Lease Purchase Tips

With lending guidelines tightening and more and more Americans struggling to make ends meet the lease with an option to purchase as grown in popularity. Both from a seller's/builders standpoint; trying to unload inventory and the lessee's standpoint trying to find a nice place for his/her family without the down falls of renting. The growing e-mails and questions I receive regarding this method has prompted me to lend (pun intended) some insight on the subject and perhaps give my audience a couple of pointers.

1) Have an attorney draw up the lease with an option agreement or have a real estate attorney review it. This will help both sides set-up the agreement from the very beginning and will also diminish confusion in the end. Not to mention it protects both the lessor and lessee.

2) Have the lease agreement recorded at the county courthouse. This is probably one you have not heard of but believe me it truly helps when you want to actually purchase the home as it solidifies your position with the lender.

3) Make sure you pay by check and once the check you have written clears the bank get a copy (front & back) of the cleared check. Do this for 12 consecutive months or more and again this solidifies our position with the lender.

4) If the lessor will allow I would suggest getting you added to title along with the current owner's. Again this will help with the lending angle when it does become time to purchase and close on the transaction.

5) Make sure you keep a log of any and all improvements that you do between the time the lease is executed and the closing of the transaction. Keeping receipts and verification for these items will definitely help with additional value and will solidify your equity position with the property.

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Your Columbia Missouri Mortgage Broker

Saving Tips. Anyone Interested?

I wanted to take just a moment and shift gears a bit. We typically try to relay what is going on in today's market. Sometimes this means national news and sometimes it is local. I want to talk briefly and provide you with a link to a different type of story that I think is important. The topic is SAVING! As mortgage professionals we take many applications. One common thread with many applicants today is a bit disturbing. There are a lot of people out there with very little money put away for a rainy day. Very little cash in checking or savings and little to no investments! It is no surprise that there are numerous people out there that live check to check. This trend is no doubt getting worse as inflation worsens. The price of goods are going up, the dollar is weak, and our incomes are not increasing to compensate! Not a good recipe to say the least. I don't bring this up to beat people up that are in this situation. If you are reading this I hope this doesn't apply to you. I bring this up for the ones it does apply to and to show you there are solutions out there.
Aside from switching jobs or careers to gain a larger paycheck, there are little things people can do each month to cut their expenses and save. There are 2 groups out there that fall in to a category that needs some help. The first is one is for whatever reason your household income is low and you have a large family to support. It is just flat out tough to make ends meet in today's economy. The second type are people that make good money, but blow it. This is the frustrating one. It makes no sense to spend every penny you make to try to and portray a certain image! This gets you nowhere and guess what? Most people could care less. Yeah I drive around and think to myself "Nice Car" if I see one, but after I drive a few blocks I have already forgotten about it. Nobody really cares when it comes down to it. I think you get my point. If you are someone living check to check or someone who just wants to put more money away for retirement, then this link is for you. No matter what your situation is, there is probably something on this list that can help. There are also many other helpful articles on the Internet. All you have to do is Google them. Just search for saving tips, budgeting help, etc.

Here is the link I mentioned above. 25 Ways to Save More Each Month!

I am not advocating a lifestyle that doesn't allow you to "live" a little. I for one don't want to be old, sitting at home thinking "What did I do with my life"? These are just some basic saving ideas. I know everyone can look at their budget and expenses and find ways to cut back. More than likely these items will hardly be missed. After you master some of these quick tips, if you want to take it to the next level you may want to get with a Financial Planner. A good advisor can plan out your financial future and help you reach your financial goals.

As prices increase nationwide and mortgage programs continue to be cut, more cash reserves are going to be critical. Gone are the 100% programs that allow someone to buy a home with little to no money. There are a few of these out there, but they are much tougher to get. Hopefully this article can give you just the little "umpf" you need to get moving in the right direction! It will open up more doors for you and will make your life a little less stressful!

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Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

Sellers Abundant and Buyers are Scarce

Mortgage Professionals are truly intertwined with the real estate community, which provides us with insight that others are typically not privy too. Over the course of this week I have spoken to numerous real estate agents, title company owners, appraisers, and account executives. All have concurred one thing; that sellers are very abundant and buyers are very scarce. I have broken this down the last two and half days to hopefully lend (pun intended) insight as to why this is the case.

We all know by now that the real estate market is going through a major transition right now. We have had huge lending cut-backs, increased inventory, heightened foreclosures, and delinquencies. This coupled with the overall un-willingness by large wholesale and retail banks to lend money in order to hoard their cash to improve their balance sheets. However, given all the negativity is this the real reason why the market is challenged? (especially in Boone County Missouri) I will offer a couple of "real" ideas at least from my vantage point as to why the market is still struggling to make the turn.

First, the bottom has not hit us yet. Yes that's right it is my belief that we are not at the bottom and perhaps will not see the bottom until the second quarter of 2009 at the earliest. I know this is a tough pill to swallow especially given the two plus years that we have battled through, however it's the truth! Look at the numbers, talk to the experts and speak to the individuals in the market and you would tend to believe this is the case. Second, since we are not at the bottom the buyer's that are out there are hesitant to pull the trigger until the bottom is reached. Why? Because they do not want to buy an already depreciating asset if they can hold out and buy at the homes lowest level. That puts them in the driver's seat and here's the kicker. They (the buyer) know they are in the drivers seat from the word go and patience is a virtue! Third, the buyers that are ready to act now, have something to sell. That's right we have a plethora of buyers that are ready and willing to take advantage of the market as it stands today. However, they cannot get their home sold and off the market. This is why I have seen agents turn down listings in order to keep their marketing overhead low. If it's a home that they know will take some time, needs some work, or a lot of advertising to sell they are simply turning down the listing and who can blame them. Lastly, the market as a whole simply has too much of an inventory of high-end homes. If you have looked at the labor market numbers then you have seen unemployment numbers steadily increase, weekly jobless claims rise, continued layoffs and firings, and big business consolidation. Individuals that could or can afford to buy some of these properties are waiting for the dust to settle to see whether or not they have a job and whether or not their pay is cut.

Please don't kill the messenger but I have always given you honest, candid, and unwavering reality to the market and this is the truth. Time will tell whether or not we can summon more vigor, strength, and optimism to weather the continued storm.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker

Tips on Buying Foreclosed Properties

With such a plethora of foreclosed homes on the market and the number continues to grow each and every week I thought it would be beneficial to know what to look out for when purchasing one of these homes both from a lending perspective and a consumer perspective. Obviously from a lending perspective we can give some insight on things to consider however, we have also been on the back end of some consumer/buyer issues that have arisen from these homes.

1) Get a home inspection: I cannot say enough about how important it is to pay the extra $200-$400 and get some piece of mind. Foreclosed properties usually have been vacant for quite some time and hence are subject to neglect unlike a normal owner occupied or new construction residence. It is not uncommon for the real estate agents listing these properties to winterize the home which means they shut off the water and electricity and rarely visit the property again. Also most of these homes have suffered some kind of deferred maintenance with issues such as, lawn care, foundation, cracking and chipped paint, etc. Most people searching for foreclosed homes want some sort of a deal, however make sure you do not use your "deal" money and re-invest it in an issue that could have been caught with a home inspection.

2) Get title insurance: The last thing you want after you have purchased the property are issues arising from title such as, tax liens, unknown easements, mechanics liens, etc. Get a reputable title company involved early so you can review the title commitment and make sure there are no surprises awaiting you after closing.

3) Look into the ownership history: How many times over the last two to three years has this property changed ownership. Most lenders ask for at least a twelve month chain of title concerning today's foreclosure transactions to guard themselves against a continued "flipping" routine. They want to make sure that the buyer/client is not getting a property that has continually changed ownership and hence "profit taking" and is left carrying the bag. There are specific Fannie Mae and Freddie Mac guidelines for "flipped" properties and you need to make sure that you are with a reputable and knowledgeable lender that can help guide you through this issue.

4) Is the property in livable condition?: Most lenders will not lend on something that isn't livable. A few minor or even perhaps medium issues will be OK, however if the home is missing cabinets, toilets, lighting fixtures, etc. that could be a problem. Again there are always exceptions to every rule but I at least want to make you aware of some things to consider when your shopping.

5) Use a Real Estate Agent: The right agent can save you time, money and lend some valuable insight on the above tips. Agents are the resource behind the local real estate market. They possess the knowledge and education to guide you through the items you should consider and can point you in the right direction for a contract, the terms, home inspection contacts, title company contacts, etc. The right agent is a must!

These are just a few items to consider when your out looking for foreclosed or distressed properties. Not every item can be a deal killer however you want to be well versed on the issues that could arise and how to handle them. The more knowledge and perspective you have on these properties the more efficient the transaction will go and the happier you will be!

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker

Future FED Action. Will it be good or bad for us?

I don't know how many times during the week we field calls from people checking on mortgage rates. Obviously this is the business we are in, but lately the callers are asking a few more questions. This is a good sign in that these consumers are following the market and our economy more closely than in the past. The more educated consumers that are out there the better! Now back to the questions. These typically circle around the topic of today's rates and how future changes in the economy will affect them. They are mostly referring to the FED and the cuts or hikes they make from time to time. "Why did rates go up when the FED cut rates?" is a very common question we hear. It is a very good question and one we have addressed in our blog several times. The FED is not adjusting mortgage rates. They are making changes to the Federal Funds Rate or the discount rate. These are rates that affect what banks can borrow money at and more closely affects short term items like car and home equity loans. Mortgages are long term products and Mortgage rates are tied to how Mortgage Backed Securities (MBS's) perform. MBS's are bonds which are fixed assets, therefore inflation plays a key role on how bond traders value them. If inflation is deemed to be a problem in the future then MBS's are a bad investment and they pull their money out. By doing this, mortgage rates go up! Make sense?
This is a concept that has been very hard to grasp from some people and it is frustrating because it is expensive to track how MBS's are performing on a daily basis. People feel like they don't have much control when they are shopping around and want to monitor rates. This is even more of a reason to use a solid mortgage professional who monitors these indicators daily! Your mortgage is a lot of money and locking at the appropriate time is very important.

We have now come to a point where inflation is becoming more and more of a problem. Just today inflation surged 5.6%. With this being the case, the FED is no longer discussing rate cuts. They are talking about keeping the rate where it is or increasing it. A rate hike definitely seems likely and is probably overdue. Now based on what we just discussed, what do you think could happen to mortgage rates with a rate hike? If a rate hike is done it will be to fight off the effects of inflation which is good news for MBS's! What happens when MBS's come more into favor? That's right, mortgage rates improve! Will we soon see rates that were as low as they were a few years ago, I highly doubt it. However, I think we can all agree that fighting inflation and lower interest rates will be a GREAT sign! I tried to keep this explanation in very simple terms since this topic can get very complicated. I know when I study up and do research on the topic I get dizzy! I hope this information was helpful to some. If you are a realtor that that doesn't currently get a copy of our weekly newsletter and would like to, please email eric.hemmer@pmg-inc.net or shawnvt@pmg-inc.net. We will gladly put you on this list. With this tool we try to keep everyone up to speed on what is going on locally and nationally.

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Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"

It's Official The Lending Integrity Seal is Here!

The time has arrived Professional Mortgage Group, Inc. and in particular Eric Hemmer & Shawn Von Talge have been recognized by the National Association of Mortgage Brokers (NAMB) as professionals with a higher level of education and integrity. You can visit their website to see who has earned this seal in the Columbia, Missouri area.

This seal certifies that we have completed at least six hours of continuing education with two of those hours in ethics training, we abide by a higher and strict code set by the NAMB, we have received recommendation letters from our peers and business partners, and we have passed the necessary test to achieve this honor. I have been an outspoken advocate for continuing education and testing for mortgage brokers for a very long time and I applaud the NAMB for taking the necessary steps to try and curb the unethical practices that have been highlighted in our industry the past couple of years. Hopefully the heightened awareness and competitive advantage that comes with having this seal will promote its use by more mortgage professionals.

Brought to you by Professional Mortgage Group, Inc.
Your Columbia Missouri Mortgage Broker

FED Survey Says....Credit Is Tougher To Get.

The Federal Reserve reported the credit squeeze only got worse during the past 3 months and that most banks plan to stay very conservative for at least another year!
So even after all of the massive cutbacks and changes that our industry as undergone over the past 2 years, either more changes seem to be on the way or at the very least we will continue with the current environment. This doesn't really come as a surprise, but nevertheless these are the results the survey produced.

58% of Banks tightened lending standards for commercial and industrial loans to large and medium firms. 65% tightened lending standards for small firms.

81% of Banks tightened standards on commercial real estate, while 50% of banks said demand for these products was weakening.

74% of banks said they tightened lending standards for prime mortgages. At the same time 53% said they saw reduced demand.

86% of banks tightened lending standards for subprime mortgages. The total number of banks who offer such loans declined to 14% of all banks from 30% two years ago.

84% tightened lending standards on non traditional mortgages while 63% reported reduced demand in these products.

36% of banks were less willing to extend credit in the form of consumer installment loans.
Only 2% were more willing.

80% tightened lending standards on home-equity lines of credit.

67% tightened lending standards on credit cards. This was done mostly by refusing new loans to consumers without good credit.

When they refer to tighter lending standards they are refrring to the following:
Higher credit score requirements, more documentation is required, more collateral is required, and higher interest rate spreads are offered. It is also becoming more common for banks to ask for co-signers.

So from these results we can see that the credit crunch is still very much upon us. Tighter credit standards will hurt the economy and slow spending. There are less avenues for people to consolidate debt and they will lean more heavily on credit cards. I really think it is only a matter of time before these credit cards companies get pinched hard. It just makes sense for this to happen. Just look at one piece of the puzzle that makes up credit card consumers, the foreclosure market. All of these people who are foreclosing on their homes no doubt have credit cards. They probably have been relying on them heavily in the recent months trying to make thing work. When they finally run out of options and are forced to walk from their homes they surely leave credit card companies hanging too. Bankruptcy is the common alternative at this point for most people. If this pinch takes place I just hope it isn't as severe as the mortgage meltdown! That would be a mess!

While this information isn't very positive, I thought the survey results were very interesting to see and wanted to pass it along.

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Professional Mortgage Group, Inc.
"Your Columbia, MO Mortgage Broker"