Kenneth Nelson

Everybody, and I mean EVERYBODY told me that when the government subsidy for the $8000 tax credit expired on April 30 that there would be a drop off in the real estate market.

To all those folks I politely say "HA ! HA ! HA !

I took in more pre-quals this weekend than I have in a long time. The market is good, not strong yet, but good. There are plenty of shoppers out there still looking for bargains. Interest Rates remain low and most of the lenders are aggressive.

This monring, Monday, May 3, 2010 I looked at my inquiry sheet and saw over 62 inquiries for mortgages and that is just in a very small geographical area of Southern Westchester and part of the Bronx.

School is letting out in another month and people are going to buy/sell or re-locate during the summer months.

F.H.A. has made it easier for mortgage brokers to do business and S.O.N.Y.M.A. is still going strong.

Sooooooo, if you are in the Real Estate/Mortgage Industry, don't listen to those guys who love to predict doom and gloom.

Keep your nose to the grindstone, shoulder to the wheel and your ear to the ground. (Who the heck can work in that position I do not know !) Good days are here and now, better days are coming.

Ken Nelson: The Mortgage Sherpa

I speak to many potential home buyers every day. I am still amazed that many people shopping for a mortgage tell me that they feel the banks have no money to lend. This is just Not True !!

There is plenty of money available for mortgages. In fact, there is more financing available than demand.

The national lenders such as F.N.M.A -'Fannie Mae' & F.H.L.M.C. - 'Freddie Mac' are well funded and anxious to lend.

Federal Guarantee programs such as F.H.A. & V.A. that don't lend money but guarantee to the lenders a percentage of the mortgage amount, are also Ready Willing and Able to assist homebuyers with various home buyer assistance programs.

Here in New York we are lucky to have S.O.N.Y.M.A.- The State of New York Mortgage Agency.

S.O.N.Y.M.A. Allows smaller down payments and low rates on all types of residential properties throughout New York state.

My own Bank-Continental Home Loans-is extremely well funded.

So, why this mis conception that banks have no money ?

I have to believe that the media is partially to blame. For the last 3 years we have been told by the talking heads on the "money & investment" shows that there is a Mortgage Meltdown. This is now ancient history as far as I am concerned.

Mortgage Lenders are lending every day. I should know. Towards the end of each month our closing agents are booked days and sometimes weeks in advance. We accomadate every customer, we even go to the homes to close a loan.

If someone tells you that mortgage money has dried up, tell them to call ME.

Sure, there are more restrictions for borrowers than 4-5 years ago, but this is just an adjustment to the freewheeling and dealing that caused many of the problems.

So, if you are an honest, hardworking person trying to get mortgage financing,call a mortgage professional

There is plenty of financing available and numerous programs to help just about anyone who wants to purchase the "American Dream"

Ken Nelson: The Mortgage Sherpa

The other day my wife, who works for a major Credit Union, told me that many of her customers do not know the meaning of equity when applying for a mortgage.

Sometimes mortgage professionals take for granted that homebuyers, especially first time buyers, understand the terminology of mortgage financing. This is a big mistake.

So, today I am going to talk about EQUITY as it applies to homebuying and mortgages.

Simply stated is the value less what is owed on it.

For example: A person owns a house that is worth $500,000.00

And they have a mortgage(s) balance of (-) $300,000.00

The equity in that property is $200,000.00 = Pure Equity

Banks & Mortgage companies use a diffferent formula if the same borrower wants to refinance the house

The formula works like this: Same House Value of $500,000.00 X 80.00% (can be more or less depending on the lenders criteria) = $400.000.00 Total Lendable Equity.

Now the lender will deduct the amount currently owed - $200,000.00 and that leaves the amount the owner can homeowner can get in cash ----------- $100,000.00 Net Lendable Equity

On home purchases, equity is described as the 'down payment' On many mortgage programs, a bigger down payment will result in more a favorable mortgage program: eg. Interest Rate, Term of Loan etc.

The least amount required for a down payment in todays market is through the F.H.A. Program.

F.H.A. guidelines allow as little as 3,50% down payment of the purchase price. Using the same example as above but on a PURCHASE: Purchase Price = $500,000.00 X 3.50% = $17,500 Down Payment

This low down payment requirement helps many 1st time buyers get thier 'dream house' but there are tradeoffs. The major one is that ALL Mortgages granted with less than 20.00% down payment require private mortgage insurance, aka PMI or on F.H.A. Insured Mortgages Mortgage Insurance Premium aka MIP

The initial cost of the PMI or MIP can be included into the mortgage, however the MONTHLY charge will be added into the mortgage payment.

In the example above, the MIP monthly payment could be as high as $241.25, this amount will be added the mortgage Principal & Interest and the escrows for Real Estate Taxes and Hazard Insurance. The total payment will be calculated into the borrower(s) gross monthly income for qualification.

Equity is a very important factor for lenders in determining a customers credit worthiness. This is why is strongly urge all potential homebuyers to speak with a mortgage professional before they begin looking at houses.

I hope this helps all you future (and current) homeowners.

Ken Nelson

Every day I get calls from my Real Estate "partners" asking me to pre-qualify their customers and send out

a pre-approval letter. I am always happy to do this, it's my job !

Lately however, I seem to be getting more and more pre-qual requests on customers who simply don't qualify for any type of mortgage financing in todays market. (Ahh, the 1990's, what a decade for mortgage guys)

All conventional mortgages in this country are underwritten using four (4) basic guidlelines that we teach in our classes using the acronym: I.C.E.A.

I - Income/Debt Ratio

C. - Credit= "Fico Scores:

E. - Equity --The Percentage of the Loan Amount divided by the Appraised Value or More Simply put

the Down Payment = Loan To Value or L.T.V.

A. - Assets.-- How much money the borrowers have for Down Payment & Settlement Costs.

It's true that there are still mortgage programs out there that will do the "No Income" or "Stated Income" loan, but the trade off is usually a much larger Down Payment/Lower LTV (70% or lower)

Credit Scoring remains, in most cases, at a minimum of 620-660 range.

Assets - Cash for down payment, settlement and escrows pretty much ALWAYS has to be verified when the loan is for a Purchase.

Soooooooo, in my never ending quest to educate the real estate establishment on the finer points of mortgage financing, I have put together a small list of some "Red Flags" to look for on a customers application that will give you a big "heads up" that this borrower just won't qualify.

And so with all proper respect to Jeff Foxworthy, Here is a short list of "They may be a reject if"

If your customers credit score is lower than his I.Q.-- He may be a reject

If your customer is on a 1st name basis with 3 or more bill collectors -- He may be a reject

If when your customer cashes his pay check at the local quik-e mart, the clerk asks him "how would you

like your cash, heads or tails ?" -- He may be a reject

If your customer needs a co-signer and he says his grandchild will co-sign but he has to wait until June when the kid graduates from high school --- He may be a reject

If your customer lists as an asset his collection of Fred Flintstone Jelly Glasses -- He may be a reject

If the appraiser can take ALL the interior pictures of the subject property with only 2 photos- He may be a reject

If your customer is a "little short" on cash for the down payment but tells you not to worry because he just bought $100 worth a lottery tickets and he's feeling real lucky this week-- He may be a reject

If your customer tells you that she is a "working actress" and that her last job was a guest role on "All in the Family" -- She may be a reject

If your customer is a Public Relations Manager and his ONLY client is Osama Bin Laden-- He may be a reject

If your customer wants to go "stated income" when he is the hot dog vendor at the local high school hockey rink and claims he makes $150,000 per year -- He may be a reject

There you have MY list, if anyone out there can think of others, please post, I'd love to hear from you !

Peace, Love, Learn, Grow

Ken Nelson: The Mortgage Sherpa