jimeyre

Lincoln's Elevator Speech

Fri, 10 Oct 2025 10:44:11 GMT

We all need a 30 second elevator speech.

The occasion was the dedication of the National Cemetery at Gettysburg, on November 19, 1863. The first speaker was Edward Everett, who was a nationally known orator. He had served as a U.S. Congressman, a U.S. Senator, Governor of the State of Massachusetts, President of Harvard University, the U.S. Secretary of State, as well as having been ordained as a minister … a distinguished resume to say the least. His speech contained over 13,000 words, and took a little over two hours to deliver.

Then Abraham Lincoln stepped to the podium. And in less than 2.5 minutes, and fewer than 275 words, delivered one of the most revered speeches in the annals of American History. But today I’m not interested in the content of the Gettysburg Address – I’m interested in the process of its creation. It’s well-documented that Lincoln went through at least four revisions of his speech, over a period of 4-5 months. It’s also known he had others review it and offer critique, in order to ensure he conveyed the message he actually intended.

Imagine preparing for 4-5 months only to speak 275 words … how many of us do that today? I would guess zero, or at least very few. But who cares, why is this important?

I’m sure you’ve all heard of the “30 second elevator speech”, and the importance of having one you can launch into and deliver with no hesitation whenever and wherever called upon to do so. Why? Because we – just like Abraham Lincoln - are all selling something.

Lincoln was selling his dream … his vision. He spoke so fervently and eloquently that our country is still trying to measure up to it. Certainly selling a mortgage, or an insurance policy, or a chiropractor's services are not as important in the grand scheme of things, but the need for us to convey who we are, what we do, and why the public needs us quickly and convincingly is just as important.

The relevant question is this: how much time are you willing to spend preparing, how much time are you going to spend preparing your own elevator speech?

I’d wager we should all spend more time in that pursuit.

Why Your Preapproval is Such a Big Deal?

Mon, 21 Oct 2024 15:09:43 GMT

People ask me why a fully-documented preapproval is such a big deal. Here's why. I've spoken about this before, but in light of today's lower interest rates, this question bears being brought to light again. Let's assume that you're selling your home, and because of the conditions of our current market, you receive several very good offers in the first couple days after going on market. What do you do? Which buyer are you going to engage with? How do you pick? If you have a really good listing broker, he or she will make some phone calls and talk with the selling brokers representing the various buyers, and ask questions about their buyers. The very first, and by far the most meaningful question should be "Have your buyers obtained a fully-documented preapproval?" Don't worry about the terms "prequalification" or "preapproval"... They don't really matter. But what does matter is the term "fully-documented".

This means that the buyer has already submitted all their necessary documentation, such as paystubs, W2's, tax returns, asset statements, a tri-merge credit report, and any other documentation required by their lender. AND it means that their lender has at least gone so far as to obtain an Automated Underwriting Decision (AUS). If they haven't done this, disregard any prequalification letter they might have presented, because it's meaningless. Simply move on to the next prospective buyer. If they have done this, then they've proven themselves to be serious buyers, and you should consider their offer accordingly - with your listing broker's assistance, of course. Preapproved buyers' loans have the best chance of actually closing, and that's what you want as a seller.

I, myself, have even received calls from listing agents while I was grocery shopping, or watching my nephew's soccer game, or attending my daughters' band concerts. Calls from listing agents doing their due diligence, going a step beyond calling the real estate broker representing the buyer, and asking how thoroughly I did my clients' preapprovals. Would that more listing brokers would be this diligent! You may choose a different way to conduct your business - that's your decision. But I can honestly say that many of the buyers I've assisted over the years have actually won in multiple-offer situations, solely based on the fact that I did a fully-documented preapproval for them, and on the strength of the preapproval letter I provided to the real estate broker that represented them.

Remember - a fully-documented preapproval is "where the rubber meets the road". If you have any questions about this topic, please feel free to reach out to me anytime. Remember, I don't work 9-5, I work start-to-finish, and I will always give you straight talk without any sales talk.

Let's Get You Into A House - Strategies 3 & 4

Mon, 21 Oct 2024 15:06:52 GMT

Budgeting strategies to get yourself into a home. We've been considering the steps that people go through mentally to get ready to buy a home. And they normally ask themselves a bunch of questions, which as it turns out, are the same questions financial planners and mortgage brokers ask, or at least should be asking their potential clients. These questions are (1) Financially speaking, where are you?, (2) Financially speaking, where do you want to be?, and (3) Again financially speaking, how are you going to get where you want to go? And of course, in the context of this blog, "where you want to go" refers to buying a home.

Last week we began to look at some specific strategies that are often suggested to help homebuyers reach their goal. The first was to "Always pay yourself first" by saving 10% of what you earn. The second was to budget a little bit for home maintenance every month, because in some ways, houses are like cars. Parts wear out, and either need to be repaired or replaced, and with a house, those parts can be quite expensive, and you don't want to be caught unaware. This week we're going to look at the next two strategies which can be utilized to help you ready yourself to buy a home.

Strategy #3 is to start living as if you already have a mortgage, and here's how it works. Let's say you're already paying $2,000/mo. for rent, and you're concerned as to whether or not you can actually afford a mortgage. First, select a neighborhood where you'd like to live, and actually write down on paper what you need in a home. Then contact your real estate broker, and ask what such a home would actually cost. Once you have a price range in mind, contact your mortgage broker, and find out what a mortgage payment would be on such a home. For the purposes of this scenario, let's say that payment comes to $3,400/mo. for principal, interest, taxes, insurance and mortgage insurance. That's a $1,400 increase, and you might be worried whether or not you can sustain that over a long period of time - perfectly understandable, right? The way to determine whether or not you can sustain it is to go ahead and pay your $2,000 monthly rent, AND save $1,400 each month, in a separate savings account, designated for your closing costs when you buy your home. Do this for 3 months, 6 months, maybe even a year. Take however long you need. At the end of this time, you will know whether or not you can actually do it, and you'll make the appropriate decision.

Strategy #4 is to minimize credit card debt. Mismanagement, and in some cases non-management of credit card debt kill more mortgage applications than anything else I see. So it's critical to understand how this can affect you when applying for a mortgage. It's actually a subject unto itself, and it's too long to go into real depth here, but I can at least give you some time-tested methods to manage a situation that's tough for many people. First, list out all your credit card accounts, their balances, their limits, and their interest rates. Sort them by balances owed first, and secondly by interest rate. Second, starting with the balances that are easiest to do this with, pay each of the cards' balances down to 50% of their limits, and NEVER exceed 50% again. Most people do not understand that when they exceed 50% of a credit card's limit, it begins to lower their credit scores. Once you've accomplished this, pay them down to 30% of their limits, and NEVER exceed 30% again. If you do this, you'll begin to see rapid increases in your mortgage credit scores. But hold on - you're not done yet.

Next, use each card you have periodically. The reason for this is that banks who issue credit cards are in business to make money. If you don't charge something periodically, they won't make any money, and eventually they will close the credit card account for non-use. And this will lower your credit score for a couple reasons which are too detailed for this blog. Just be sure you use each card you have... You don't have to use each one every month, but use each one every few months, even if it's just for a tank of gas in your car.

Last - never close a credit card account! There are two exceptions to this. If your identity has been hacked and you fear that someone may have gotten your credit card information, call the bank who issued you the card, and have them issue you a new card. And if for some reason you suspect that the bank who issued you the card is going to close the account for non-use, either charge something on it immediately, or close the account yourself. It always looks better on a credit report if you've closed an account, than if the creditor closes the account on you.

Hopefully the questions we've looked at, and the strategies that I've suggested are things you find helpful as you get ready to buy your home. If you have questions about any of it, please feel free to reach out to me at anytime. Remember, I don't work 9-5, I work start-to-finish, and I will always give you straight talk without any sales talk.

Budgeting #3 - More Questions Financial Planners Will Ask You as You Prepare to Purchase a Home

Mon, 21 Oct 2024 15:04:30 GMT

Now that you know where you are financially, as well as where you want to be financially, the next question becomes "How are you going to get there? In the last couple of blog posts, we’ve been dealing with the questions Financial Planners ask prospective clients, which just happen to be exactly the same questions that a good real estate broker and a good mortgage broker should be asking.

The first question, “Where are you, financially speaking?” is simple enough. After all, everyone has to start somewhere. And it really doesn’t matter where you are when you start, it just matters that you start!

The second question, “Financially speaking, where do you want to be?” is the logical follow-up, but sometimes it’s a little difficult to be specific with your answer. And I would add that I don’t believe “specific” is enough…I think you should get down to the bottom of the barrel, the ticky-tacky, nitty-gritty, hard core truth of the matter, and get face-to-face with where you really want to go. Be VERY specific with your answer, using the acronym S.M.A.R.T. Because if you really want to accomplish your financial goals, they should be specific, measurable, attainable, relevant, and time-based.

Once you’ve answered the second question, it’s time to get on to the third question, which is “How are you going to get there?” You have to create your road map, right? Unfortunately, it’s not as simple as asking Siri or Alexa how to go from point A to point B, but once you have that S.M.A.R.T. goal firmly in your head and written down on paper, the job of figuring out how to accomplish it becomes much easier. It usually involves some behavioral changes for most people. This can be problematic for many, but Financial Planners and Mortgage Brokers have developed some simple strategies to help you do just that. Let’s deal with the first two strategies today.

Strategy #1 is really simple - Always pay YOURSELF first. OK, you earn a certain amount on your job, and your employer takes out various taxes, social security, etc., before they give you your actual paycheck. You may have rent, utilities, credit card payments, car payments, etc. that you need to pay each month. But unless you set aside a little for your retirement every time you get paid, your retirement years may be pretty bleak. Financial Planners suggest that you should set aside 10% of your income toward retirement, but it might be hard for you to discipline yourself to do that. So just have your paycheck auto-deposited in your savings account. And when that money shows up in your savings account, transfer 90% of it into your checking account. Live off of what's in checking, and DON'T TOUCH YOUR SAVINGS ACCOUNT! If you set this up so that it's done automatically by your employer and your bank, it's a lot easier to accomplish.

Strategy #2 is to put a line item in your budget for home maintenance, and save a little money each month toward that. You may not own a home yet, but that doesn't matter. Get started doing it now, and you'll already have a little nest egg built up when you do purchase that first home. Look, I live in the Pacific Northwest portion of the U.S., and we get a lot of rain up here. And no matter whether I'm driving through a neighborhood that's priced for first time homeowners, or a neighborhood where the average price exceeds $3,000,000, I see the same three things all the time. I see old, rusted out lawn mowers sitting beside the garage, rain gutters and downspouts that are overflowing and rusty, and roofs with curled up edges on the shingles.

Now you might not be concerned about replacing a lawn mower. They're maybe... What - $300-$500 at the store? That might not pose a problem for you. But what about replacing damaged gutters and downspouts, that start out at around $3,000-$4,000 for a typical home in my neck of the woods? And if you need to have an old roof removed and a new one installed, it can run anywhere from about $8,000-$80,000! Maybe even more, depending on the size of your home, and the complexity of your roof design. Are you ready for that?

Please understand, I'm not saying these things will happen to you. But - they might. And if they do, I want you to be ready for them. I want you to be able to say "I've got this", and be able to sleep at night. If you have any questions about any of this, please feel to reach out to me whenever is convenient for you, via phone, text, or email. Remember, I don't work 9-5, I work start-to-finish. Come back again next week, and we'll deal with Strategies #3 and #4.

Budgeting #2 - Where Do You Want to Be?

Mon, 21 Oct 2024 14:58:03 GMT

SMART Goals. Two weeks ago we reviewed the first question financial planners will ask you, which is "Financially speaking, where are you now?" And of course, that's the same place to start when you're planning on buying a home. After all, if you're going on a trip, you need a point of beginning, right? Seems simple enough. And once you have your beginning point, naturally you'll need to know your destination before you can decide how to get there.

Most people answer pretty vaguely when I ask them things like "What price range do you want to be in?", or "How much of a down payment are you prepared to make?", or "Do you have liquid assets to cover the down payment, closing costs, and prepaid expenses?", or "How soon do you want to move?". When I say "vague", I don't mean that in an insulting way at all. It's just that most people want to buy a home at some point in the future, but they haven't yet thought out all the necessary steps along the way to accomplish that goal. And this is where I borrow heavily from financial planners - in fact, I don't just borrow from them, I plagiarize them shamelessly! Let me explain.

If I were to ask you today "Financially speaking, where do you want to be?", you might answer "I want to pay off my debts, save a down payment, and buy a house in the next five years". And while most people would say that's a pretty good answer, financial planners will tell you it's not a good answer at all. They would say it doesn't "have any real teeth". Here's why.

Financial Planners will say you need to set a SMART goal instead, and say something like "I want to pay off my credit cards, save a 3% down payment for a $600,000 home, have $5,000 left in the bank for a rainy-day fund, and I want to do this by two years from today." Can you see the difference? A SMART goal is (1) specific, (2) measurable, (3) attainable, (4) relevant, and (5) time-based. It has some real criteria built in by which you can measure your progress steadily and consistently. And you'll reach your goal a lot faster if it's a SMART goal!

Helping prospective homebuyers develop goals to purchase a home is a lot of what I do. I've been doing it for many years, and I'd love to help you with it as well. If you're interested, just reach out to me in whatever way and time works best for you. And please be sure to stop by for next week's blog as well, when we'll talk about the third question financial planners ask, and how it will help you reach your goals to purchase a home.

Questions Financial Planners Will Ask You

Mon, 21 Oct 2024 14:52:40 GMT

Nobody truly likes budgeting, but financial planners will tell you it's crucial to your financial health. And if buying your own home is going to be a part of your overall financial plan, you should listen and pay attention to what financial planners say.

I've known and worked with many financial planners during my career, and it never fails to amaze me that almost always they will begin to form a relationship with prospective clients the exact same way that I do - by asking questions. After all, it doesn't make any sense to just start spouting information and knowledge at someone, because that will almost guarantee you'll lose that prospective client. That's not what building relationships is all about. Building relationships takes time and effort, and in simple terms, trying to fit yourself into the prospective client's shoes, into their lifestyle, into their mindset. And you simply can't do that without asking questions.

Whether or not your financial plans include owning real estate, financial planners will usually start with the same question - "Financially speaking, where are you now?" And your answers might include a quick review of how much you have in the way of assets, what your credit scores might be, what your long-term employment prospects are, an idea of when you want to retire, do you want to travel the world in your retirement years, etc. When you begin providing those kinds of answers, the financial planner will begin to "see into your lifestyle". And once you've decided to work with a financial planner, they'll do the same thing that many good real estate brokers and mortgage professionals do, which is to help you see and clearly understand your relationship with your money. Make no mistake about it, you have a relationship with your money. It may be a very healthy relationship which you are in firm control of, or it might be a toxic relationship, in which you're always spending more than you earn. Either way, it's very healthy to take a good, hard look at what you do with the funds you have. It will help you see patterns, some good, some bad.

Let me tell you a quick story about a former client. A very nice young couple attended a first time homebuyer class that I conducted, wherein I told a true story about another former client who had been a barista at a large retail coffee chain. This coffee chain employee had been in the management-trainee program, and in one of her meetings she learned that the "average spend" for a customer of this coffee chain was $350/mo., or $11.67/day in a 30-day month. Now, this was before the Covid Pandemic, about 8 years ago, so imagine what that amount would be today!

So the couple attending my homebuyer class went home, decided not to change their spending habits, but also to monitor what they were spending each month. Two months later they called and exclaimed "You've ruined our trips to "XYZ" Coffee! We kept track, and we were spending almost $400/mo.! So now we've bought our own espresso machine, and we make our own coffee each day, and we're saving about $300/mo.!" Think about that - $300/mo., or $3,600/yr. That's a lot of money that they hadn't realized they were spending.

Simple stuff? Sure, but it boggles my mind how many people I speak to who haven't gone through this kind of exercise. And it's one of the easiest things to do. It just takes a legal pad and pencil, maybe a calculator, maybe an app on your phone - just something that will help you figure out where your money is going. And it's the first step to financial health, and to owning your own home.

Does Down Payment Assistance Makes Qualifying Harder?

Mon, 21 Oct 2024 14:48:37 GMT

Does down payment assistance make qualifying harder? The answer is case-specific. I've done hundreds of mortgage loans for my clients that involved down payment assistance in the past. And in 99% of those cases, the down payment assistance did not make it harder for them to qualify. But in the interest of being fair, that was because I explained various down payment assistance programs to them, recommended they select a program where there was no monthly payment required, and they accepted my recommendation.

Let's do a quick review here. All the down payment assistance programs I've ever known about involve both the main mortgage on the house, and a down payment assistance loan that is recorded against the home as a second mortgage. In some cases, the borrowers are required to make a monthly payment on that second mortgage, and there is absolutely nothing wrong with those programs. But the reason I have never done such a loan program for any of my clients is that the monthly payment on the down payment assistance loan has to be counted into their DTI, or debt-to-income ratio. And that in turn means that their first mortgage - the "big mortgage" - has to be a little less in order for them to qualify.

So instead, I've always recommended that my clients use mortgage programs where there isn't any monthly payment required on the down payment assistance loan, because there isn't any payment to be included in their DTI. And that usually allows their "big mortgage" to be a little more, thus enabling them to buy a little more house. These programs usually require that the borrowers take a homebuyer education class, either live or online. This is usually required by the private mortgage insurance companies that insure these loans, because they want to make sure that the borrowers on these kinds of loans go into them with their eyes wide open, and fully aware of what their responsibilities are in a mortgage contract.

In lieu of monthly payments on the down payment assistance loans, these loans usually have to be paid in full when the borrower pays the mortgage balance in full, refinances the mortgage, or vacates the house to turn it into a rental property. There are also some programs that turn the down payment assistance loan into a grant, where the loan is forgiven after the borrower(s) has made their first 60 payments on the mortgage in a timely manner. And I've done both of these kinds of programs many times for my clients.

So - back to the original question: Does down payment assistance make qualifying harder? As I've said, the answer is case-specific. It depends totally on which down payment assistance program the borrower selects. It might, and it might not. And any mortgage loan officer who is "worth their salt" should be able to explain this to your satisfaction, as well as guide you in the selection of which down payment assistance program you want to use. If they can't, call me , and I'll be happy to walk you through it.

It's Too Expensive in My Market!

Mon, 21 Oct 2024 14:43:29 GMT

People said that in 1980, too! But consider what's happened since then! This is #4 of the great mortgage myths. Let me begin by saying I recognize houses are far more expensive than they used to be. I bought my first home in 1977, and I paid $11,000 for it. It was 50 years old, 2 bedrooms and 1 bath, 1,000 Sq.Ft., located in central Washington State. Today that same home is tax-assessed for $337,650. $11,000 might seem like a very low price, but believe me, back then it seemed like an awful lot. Today I live in an area where first time homebuyers have difficulty finding a home for less than $600,000, and if they're purchasing with small down payments, their payments run somewhere in the $4,000-$5,000/mo. range. But you know what? People are still buying! They're making adjustments in their monthly budgets, they're adjusting their expectations of what they're actually going to get in their first home, they're a little more accepting of kitchen countertops that haven't yet been upgraded to granite or marble... they're simply finding a way to make it work.

The questions are (1) how?, and (2) why?

The "how" is simply a function of dollars and cents... perhaps paying down some credit card debts, maybe paying off the car, and it could even be changing to a higher paying job. Then it simply becomes a matter of finding out what you can be approved for, and finding something in that price range that meets your needs more than it meets your desires. Sure, maybe it will have the wrong color carpets, and the wrong color exterior paint. But those are things that can be changed with time and effort. If a house is priced right and it has what real estate brokers refer to as "good bones", it's almost always a good investment.

The "why" is probably far more important to most people, and actually has a great deal of bearing on the "how". I dealt with a young couple about 5 years ago, who had really expensive taste. They could have afforded a home in the $350,000 range, but they couldn't find any homes that met their expectations and desires for less than about $475,000. They drove through neighborhood after neighborhood, weekend after weekend, pointing out homes they were interested in to their real estate broker. On Monday the real estate broker would call me, review the weekend's activity with this couple, and ask if there was any way possible for them to get into a $450,000-$500,000 home. My answer was always the same... not unless they get higher paying jobs, pay off a lot of debt first, or get a large gift from parents and relatives. Guess what - they still don't own a home today. They were either unable or unwilling to adjust their expectations and desires. Consequently they've forfeited 5 years of enormous equity growth and income tax deductions, to say nothing of the personal satisfaction of owning their own home.

Contrast them with another couple that I'm working with today. I first met them 10 years ago, when they attended one of my free homebuyer classes. They just wanted to get into a home that they could make their own, be able to paint a room the color they wanted, to plant their own plants, and to build a deck in the back yard because he liked to barbecue. They had decent jobs, decent income, and the most important thing was that they were realistic. They had a great real estate broker who found them a home that met their needs, and they bought it for $237,000. They worked hard to improve that home, and I refinanced it for them in 2021 when interest rates were lower. Today that home is tax-assessed for $539,000 - more than double what they paid for it! They were already saving for their next home, and because they were able to save some more money with their new lower mortgage payment, they were able to set aside even more for their next home. They called me 3 weeks ago, ready to start looking for their next home. I introduced them to a great real estate broker, and they're now under contract on a home for $680,000. And I'll close their loan for them at the end of this month. And that's my point.

This couple's "why" was more important to them than their "how". Consequently, they were willing to adjust to the market, and they made a smart investment. And today they are far better off financially than the first couple. I see this all too often, and I reply with the same answer that many other lenders and real estate brokers say - "Marry the house, and divorce the rate". It simply means that everyone acknowledges that with today's higher rates and higher prices, it's just a given that most of the time, the monthly payment will be more than you're comfortable with. And while I agree that this must be carefully considered in a "total life" concept, if you don't do it now, when are you ever going to do it? In other words, if you don't want to buy at today's prices, at today's rates, and then refinance later when rates go down again, when are you going to buy?

Will home prices come down when rates begin to decline? Think again - all lower rates will do is cause prices to keep increasing. It's the law of supply and demand. If you wait until later, all you'll do is cost yourself more money, and I can show you that in black and white. If you'd like to go over it, reach out, and let's do a Zoom meeting. I'm happy to show you how it works.

But please - don't get caught up in the myth that homes are just too expensive in your market. And don't tell me that you can't do it I've seen far too many people make it work, and be better off for it. If you want to do it, if you want to make it work, and if you're reasonable with your expectations and desires, you CAN buy a home. Call me , I'll prove it to you.

You've Got Good Job & Credit, & You've Found the House. Now What?

Mon, 21 Oct 2024 14:27:38 GMT

I've spoken about this before, but in light of today's lower interest rates, this question bears being brought to light again. Let's assume that you're selling your home, and because of the conditions of our current market, you receive several very good offers in the first couple days after going on market. What do you do? Which buyer are you going to engage with? How do you pick? If you have a really good listing broker, he or she will make some phone calls and talk with the selling brokers representing the various buyers, and ask questions about their buyers. The very first, and by far the most meaningful question should be "Have your buyers obtained a fully-documented preapproval?" Don't worry about the terms "prequalification" or "preapproval"... They don't really matter. But what does matter is the term "fully-documented".

You Don't Need 20% Down!

Mon, 21 Oct 2024 14:16:03 GMT

You don't need 20% down! Sure, it's nice, but it's not necessary. In my blog entry of last week, I promised that we'd blow the 5 greatest mortgage myths of all time out of the water. Today we're going to take the first one head-on, the idea of needing a 20% down payment before you can purchase a home. Simply put, it's just not true. It was true - a long time ago - but no more. Here's a short history on mortgages and mortgage insurance, so that everyone understands what it is, and why it exists.

In the mid-to-late 19th century, most of the U.S. population did not own homes. The "average Joe" just simply couldn't afford to buy one. The banks said you had to put 50% down, finance the balance over a 10 year term, and pay off the entire balance at the end of the 5th year. So if you were able to compile a 50% down payment, but not fortunate enough to pay off the balance in 60 months, you were constantly having to refinance your mortgage every 5 years. This was quite common in those times prior to the existence of mortgage insurance. Mortgage insurance is what makes lenders comfortable with low and/or no down payment mortgage loans, because if a homeowner defaults on their loan, the mortgage insurance company helps to make the lender whole.

Mortgage insurance began in the U.S. in the 1880s, and the first law on it was passed in New York in 1904. Then the U.S. went through World War I. Afterward there were a large number of service people returning to their homes with marketable skills, but they hadn't been in the work force long enough to save up a large down payment or develop credit histories that were acceptable to traditional banks. The mortgage insurance industry grew in response to the 1920s real estate bubble and went virtually bankrupt after the Great Depression. So from 1933-1956 commercial mortgage insurance wasn't available in the U.S. No PMI companies even existed until it was authorized again in 1956, when a law was passed, and Mortgage Guaranty Insurance Corporation (MGIC) was chartered. This was followed by a California law in 1961 which would become the standard for other states' mortgage insurance laws. Eventually the National Association of Insurance Commissioners created a model law.

The Federal Housing Administration (FHA) was conceived in 1934. And within 4 years of that time, homebuyers could purchase a home, using an FHA loan, with only 10% down. Today you can purchase a home with an FHA loan with as little as 3.5% down payment. Doing this you would have what is called the Upfront Mortgage Insurance Premium (UFMIP), which is usually financed into the loan amount, as well as a monthly mortgage insurance premium.

Later the U.S. went through World War II, during which the VA mortgage loan program was begun in 1944. Having undergone several updates of down payment requirements, maximum loan terms, and maximum loan guarantee, today a person can purchase a home with absolutely no down payment. The borrower(s) will pay a VA Funding Fee, which can be financed into the loan amount, unless he/she/they is/are exempted from it, according to their Certificate of Eligibility. And there is absolutely no mortgage insurance at all.

Later, of course, the U.S. went through the Korean and Vietnam conflicts. And again as in the past, a large number of service people returned home with marketable skills, but not enough time in the work force to save large down payments or develop credit histories sufficient for low or no down payment mortgages with conventional lenders.

So PMI companies developed mortgage insurance programs, first to insure mortgage loans for people who made 10% down payments. Due to growing demand and increasing home prices, they later developed programs for people who made 5% down payments. Later still, 3% down, and even 0 down payment conventional loans were made available. So if you want to purchase a home, mortgage insurance truly isn't the "elephant in the room" that it's often made out to be.

If you can afford to buy a home with a smaller down payment and a higher monthly payment, you can certainly do so. In fact, simple math will prove that if you can do so, you are much wiser to do so as soon as you are able, rather than waiting until you save 20%. And if you'd like to go over that, just contact me directly, and I'll be happy to illustrate it for you.

Be sure and watch for next week's blog. You know that down payment you're saving for? Well, you can get down payment assistance on many mortgage loans across the country!

Blowing The Five Greatest Mortgage Myths Out of the Water!

Mon, 21 Oct 2024 14:08:00 GMT

If you want to buy in today's market, you need to be well informed! It's amazing that so many first time homebuyers still believe in the five greatest mortgage myths of all time, because they haven't been true for decades. I can't begin to tell you how many homebuyers I've worked with over the years who started out with the same bad information. As I've worked to help them retool their knowledge, and empower them with current information, I've found that the misinformation usually comes from two main sources.

The first source is understandable. Because homes are so expensive, homebuyers want to be wise with their money, and seek out the experiences and advice from their friends and loved ones - it's just the normal thing to do. But if their parents bought their last home ten years ago, and they rely on their parents' advice, then they're relying on information that is totally out of date. If they're trusting information from their older siblings who bought homes just 3-5 years ago, the guidelines on a particular subject could have changed dramatically. If they're drilling down into the information from their best friends who just closed on a house last month, please listen and hear what I'm telling you when I say that no two situations are EVER the same! So the only scenario that can be considered is YOURS, and if you try to do it differently you're already making mistakes that could easily be avoided. And that means that you need to find a mortgage loan originator who will take the time to answer your questions - all of them - even if you ask the same question 3, 5, or even 19 times. The one you select needs to do that for you. I'll cover how to find such a loan officer in a later blog entry, but for now, just know that you need to do your own research, and find a loan officer who works full-time in the mortgage industry.

The second source of bad information is the mortgage industry itself. I've met mortgage loan originators who found it all too easy to gloss over loan terms, explanation of mortgage terminology, why things have to be done a certain way, who don't want to go the extra mile to make sure that their clients have a good understanding of what's going to happen as they go through the mortgage process. Heck, people don't want to seem dumb, so after the second or third time asking the same question, they usually just say "OK" and move on. It's incumbent on a mortgage loan originator to repeatedly ask "Are you with me", "Do you understand that", and "Are you OK for me to move on to the next subject?" If they don't do that, they're just perpetuating their client's lack of knowledge. But let me put it a different way... If you're not working in the mortgage industry every single day of the week, there's no way for you to know what you don't know. But it is most definitely a loan officer's job to discover that as he/she works with you, and then to make sure that you understand what's happening in your pursuit of a mortgage. That's just good business, plain and simple.

In that pursuit, over the course of the next five weeks, together we're going to demystify the top five mortgage myths of all time, and blow them out of the water. So stay tuned! Next week - You Need A 20% Down Payment (Bah, Humbug! Very few of my clients had 20% when they bought their first homes).