. The next investor who looked at the property bought it.My failure to quickly size up the opportunity costme an excellent property that was offered with terrific seller financing.
Avoid Mistakes Similar to Mine
Separate the financial from the emotional—only then will you judge fairly whether the decision exposes you tomore cost than benefit. As humans,we seemto be hardwired with emotional response. Yet, to build your financial future you can’t let emotions control. Persistently weigh and consider. Yes, identify what you like and don’t like, what you want and don’t want. Then attach a dollar price tag. Don’t think here and now. Think of your future returns. Throughout Mortgage Secrets you’ll discover dozens of property purchase and financing techniques. Each of these offers trade-offs. Some require effort, inconvenience, or discomfort that at first glance may seem unappealing. Please, though, leave that possibility in view until you’ve examined it closely. Do now what most people won’t do. In 10 years, you’ll do what most people never can.
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