Category: General

Back
in 2000, a little-known Irish quartet had a sleeper hit on the airwaves here in
the United States called “Stuck In A Moment You Can’t Get Out Of.”  (Check it out on YouTube, if you’re
curious.)  It’s
a catchy tune about one friend trying to tell another that just dwelling on
something isn’t going to get him anywhere.
Near the beginning of the song, there are these lines:  “I never thought you were a fool, but,
darling, look at you.  You gotta
stand up straight, carry your own weight.
The tears are going nowhere.”
While this song is 17 years old, its message couldn’t be more applicable
to this very moment in time when we have very low inventory of homes and an
ever-increasing pool of potential buyers.

If
you or someone you know is currently “stuck in a moment” (i.e. renting) because
they’re just not SURE of what to do about buying a home, raise your hand.  Wow, that’s A LOT of hands!  If you or someone you know is waiting on a
visit from the Mortgage Fairy to sprinkle pixie dust and go *boop* with
her magic wand before making a decision, let’s just say she’s on vacation, and
she’s asked me to fill in for her –
and I’m all you need.

There
are as many reasons for inaction as there are people, but they ALL start with
“I don’t think I qualify because . . .”
Stop me when I get to yours: “I don’t think I qualify because . . . I
have bad credit . . . I’m self employed . . . I don’t have a normal W2 job . .
. I have student loan debt.”  These are
all viable reasons for being UNSURE about your ability to qualify, but they’re
NOT ABSOLUTE FACTS.  However, not being
sure causes so many just to stay stuck in a moment –
and it doesn’t help when you hear the news stories about how there are bidding
wars for homes because of this low inventory.
When that happens, you just sit there and say, “Well now there’s NO WAY
I can get into a house!”  Since I don’t
have a magic wand, I’ll take a more direct approach.

If
you feel stuck in a moment, I have one thing to say to you: DON’T go look at
another house either online or on a Sunday drive –
you’re only torturing yourself.  Instead
of looking at houses –
yes, that’s the fun part, we’ll grant you –
give us a call or come see us in person.
Every
Tom, Dick and Harry in the mortgage world will ask you six questions and tell
you you’re “prequalified” –
but it’s still a crap shoot, and they could be setting you up for failure
again.  A brief meeting or conversation
with us will help you avoid that failure.

We’ll
address, up front, whatever your reason may be that you think will disqualify
you for a loan –
and as we help you address that reason, we’ll be taking you through the entire
underwriting process to get you FULLY APPROVED up to a certain dollar
amount.  The entire process could take a
few weeks or a few months –
or longer –
but whatever the time period, when you’ve completed the process with us, you’ll
be able to stand toe to toe with fellow buyers and have a MUCH STRONGER
position of negotiation than 95% of them because your FULLY UNDERWRITTEN
APPROVAL will be like cold, hard cash to a seller –
all the others still have to make an offer, get it accepted, and THEN go
through the underwriting approval process.
This also means you can close sooner –
something else sellers LOVE!

Side
note to agents: I would STRONGLY encourage you to go through your database of
past clients who have previously been denied a loan for whatever reason and
reach out to them TODAY.  Depending on
the size of your database, you could have five, ten, fifteen (or more)
transactions just waiting to be developed by us FOR YOU –
you won’t know until you try.

Let
us give you the edge –
you, too, can be a homeowner.  It may not
feel like it’s possible, so let me close with the final lines from the one-hit
wonder I mentioned in the beginning: “It’s just a moment.  This time will pass.”

Context
and perspective!  Those are two concepts
that are more and more important by the day as we now live in a time when it’s
so incredibly easy to take things out of context and see them solely through
someone else’s perspective.  Don’t worry,
I’m not going to get all political on you –
I’ll leave that up to the unbiased press and media who don’t like
competition.

Recently,
I came across a photo on the internet that showed a gentleman sitting at a
table in what looked to be a quad or campus common for a high school or
college.  Because the photo is taken from
a distance, and the poster attached to the front of his table was designed in a
particularly confusing way, it looked like all the poster really said was “Free
HIV”.  My first thought was (and it’s
quite possible yours would be the same), “Are there hordes of people lining up
to PAY
for HIV?  I would think the ‘free’ part
was sort of implied.”  Then I thought,
“Free or not, that’s not really the best way to pick up on women.”  After thinking I was possibly the funniest
person on the planet, I looked more closely at the photo and was barely able to
make out that it was “Free HIV testing” being offered.  (Still not the best way to pick up on women,
but I’ll give the guy points for creativity.
Or, if they were trying to get the message out to get tested, they might
not be hitting ALL their demographic with the confusing presentation of their
message.)

A
few years back, on the BBC’s website, they had a headline that read: “Sewer was
blocked by large Pooh”.  (I’m not making
this up.  Type that into Google, and
you’ll see what I’m talking about.)
Beneath the headline, they placed a photo of some type of large outdoor
receptacle which contained a large stuffed animal of Winnie the Pooh, which one
can safely assume was the reason for the blockage –
or at least hope it was.  Obviously,
without that photo, one might think the editor didn’t catch the misspelling and
be intrigued to find out just how large it would have to be to cause a blockage
of a sewer.  Before this week’s
newsletter descends into murkier territory, I’ll move on.  You get my point, though, right?

Context
and perspective!  Quite often, in the
mortgage business, we hear A LOT of things taken out of context or told from
just one person’s perspective that are just plain wrong.  For example, one might hear a real estate
agent say, “Whatever you do, don’t go with a VA loan.  They’re a complete nightmare!”  To that agent, sure, she may have had a horrible
experience with ONE VA loan 17 years ago that has left her scarred –
bummer!  However, we absolutely LOVE to
do VA loans, and we’ve found them to be one of the easiest products to present
and process.  If someone who is eligible
for a VA loan, upon hearing that agent’s rant, dismisses the possibility of
going with a VA loan, they could be spending a lot more than they need to spend
to get into the home of their dreams.
Along those same lines, when someone says, “My parents bought their
first house with an FHA loan, so I’m going to buy my first house with an FHA
loan,” they’re allowing someone else’s perspective to determine their destiny
and REALLY limit their options.

In
both the cases of the table advertising Free HIV (testing) and the headline
discussing a sewer blockage, what both could have used was editing.  In an episode of Everybody Loves Raymond
where Robert gets married and Raymond gives the Best Man’s speech, Raymond
reflects on their childhood and talks about how he and his brother use editing
to remember only the good parts: “We only remember . . . the food.  We don’t remember when mom would yell at dad
not to scratch his rear end with a spatula in the bakery.  Editing.”
As mortgage folks, we need to help agents and borrowers do some editing
to help make as many stories come out with a happy ending.  That’s no fairy tale either!  With that said, though, after reading this,
you’re probably never going to look at Winnie the Pooh or a spatula the same
again.  Sorry about that!

We
have a man who works in our office –
we’ll call him Rex –
who lived in New York City in the late 1980s.
This was a time before Times Square was populated by the Lego and
M&M stores and taking the subway to The Bronx to watch a Yankees game was a
bit like walking through the woods with nothing on but underwear made of meat
(and not in a Lady-Gaga-performance kind of way).  Oddly enough, he loved that time!  He’s told us a few stories of his New York
days, and I’ll share two of them with you here.

One
winter afternoon in Astoria (Queens), Rex was standing on the corner waiting to
cross the street and catch his bus to his apartment in Bushwick
(Brooklyn).  The light was red, so as he
was waiting for it to turn green, he noticed a large truck idling at the light
beside him, and it sounded like it was on its last leg.  As the light turned green and he proceeded to
cross the street, the truck entered the intersection and left Rex in a dense
cloud of black fog from its exhaust pipe.
As the air cleared, Rex looked up at the truck speeding away and noticed
that it had a sign on its tailgate: Environmental Protection Agency!

Another
winter, he found himself in the Washington Heights section of Manhattan in the
shadow of the George Washington Bridge.
As he was walking along, minding his own business, a young drug dealer –
probably about 14 years old –
sidled up and started walking beside him.
The young “distributor rep” looked up at Rex, smiled, and said, “Excuse
me, sir.  You wanna
buy some crack?”  Rex kept walking,
smiled back, and kindly said, “No, thank you.”
Not one to give up on a possible sale, the young resident of Washington
Heights countered with, “It’s good sh*t,”
and he flashed an extra bright smile.
Without skipping a beat, Rex painted a semi-serious look on his face and
asked the young man, “Isn’t that an oxymoron?”
The young man stopped dead in his tracks, and as Rex kept on walking, he
could hear the young man saying to himself, “An oxy what?”  I have a point, I promise.

We
recently met a relatively new real estate agent who told us about his plans to
become the area’s leading luxury property agent.  As our meeting progressed, he told us about a
particular listing he just obtained –
it was just north of $1 million.  Kudos
to him!  After he told us about this
million-dollar listing and everything he was going to do to market it, we
simply gave him a couple of pieces of information to think about and consider:
(1) a home in that price range and area of town, on average, takes a
considerably longer time to market and sell (that wasn’t our opinion; it was
based on MLS data we had readily at hand that we showed him); (2) homes in the
$200-400K range are selling almost immediately, and homes in the $400-600K
range are selling in just a few months.
(Again, we used data from MLS to share these points with him.)  Then, we simply explained that he could sell
a couple of $200-400K homes and a couple of $400-600K homes in a quarter to
half the time it will take to market and sell ONE million-dollar home –
and his cumulative commissions would be the same.  Light-bulb moment for our new real estate
agent friend!

Whether
you’re a real estate agent or a seller/buyer of real estate, it’s always a good
idea to seek out someone who’s just as passionate about your goals but isn’t
passionately invested in your plans because they’ll be able to see things you
may not see –
their “cooler heads” will be able to gather data and insights to share with you
that you might have missed in your excitement.
The driver of the EPA truck probably couldn’t care less he/she was
spewing toxic clouds, but someone in the EPA who is less concerned about
getting the truck from Point A to Point B is going to see to it that it gets
fixed (I would hope).  It’s with that
same hope that the young man in Washington Heights gave up dealing drugs,
bought a dictionary, and looked up the word “oxymoron” –
perhaps now he’s a tenured professor at Columbia University, all because Rex
took a moment to say something to him.

Even
though
I’ve
sort of borrowed
the title from a 19th-century
classic of literature as my own title, I’d like to tell you about another book
I recently read.  I’ll sum up the basic
premise of the book with a quote from the author in an interview he gave to The Huffington Post:  “If your emotions are constantly being pushed
this way or that way, and you feel like you’re never in control, it’s probably
because you’re valuing a lot of the wrong things.”  As part and parcel to that thought, in the
book he talks about the choices we make and our willingness to accept the
“pain” that those choices carry with them –
ironically, that pain is the key to our happiness.  Let’s
look
at a choice of options: renting a really nice apartment versus buying a very
modest house.

The
apartment in question is two bedrooms and two baths, 1,200 square feet, and the
monthly rent with a 12-month lease is $1,450.
The appliances are brand new, you have a really nice pool, a sand
volleyball court, and a surprisingly large workout facility.  Also, you’re right downtown, so you’re
surrounded by great restaurants and convenient shopping.  Bonus!

The
home in question is two bedrooms and two baths, 1,300 square feet, and the
asking price on the house is $199,000.
On an FHA 30-year fixed mortgage at 4.25% (5.462% APR) with 3.5% down,
the monthly payment (including taxes and insurance) is
$1,354.  Obviously, it’s an older house, and it
doesn’t have the pool, volleyball court, or workout facility.  The home is in the same general area, though,
as the apartment, so you’re still close to the great restaurants and convenient
shopping.

The Pain

Let’s
start with the house: it’s not brand new, you’ll have to maintain the yard
yourself, and you’ll need to come up with the 3.5% down payment, which is
$6,965.  If you want to have a workout
facility, you’ll need to budget an additional $40/month to join a local
gym.  Now for the apartment: after the
first year, the landlord or management company is going to raise your
rent.  Let’s be conservative and say it’s
just over a 5% increase, or $75;
the following year could be more because they want to spruce up the complex’s
look.  You’ll
only have one covered parking space, and it’s not right next to your
apartment.  Lastly, while you’re on the
ground floor so you don’t have to worry about stairs, you have neighbors above
you who work odd hours and find
slamming doors to be fun . . . at 3:00 a.m.

The Payoff (Happiness)

This
time, let’s start with the apartment: you don’t have to worry about any yard
maintenance.  If the water heater springs
a leak or decides to explode, you don’t have to pay to fix or replace it.  You might have rock-hard abs and a finely
toned body from the workout facility.
Now for the house: each year at tax time, you get to deduct the interest
you’ve paid on your mortgage –
suddenly, you’re getting money BACK from Uncle Sam instead of owing him.  Home prices have increased conservatively at
5% year over year, which means your house has gone from being worth $199,000 to
$208,950 –
just by owning your home, you’ve earned almost $10,000 in equity in one
year.  Last but certainly not least, your
mortgage payment isn’t going up year by year.

So,
let’s do some quick math: at the end of two years, if you choose to live in the
apartment, you MIGHT have rock-hard abs at the cost of $1,450/month for the
first year and $1,525/month the second year.
If you choose to purchase the house, you will have over $20,000 in
equity and have saved $1,152 the first year and $2,052 the second year
(mortgage versus rent).  In other words,
you’ll be $23,204 ahead of the apartment choice with a healthy tax break.  Sounds to me like the pain is worth the gain –
and you can do sit ups anywhere.