February :: SoundBiteBlog.com 2007 :: SoundBiteBlog.com

(This article is a follow-up to my previous Sparky’s Crablog post “Got Crab?” )

You have to understand what it is that motivates any person in their right mind to ever consider buying a boat in the first place.

Crab. Yummy, tasty Crab. Lots of Crab.

Our initially sad, but comical efforts with the Wally Mart inflatable left much to be desired. Hence, the purchase of the sea-worthy C-Dory! 

Now it doesn’t usually take all that long, from the time you buy your first boat, and enjoy the brief thrill of ownership, to quickly realize what an utterly ‘stupid’ and ‘idiotic’ purchasing decision you’ve made.

The learning curve of safe boat operation is a painful and costly succession of errors.

Our first trip out was disasterous! We went over to Brownsville Marina in Bremerton, one of the better launching spots in the area. We got the boat about halfway down the slightly steep ramp when the winch strap ‘snapped!’ Luckily, we had the security chain attached, and the boat only slipped down a few inches. The Marina Store was conveniently located nearby, so we purchased a new winch strap (the first in a very long line of expenses)

Let me stop right here and just mention one of the basic tenets of ‘Murphy’s Law of Boat Repairs:’

“Whenever you need to buy something to repair your boat, you will never, ever be remotely close to a store that sells discount boat parts, or anything that even remotely resembles a bargain priced item.”

We installed the over-priced, gold-plated, diamond studded winch strap and lowered our vessel into the cool, blue waters….

For the next several hours, we vainly attempted every conceivable option known to man in an effort to coax/ellicit life from our 40 horse Johnson outboard motor. When that failed, we switched our novice attentions to the 9 horse kicker motor. Nothing there either. It was an outboard motor tag team. They were both in cahoots against us.

All the while, as we toiled, sweat, and prayed for a motor miracle, we neglected to notice, that the tide was going out.

As the resident boating Newbies, what we didn’t realize, was at the Brownsville Marina, when the tide goes out, the launching ramp is rendered useless for several hours. The only thing worse than not being able to start our boat engine was having to sit helplessly at the dock, watching the paint peel, and waiting for the tide to come back in.

To make matters worse, because the launch ramp is directly adjacent to the marina store/cafe, our escapades were on full display for all the luncheoning patrons to see. We provided some really great comic relief!

You know, sometimes, life is a lot like learning how to safely operate a boat. Inevitably, you’re going to make a few mistakes along the way (okay, a lot of mistakes). Sometimes the mistakes are costly. Other times, they’re just frustrating, embarassing, and, well, just plain stupid. What’s important, is to learn from those mistakes. And it’s not simply a matter of learning what you did wrong, but learning what you can do right or better the next time.

Oh, the joys of boat ownership! Trust me, this is just the beginning of “Stupid Human Boat Tricks!”

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Posted in Bites of Washington, Kitsap County Bites, Laugh Tracks | 16 Comments »

This is the first in an on-going series of articles dedicated to helping 1st Time Home Buyers successfully achieve their purchasing goals. Each time, we’ll identify and discuss, in chronological order, key events in the home buying process.

Today’s topic: Mortgage Lending and Loan Pre-Approval

The first step in your home-buying adventure should be to find an experienced mortgage loan specialist. Before you start the home-search process, you need to know if you’re in a position to purchase a house, and at what price. A seasoned mortgage professional will be able to review your current financial status and determine if buying a house is a realistic and prudent goal for you. Sometimes, people need to pay-off some outstanding debts first, or repair a past credit problem. A qualified loan specialist can help you to formulate a game plan for working through these issues. The next step is to help you select a loan product this best suited for your specific needs. Years ago, buying a home required a  substantial cash down payment. Now days, there are many creative programs available, specifically for 1st Time Buyers, making it easier than ever to qualify for a home purchase. Once your mortagage specialist has reviewed and verified all of your financial information, and helped you to select a particular loan product, they can then determine a suggested price range to fit within your budget. This price range will serve to drive your home searching process. Many times, a loan pre-approval letter can be provided by your lender, helping to better portray you as a strong, qualified Buyer.Here are some helpful suggestions:

• Identify, interview, and evaluate at least 3 different lending sources. Obtain recommendations from your real estate agent or friends.
• Ask lots of questions. The folks at Network Mortgage states there are 3 key elements to finding a good loan specialist: They need to be knowledgeable and willing to take the time to educate 1st time buyers. They need to have the ability to empathize with people, understanding their individual needs and issues. And there needs to be a relational chemistry between the Buyers and their mortgage specialist.
• Use a local lender. It makes sense to work with someone who knows the nuances of your particular market and can respond quickly to any issues that may arise. It’s also easier for area agents and title/escrow offices to coordinate the transaction with local lenders.
• Don’t shop for lenders based solely on the interest rates they quote. Just because someone offers you the lowest rate doesn’t always make them the best choice.

Having a knowledgeable mortgage specialist as part of your team will help you to successfully achieve your home-buying adventure!

For the next installment in the series, go to Top 10 Traits of a Great Agent

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Posted in Adventures in 1st Time Home Buying | 12 Comments »

Tags: credit repair, credit scores, hansville wa real estate, Kitsap County WA real estate, lenders, loan officer, loan pre-approval, mortgage broker, mortgage loans

There are many misconceptions about home loans. This is a list of a few of the most common ones with the real answers. Test yourself and see how many you get right. Mythology and Mortgages don’t work well together. The first makes interesting stories, the two combined will lead to frustration.

I have a job, I can buy a house. 

Employment is only one of the things a lender checks for. It is not an automatic license to purchase. The amount of time you have been on a job is also important. If it is under two years, you can expect to be looking at a non-conforming loan program.

I’ll get a second job so I can qualify for more house.

This won’t work at all. Most lenders require a minimum of two years on a second job before they will count it as income.

The VA inspector will check the property so I don’t have to worry.

There is no such thing as a VA inspector! As a matter of fact, when you sign your VA loan application package, you are required by VA to aknowledge three times in writing that you know this fact and you understand how important VA thinks an inspection is. VA strongly suggests that you hire an inspector.

I have a co-signer, so my credit doesn’t matter.

Not true. Unless you are looking at sub-prime financing. Some sub-prime loan programs will ignore derogatory credit. But, these are special loan programs and you will pay a premium (in the form of higher interest rates and fees) for  them.

I have a co-signer, so I don’t need a down payment.

Exactly the opposite is true. If you plan on having a parent or other family member, who will not be living in the home, co-sign for you, start saving you money now. Almost all programs that allow a non-occupying co-borrower, require additional down payment.

I’m a VA borrower, I don’t need down payment or closing costs.

This is mostly true. VA does not require that the borrower pay anything out-of-pocket. But, if you can pay 10% or more down, you will save thousands of dollars on the VA Funding Fee. Putting nothing down may also lower the amount that you can qualify to borrow. And it will lower the amount of house you can buy. By not paying your own closing costs, you may limit the number of homes available in your town. Many sellers become quite concerned with a buyer who has nothing to bring into the transaction, and they will not consider the offer at all.

I’m a VA borrower, I don’t have closing costs.

Completely untrue. VA borrowers have closing costs just like everyone else. They are allowed to have others pay for their closing costs. But, the closing costs exist and must be paid by someone.

One late payment isn’t going to hurt me.

Partially right. One late payment on a credit card five years ago will not hurt you. A recent late payment will. And if the recent late payment is on a mortgage? Things get very difficult. Lenders do not like loaning money to people who have paid late on a previous mortgage in the last two years. You will need a special loan program.

I don’t make enough money to qualify for my home, so I will use a Stated Income loan.

Totally untrue. A Stated Income Loan is not a license to lie! Stated Income Loans were designed for people who have difficulty proving what they make, such as self employed borrowers with good accountants. These loans were never meant to be used for people that don’t make enough money to borrow on an expensive property. Self employed borrowers often do make enough, they just can’t prove it with paystubs or W2′s.

I can call this purchase my primary residence, and get a better loan.

If this is not going to be where you live, you just committed fraud. If your loan officer suggested it to you, he or she just committed fraud, and because you went along with him or her, so did you. Don’t lie to get a loan or a better loan. If you lie and you are caught, the penalties are severe and can include jail time. There is no such thing as a small lie when it comes to real estate.

There are many more, but this list includes the fallacies I hear often. The encouraging news is that there are loan programs for all of the above scenarios. Find a loan officer you can trust, explain you entire situation with him or her. And then let them do the job you are paying for. You can buy a house, it may just take a little more work than you realized.

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Posted in Miscellaneous, Mortgage Bites | 1 Comment »

In any job that involves the transfer of money, there is always an opportunity and temptation to be swayed by the Dark Side of the Force. Many times we feel we can bend the rules, however slightly, to justify the means to an end. We try to convince ourselves that we are genuinely serving our clients greater good. We argue, “I’m only trying to get the deal to close,” as our tainted hand slowly slithers under the table.

This is a follow-up to what my distinguished colleague Buckwheat had recently penned about fraud in the real estate industry (see: “Is it a ‘little white lie’ or is it fraud?“)

Recently, another agent in our office (we’ll call him “Bob”) confided to me about a recent challenging situation. He was representing some Buyers on the purchase of an investment property. As per the contract, the Sellers had agreed to pay a specified amount of the Buyer’s closing costs. Just shortly before closing, the Buyer’s Mortgage Officer calls Bob and informs him that the lender will only allow the Sellers to pay up to 2% of the closing costs. As a result, this ceiling amount leaves about $1000 on the table. So the Mortgage Officer matter-of-factly asks/tells my friend Bob to draft a letter, instructing Escrow to credit the $1000 to his commission. And then after closing, to write a check to the Buyers.

Well, last time I looked, this constitutes lender fraud. There is no grey area here. It’s against the law, plain and simple. It doesn’t matter what we think. It doesn’t matter whether or not it seems unfair to the Buyers. It’s wrong! Period! And, if convicted, you could face some rather hefty penalties, lose your license, and possibly serve some jail time!

Ardell DellaLoggia, of Rain City Guide fame, recently posted an excellent blog on this same topic, entitled “Agent FIRED!” In this post she sadly recounts a story concerning a local agent that was fired by her clients because she refused to commit lender fraud! This agent attempted to find other creative and LEGAL ways of resolving the problem, but the client refused to listen to her and trust her counsel. This agent shares her entire story within the comments. Definitely worth the read!

Unfortunately, this is a practice that has become all too commonplace in our industry. Why is that? As licensed real estate agents in Washington State, we’re required to take a Code of Ethics refresher course every two years. You would think that would help deter or reduce this practice!

How do professionals begin the slide down the slippery slope? It typically starts out somewhat innocently. Maybe we’re new to the business. We don’t realize that we’re committing a crime. Someone more senior, more experienced, more seasoned, assures us that it’s ‘okay’ and that we’re serving the best interests of our clients. “Just this once,” they say. The next thing you know, you compromise again. Then again. And again. Pretty soon, it’s common practice. Your clients begin to expect it. One compromise ALWAYS leads to another greater compromise.

So what did my agent friend, Bob, do? Well, Bob’s one of those boring, black & white, ”Take the High Road” kinda guys. That’s why he’s my friend. He told the mortgage officer in no uncertain terms that what she was asking him to do was lender fraud; an illegal action; punishable by law! The officer’s response? “Oh, really?”

Bob later found out that this particular Loan Officer had coerced another agent into committing this offense on several occassions, and that her supervisor, a Senior Loan Specialist, was the one who told her it was an acceptable practice.

I don’t know about you, but I value my reputation way too much to pull this kind of stunt. I have a responsibilty to my managing broker, to my fellow agents, my clients, my family, and to God, to be completely above board and honest in all of my dealings and relationships. If a transaction needs me to do something illegal or unethical in order to succeed, then it’s not worth the success. I would always rather fail with integrity, than to win through deceit.

Remember. Luke Skywalker didn’t turn to the Dark Side all at once. It started with bad advice and a long line of little compromises.

-Sparky-

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Posted in Buyers, Mortgage Bites, Real Estate Bites, Sellers | 12 Comments »

Ditech and Quicken Loans are doing a great job of enticing people with thoughts of $600 a month payments for $200,000 homes. Just remember what your mother told you years ago. “If it sounds to good to be true, it probably is.”

I detest Option ARMs! In my opinion, they are nothing more than the legalized pillaging of American home equity. Lenders with enormous advertising budgets promote them in a fashion similar to old-fashioned used car salesmen. They hook consumers with thoughts of low payments for expensive homes. Or, low payments on refinance transactions. The disclaimers on the television would make an eagle squint. And they are gone faster than the fastest speed reader can read. Of course when a consumer calls on the advertisement, he or she is connected with a salesperson. Salespeople are not well known for watching over a client’s best interest.

If you have seen or heard these adveritisements and wondered about them, you probably have more questions than answers. Let me pull back the curtain and show you how these loans work. First though, I’ll tell you that an Option ARM can be a valuable loan instrument under the right circumstances. You must understand how they work before you take the plunge into them. And that is the problem! Most people with Option ARMs do not fully understand how they work. These are the people who end up in my office or on my telephone, terribly concerned because something is not right about their loan. They don’t know what it is, exactly. But they know something is amiss.  Read the rest of this entry »

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Posted in Bite Me Blogs, Miscellaneous, Mortgage Bites | 6 Comments »