Tax Credit Deadline Looms!

There is a great article on MarketWatch.com about the tax credit and how it works. (see linke at the bottom of this post) A reader wrote in to inquire whether two people who are planning on getting married can by a home before they are married and then both claim the $8,000 credit.

The answer was a resounding NO! Here are some important things you need to know about the Federal Tax Credit for purchasing a home.

1. It's not really $8,000... ...That's right, its 'up to' $8,000. The law actually says that the credit is $8,000 OR 10% of the purchase price of the home, which ever is lower. This means homes less than $80,000 yield a lower credit.

2. It is for first-time home buyers. The definition of a first-time home buyer is anyone that has never owned a home or who has owned a home in the past but has not been a homeowner for the past 3 years.

3. You can only take a credit equal to what you paid in Federal Income taxes. There are some disputes on this one so anyone considering purchasing a home should check with their accountant or CPA.

4. Multiple buyers of a property, i.e. spouses, betrothed, life partners, friends, etc, can only split the tax credit. So if there are two people, each owning 50% interest in the property, then they don't both get $8,000. They would have to split it.

5. And LAST OF ALL! The tax credit is set to expire December 1, 2009! That's right! Get out there and get shopping if you are a first time home buyer and if you are a builder, Realtor or investor, get to marketing that home. After December 1st it may be a tougher sell!

Read the article that inspired this one and many others on this blog at http://marketwatch.com/ For the specific article that relates to the tax credit got to http://www.marketwatch.com/story/expert-gets-it-wrong-on-home-buyer-tax-credit-2009-07-24?link=kiosk

Luring the Right Buyers

Whether you are a real estate investor and you want to use a ‘flip’ strategy or you are a homeowner ready to sell your home fast so you can take advantage of the current market to upgrade. Luring the right buyers is critical in this type of real estate environment.

With the federal tax credit of up to $8,000 and now with HUD allowing for the issuance of short-term ‘down-payment’ loans for those that qualify for the credit, a bevy of new buyers are hitting the streets. You can sell a home and in some areas you can sell it fast if you do the right things and deploy the correct strategies.

The Finer Points of Selling

As a seller there are some critical mistakes that you don’t want to make and there are some important things you can do to make sure that your home is above the rest. Learn the psychology of today’s buyer and you’ll achieve success.

Remember that people are nervous right now. They are willing, but reluctant, players in the real estate game. Most buyers understand that they can get a great deal but are still nervous about the economy. They also are ‘novice’ buyers and many don’t want to buy a home that needs a lot of work.

Understanding how to overcome these buyer’s objections and knowing how to create excitement and buzz is critical to getting offers and receiving a contract that is close to your original asking price.

Point 1: Create an Emotional Connection
It is all about that first impression. One thing that many people forget is that the front of the house is the first thing a buyer sees. Make sure you spend a little extra time creating some flair and excitement there.

It’s kind of like staging the inside of a vacant home (which we’ll get to in a moment). You want to focus on some key areas. Take care of the simple stuff. Edge the driveway and curb, Paint the front door and shutters, cut large shrubs back and replace dead shrubs. Add some color by planting seasonal flowers and ‘limb up’ trees with low hanging limbs so the house is visible from the street.

You can even move to the backyard and create a little outdoor living space by adding some lawn furniture. Kick it up a notch by having a pitcher of lemonade and some to-go cups when ready when you know the showing is going to happen. Just before you leave, place the lemonade on a table outside and put a note on the back door inviting them out for a cup! Be creative and create an emotional tie!

Point 2: Stage and Declutter
I cannot emphasize this enough. Even if you do a great job of making a beautiful connection outside, it can all be lost once the prospect walks through the door. That is why it is critical for vacant homes to be staged and for occupied homes to be decluttered.

Staging is about making a connection with potential buyers. They want to know that they can truly ‘live’ in the home. You don’t have to stage every room and you don’t have to set up a complete room of furnishings, however, making sure that you have some nice pieces of furniture, fresh flowers and colorful vases and lots of lamps and light are a must.

Decluttering is also important. The trick is to create a showroom appeal. You want a modern, clean feel and you don’t want to make the family feel like they are living in ‘your’ home. Some experts even suggest removing all pictures of family and replacing them with pictures of scenery, flowers and other serene settings.

Lastly, staging is not only about the look of the place. Staging can include sights, sounds and smells. Pleasant music on in certain rooms can evoke a since of calmness and fresh baked chocolate chip cookies never displeases. Again be creative and get potential buyers thinking about where the furniture goes instead of looking for problems with the home.

Point 3: Don’t Be Cheap
Remember, this is a buyer’s market and buyers know it! Don’t be cheap, offer right out of the gate that you are willing to pay closing costs. This may help you get an offer that is higher right from the start.

Also make sure that you don’t snub lower offers. Remember that people are trying to find a deal and these days they can. If they make an offer on your house then that means they are probably truly interested. Every offer deserves a counter offer; it’s basically a conversation starter that could lead to a sale!

Point 4: Warranties & Protections
Some creative strategies that could get your house sale moving and attract more quality buyers to the table are the exact right incentives for today’s market place! First, offer a home warranty, even an extended home warranty. This can be a great way to get people in the door.

But don’t stop there, some lenders and many real estate firms offer policies from affiliated insurers that protect the buyer in case of job loss. Offer to pay for insurance that will make payments for the buyer if they lose their job. Many times this can get a buyer over the hump and help them make an affirmative decision to buy!

In Conclusion; Be Creative

There are many other creative ways to get your home sold. Everything is on the table these days from Life Insurance that pays off the mortgage if someone should die to paying the first year of utility bills for a full price offer.

If you are a real estate investor attempting a quick-turn strategy you should employ all of these strategies to create a sale in a short period of time for top dollar. If you are a homeowner attempting to sell, these strategies should make your home stand heads and tales above the rest!

Remember that an emotional connection, imagination and strategies to overcome buyer’s fears and concerns is the way to a successful transaction in a shorter period of time. Good luck and happy selling!

For more information and to read the article that inspired this one go to http://www.marketwatch.com/story/story/print?guid=05010834-B368-4E28-A473-A3E147D3D657

The GM Affect

Interest rates have gone haywire the last couple of days. You won’t hear it reported in the media though. Why? Because it would look bad for certain economic positions and actions taken by the current Administration …at least that’s my take on it…

The problem is that the bond markets are upset about the way the Obama Administration has handled the bond holders for Chrysler and fear the same will happen with GM. At the administrations urging, the judge in the Chrysler bankruptcy case forced the bond holder to take on more risk.

Usually bond holders are the first to be protected in a bankruptcy but this time it was other interests that were protected first. (think Unions) The bond holders took a back seat to almost every other concern.

Before you go saying those ‘evil’ bond holders (lenders) deserve it, think about this. Bond holders invest in companies by making loans to them because they are risk adverse. Investing in normal stocks is to risky for these investors. There reason? They are investing money from pension funds and insurance companies. This money needs to be invested in areas with very little volatility and steady returns with low risk to the money. (think about your pension, you want safety right?)

The way these bond holders are being treated is a huge change from how large restructuring like this normally takes place. And this sets a dangerous precedent going forward. So with a bankruptcy from GM looming on the horizon, the bond market got very, very nervous and everyone backed out of the market in one day!

I’m calling this The GM Affect because it was so awful. We saw rates jump 1% in less than 24 hours ….by the way… That is completely unheard of!

Rates have come back down today, but I don’t know how long that will last. Rates jumped up to 5.5% from a low the previous day of 4.5%. Rates today are back down to 5% but no one knows for how long.

With a very scary economic report just out about a 5.7% decline in GDP the first quarter of this year and about companies slashing inventories and jobs (approximately 2,000,000 more jobs lost) I’m not sure how much longer rates can stay this low.

So while the Administration rolls our their latest campaign touting the ‘good’ that the stimulus package has done and while they roll out the parties for the supposed 150,000 jobs that were created, our economy has had the second largest contraction since 1981. (By-the-way, only about $11 million of the $45 Billion that has hit the economy was for worthwhile make- work projects. The rest was for one-time payments for welfare and Medicare and for the extension of unemployment benefits.)

I know that this sounds like political commentary and I apologize because it is truly not meant to be a political view point. I'm commenting on my concern about the numbers The numbers don’t lie, and since they don't lie, then someone or something else is lying. Could that something be the government, maybe both parties? Some will point back to the Bush administration as an excuse to support Obama’s actions. Guess what? Bush was wrong as well!

All the economic tricks and gimmicks being tried today have been attempted before. We did here in the late 70's to early 80's. and it didn't work. Heck countries all around the world have tried what we are doing and they will tell you it doesn’t work.

Call it Keynesian Theory, call it Social Democratization, call it whatever you want but understand this. If it is illegal for you to 'kite' checks to cover your debt, then why do we allow the government to do it? (Kiting a check is when you deposit a check from one of your own checking accounts into another and then from that account back into the original account in a never ending circle just to cover checks that you right elsewhere, at some point it will catch up to you.

So why are we allowing our government to do a thing that we would be put in jail for doing? Because of some ‘theory’? Does this make sense to anyone?

At some point we will not be able to print enough money to buy our own bonds to fund our bloated and bureaucratic government. I’m hoping for the best and preparing for the worst. Here’s a link to a great article with the bad news/good news that can help you make up you own mind. http://www.marketwatch.com/story/us-gdp-revised-to-57-decline-in-first-quarter

U.S Foreclosures Filings Sets New Record High

The second wave of foreclosures has arrived. Is the American economy ready?

The tide of potential foreclosures has been rising for quite some time. The U.S. economy had a brief respite while banks and lenders tried to decide which way the political winds were blowing. This may have briefly delayed many of the recent filings.

Now that the new administrations policies are clear, the cleansing of the banks balance sheets begins anew. Combined with holdover filings from last year, we are beginning to see the start of the ‘second’ wave of foreclosures.

This so-called second wave is caused by the Alt-A and Option ARM loans that are scheduled to adjust or come due between now and November of 2009. Many of the resets on these loans will cause real estate investors and laid off workers to default.

A recent article on MarketWatch.com (http://www.marketwatch.com/story/us-foreclosures-reach-record-rate-in-april ) suggests that the delay was caused by the moratorium on the industry that were recommended by regulators. Some believe that the recent stabilization in overall values across the nation may hold steady even though there is this new round of repossessions hitting the books.

Opportunity abounds for real estate investors with the means or the creative drive. With multiple options available, investors can still invest in real estate and with rising rents and low prices real estate investor activity in the market place appears to be increasing again.

While many thought that greed and over zealous real estate investors were partly to blame for the bubble in the economy, some economist have argued that prudent and professional real estate investors need to be active in the market in order to truly stabilize home values.

There are many lenders that have started to lend to investors again. Cautiously these lenders have entered the market and are lending to those that can prove experience and credit worthiness. Still other real estate investors are slowly testing the markets using creative strategies that skirt the traditional lenders and allow them to access capital that allow them to build and manage large portfolios of rental properties.

The time is ripe for real estate professionals. These are the times when fortunes in residential real estate are made and many people are seeking out the abundant opportunities in this market. Is the time right? Is America ready for the second wave? Only time will tell…

You Know it is the Bottom When...

In a shocking display of just how bad the foreclosure crisis got in California, a Texas bank decided that it was more cost efficient to destroy 16 brand new homes in a development they took back through foreclosure than to try and finish and sell the homes.

This is true evidence of exactly how far prices have crashed and is the perfect indicator of what happens when a crash begins to reach the bottom. When the decisions like this can be made and are sound business decisions it can be a sign of that things have gotten about as bad as they are ever going to be.

This is called capitulation and it is what many experts have been looking for in order to 'call' a bottom. This is exciting because positive signs after this may be not be false positives. Future positive market activity may be the real thing.

Stay tuned.... Ben Bernanke speaks today, analysis tomorrow.

Time to Get Started!

Many of you know that I have a passion for real estate and some of you even complain that I work at it way to much. Well guess what, I've listened to you and I'm turning over a new leaf.

Instead of working at this business day in and day out. Grinding it as my dad used to say... I've started a new venture that will let others 'grind it' with me!

I bet you thought I was going to say I was hanging it up, throwing in the towel or some nonsense like that? LOL

Come join me and learn what me and MY advisers already know. Real estate is the key to real wealth and growing a solid, long-term real estate business leads to true economic freedom.

Our first ever Networking and Education Event is scheduled for the this Saturday, April 25th, 2009 from 11am to 2:30pm. Find out all the details by visiting my site a http://metroarearc.com/

We will have nationally recognized speaker, author and real estate experts Andy Heller and Tony Youngs. Come sit down with them in a private 30 minute Q&A. Get up close and personal, it's a once in a life-time chance to get all your questions answered.

We'll have hot dogs and cola and lots of networking. Join in our breakout sessions and learn How to Finance your deals, learn How Important your floors can be in your rehab and visit with Author and Decorating Expert Barbara Heil-Sonnek and learn how to rent or sell your home faster!

Please come, the cost is only $29 at the door for non-members. FREE to members of MARC. If you are not a member of Metro Area Realty Clubs, join the day of the event and attend this event and all of our future events for free.

Please come and join me, this promises to be a day filled with education and networking! It' s a GIANT Cook-Out also, you know how much fun that can be! ;)

Ready To Refi? Here is the 411

Normally I reserve this blog for comments on residential real estate investment strategy, but today I'm going to stray from my normal regimen.

Interest rates are at all time lows. So far the only people that could refinance were those with a lot of equity in their home and perfect credit, but all that is about to change.

Many of us pay our bills on time and are responsible and we have bemoaned the fact that it seemed that all the help was only targeted at those who were irresponsible and didn’t pay their bills. Well now we are getting some help.

The issues facing many responsible home owners may be two fold.

1. The value of most property has dropped more than 25% and some as much as 50%. Refinancing for many people means they would have to add PMI at inflated premium prices. This means the savings from lower rates is wiped out by the addition of higher priced PMI.

2. Many responsible homeowners owe more on their home than it is actually worth.

The governements solution is the Making Home Affordable Program. This program has it’s own web site with details about checking to see if your home will qualify under the program.

The program allows lenders to refinance your home up 105% of it's current value. This means that even if you owe more than your home is now worth, you can still refiance at much lower rates without taking any penalty to the rate.

With regard to the PMI, if you do not currently have PMI then your new loan will not have PMI. And if you do have PMI then your new loan will have PMI but it will not be higher than what you currently pay! Now that's relief we can believe in!

If your loan was sold off to Fannie Mae or Freddie Mac in the secondary market it will qualify. But, there are separate rules to follow depending on which company bought your loan.

If your loan was purchased by Fannie Mae you will be eligible to complete a rate and term refinance of your 1st mortgage at the new lower rates with any lender or mortgage broker of your choice as long as the new loan is underwritten to Fannie Mae.

If your loan was purchased by Freddie Mac you will be eligible to complete a rate and term refinance of your 1st mortgage at the new lower rates with the lender that currently holds your mortgage. However, in order to keep your current lender honest and competitive you can seek out a mortgage broker that will take your loan to your lender through their wholesale channel.

All this may sound a little confusing so I’m offering up my email address and phone number and will assist you with any questions you may have free of charge. If you have specific questions or need more information please contact me at:

Michael Gross
Office Phone: 770-350-7373
Email: mgross@dividendamerica.com

I also have the web site where you can look up your loan to determine if you have a FannieMae or FreddieMac loan. Shoot me an email or give me a call. Happy to help in any way I can.

Michael D. Gross
President
Dividend America Mortgage
770-350-7370
http://dividendamerica.com/

Short Sale Madness

Many investors today are chasing the ‘short sale’ as a viable preforeclosure strategy. However, they are finding that the short-sale is really a long sale.

The one thing to remember about short sales is that you may be able to short the mortgage on the home but you’ll have to be long in patience! With the advent of the government encouraged loan modification process, the short sale process has become even more cumbersome.

If you have a short sale strategy, you should have other strategies also. Many times short sales offers never get accepted because lenders are overwhelmed and do not have the staff or decision making powers to move the transaction to acceptance.

If you are entering into a short sale negotiation with a bank you should have the ability to close quickly and have the willingness to wait blindly. Patience is usually the key to success in these situations.

What you need is viable strategies…

Steps to Success

With the government encouraging banks to modify loans and keep homeowners in their homes, short sales are becoming tougher. To succeed you’ll need to modify your strategies.

First remember that you’ll have to work within the system and that will be frustrating. Your tactic may require you be flexible. One tactic that many investors are employing is a total investment of time.

This means they inform the Realtor and the lender that should a short sale not work out, they are willing to wait through the foreclosure process and continue the negotiation process once the property comes out of foreclosure.

Another tactic is multiple offers. Some experts suggest putting a 48 hour limit on acceptance of the contract. This way they can make several offers in a very short period of time without being committed to closing on all of them.

In this way the investor can continue to take advantage of every opportunity. Since very few short sale transactions actually end a successful contract, having the ability to negotiate several contracts at a time is critically important.

Finally, to create the most success some savvy investors have started to employ short sale experts. This can be tricky because there are many people who claim to be short sale experts but few really are.

Make sure your short sale expert is a professional. Check references; make sure they have the necessary skill sets. Many experts recommend only using attorneys or qualified real estate agents.

Avoid anyone who just took a course on the subject and no real estate experience. To be successful you’ll need real professionals that understand the law and understand how to speak to attorneys.

The bottom line is this, in these days and times when bank REO departments are overwhelmed and the government is exerted more and more regulation over bank policies invests will need more than a short sale strategy to score great deals!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

5 Reasons To Buy NOW

Recently I read a great article on MarketWatch written by Amy Hoak. http://tinyurl.com/dx9wjb She believes that the signs are right and buying now may be a very smart decision.

The reason that a lot of people are choosing not to buy right now is because of all bad news in the media. However, it is exactly times like that the people need to break away from the pack and buck the trend.

Warren Buffet says that when markets are greedy he is cautious but when markets are cautious, he is greedy! In a nut shell, the housing market is very cautious right now, you should be greedy.

Amy’s article goes on to point out 5 reasons why you should buy a home right now!

1. Affordability – Home prices are now at 1999 levels! That’s a huge discount and since the profit I real estate is generally made when you buy, now is the time.

2. Large Inventory – There are many homes to choose from, pick the one you want and name your price! More than likely, it’ll be yours.

3. Builders Discounts – Builders have finally figured it out. Shedding the dead weight is the only way to get cash flowing and business moving again. And their giving huge discounts to move those empty houses.

4. Low Interest Rates – Interest rates on residential mortgages haven’t been this low since the early 50’s! If you miss this move, it will likely be another 5+ decades before you see them this low again.

5. Federal Tax Credit – While this doesn’t affect investors directly, it can in the future. The last time we had a housing slump it was this exact credit that helped pull the country out of it.

The bottom line is that now is a good time to buy. Using a buy and hold strategy could mean huge windfalls when the economy turns around so get out there and make some offers. Now is the time!

Roller Coasters and The Ride

http://strategysessions.blogspot.com/

Remember those really great roller coaster rides you experienced as a child? After zooming around several twist and turns and being jerked from side to side, your cart would slow as it approached the really large hill.

You hear the chu-chunk of the hook as it locks onto your cart and then you experience a slight jerk as you are pulled reluctantly forward. Clink-clank, clink-clank; you here the ‘song of the chains’ as they grown to pull the weight.

It’s just the carts, you and 50 others behind you, anxiously awaiting what comes next. The exhilaration, the anxiety …your breathing is no longer rhythmic but comes in big gulps of air and wind. Sweat on your temple as you near the top!

You can’t see over the edge, you feel as if you are dangling in space with nothing but this flimsy bar strapped across your thigh. You notice a loose bolt and the bar jiggles. You think, oh my, that’s not good!

Suspended in time, animated at the top, you wait. And then it happens. You roll over the precipice and you are staring straight down! Sky above and earth below! God I hope this thing has breaks or a parachute is the only thought rushing through your head!

Before you know it your flying, heart racing, down, down, and down, faster and faster! Everyone’s screaming bloody terror, a few fools have their hands in the air, you hang on to the bar for dear life praying that the loose bolt doesn’t unscrew any further!

Then you are at the bottom! Whew, everything levels out. You are still moving faster than the speed of light and you are still being jerked from side to side but you know the ‘ride’ is almost over! There is hope! Whew!

That’s how I felt the first time I ever rode the Scream Machine at Six Flags Over Georgia. I’m sure everyone has experienced their own Scream Machine in their own town and hopefully my description evoked the same sensational memories I have.

I give you this experience as an example of what has happened in the real estate industry. We’ve heard the cha-chunk, we’ve experienced the ringing clink-clank and we’ve endured the precipitous fall to our inevitable doom!

But now we are in the jerky part of the ride. It’s still a little scary, we have some more hills to climb and fall from and we have a few more harrowing hair pin turns to endure, but the end is near.

If you are an investor you should be prepared. Get ready so that when the cart pulls into the station you can hit the ground running. There are new rules and if you can figure out what they are and prepare yourself to operate in the new environment the opportunity will abound.

Stay tuned for what the new rules are, changes are coming fast and furious again. But this time it will be for the good.

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Window of Opportunity

Americans are receiving an opportunity we haven't seen in over 30 years! That opportunity exists today, right now!

Like many Americans I was taught that saving was important but I never really 'got it' until now. We all thought that Social Security would be there for us. Many government officials have also touted the virtues of Medicare and Medicaid to take care of us when we are older.

The Nanny State ....This utopia that would save us all and give us comfortable lives has been tried elsewhere in the world. France, Spain, Italy and to a greater extent the former Soviet Union. Guess what? It DOES NOT work.

Look at our current economic situation. It was caused by many things but the main cause is to much spending. Now look at our politicians, many who either have been in Washington for a very, very long time or who embrace the tired old thinking of their traditional 'party' lines.

While I truly believe that more government and more spending are NOT the answer to our current economic problems, there is an opportunity in all of this! That opportunity is the lower interest rates.

These lower rates give all of us the opportunity to consolidate debt. These lower rates give people the opportunity to change 30 year debt to 15 year debt or take 15 year debt and accelerate the principle reduction to pay it off in 10 years.

Debt repayment and becoming debt free is the opportunity that exists before us today. That opportunity will not exist for long! All the money the government is printing and bonds that are being sold to fund the huge omnibus spending packages will eventually cause higher inflation and higher interest rates.

Your window of opportunity is now. And whether I sound like Paul Revere or the The Little Boy That Cried Wolf! is not important. This window of opportunity to change your life and your families future is what is important.

I look at Washington and see the boondoggle. I see a government that constantly believes that spending is good and that getting us to spend is the way out of this mess. I say NO! The way out of this mess is savings, debt repayment and a taxation system like the Fair Tax that promotes a society that spends responsibly and saves, saves, saves.

We will come out of this recession. We are Americans so we will find a way to thrive. And whether the next economy is a growth economy or a further sinking recession, if you take advantage of this window of opportunity it won't matter to you. You'll be prepared for both!

So take my advice (for whatever that is worth...LOL) and make a decision soon! Choose to save, lower your interest rates, consolidate debt or shorten the term to pay off your debt, even if that means you have to roll in a few points to get that really great rate! In 5-10 years, you'll be glad you did!

Michael Gross is the President of Dividend America Mortgage. He has been a Realtor, a builder, an appraiser and has been a consultant in the field of Real Estate to Fortune 500 Companies. Today he uses all of his experience to help home owners and investors get the best rates and the right mortgage for every situation. Call Mike at 770-350-7373 or email him at mgross@dividendamerica.com

Fannie Changes The Rules Again!

Confused by all the rules and regulations coming out of banks these days? Well here's on piece of news that makes a lot of since!

But this time it's a good thing! If you are a real estate investor specializing in residential you are getting ready to receive relief!

Many residential real estate investors have had their businesses stalled because of Fannie's 4 financed properties rule. But the game is changing, on March 1st Fannie Mae will start allowing investors to have up to 10 financed properties.

As always, the devil is in the details. Here's a short list of what you need to know.

1. You must have a 720 or higher credit score.

2. This is a Full Doc loan - be prepared to prove income.

3. 75% Loan To Value for rate and term refinance on Single Family but only 70% on Multi Family.

4. You can cash out SFR but only up to 70% and only after 6 months to 1 year seasoning.

5. Here's the kicker - You must prove cash reserves of 6 months PITI on the property being financed plus an additional 6 months PITI for all other investment properties and/or 2 months PITI for a financed primary and second home.

I know, I know, that seems like a lot and some of you still don't qualify. But the good news is things are beginning to loosen up and the brainiacs in D.C are finally realizing that to stabilize home values and get the economy moving again they have to include Real Estate Investors in the equation!

Michael Gross is President of Dividend America Mortgage and is an expert in investment property financing. His vast 20+ years as a builder, appraiser, Realtor, mortgage broker and active investor gives him the knowledge and experience to help anyone seeking a mortgage for the purchase or refinance of any type of real estate. Call Mike at 770-350-7373 or email him today at mgross@dividendamerica.com.

I Want My Four Point Five!

...Okay folks, get ready for a long one, but hopefully worth the read! :)

I want my Four Point Five, interest rate that is… That’s right, we’re all sitting around waiting for that 4.5% interest rate that the Feds promised. After all, it’s the only thing that will get our economy turned around right?
Well, that and the new pork belly stimulus package, but that’s a different subject all together.

We’re here today to try and understand why interest rates haven’t dropped to 4.5% like the Fed promised. The answer is in something called the Mortgage Backed Securities (MBS) market and the Treasury Bond (TSY) market.

I wish the explanation of how these markets work was simple but it’s not so I’ll try to summarize using visual analogies.

Imagine a table covered with stacks of little square crackers. All the crackers look the same but their not. Some have a little salt on them, some have no salt on them and some, well, they have a whole lot of salt on them.

Now imagine that you live on a diet of crackers and salt. Sometimes you need more salt and sometimes you need less, BUT! you always need crackers. On days when you need a lot of salt and you have to compete with others that need the salt too, you’ll pay more for the very salty stack of crackers and pay less for the unsalted stack.

Supply and demand comes into affect. There is a limited supply of stacks of very salty crackers and everybody wants them, this drives the price of the very salty cracker stacks way up!

This is what is supposed to happen in the MBS (Mortgage Backed Securities) market. There are pools of securities called Stacks. A share of a stack, one cracker if you will, starts out worth $100.

These stacks come with different layers of salt or interest rates. So you’ve got a stack that pays a 4% rate, 4.25% rate, 4.5% rate, 5% rate and so it goes. Because of the varying returns on each of these stacks, the price of the share (the cracker) in the stack will vary based on the number of buyers for that stack.

So, if nobody wants a 4% return, the $100 share might be sold for $98. If everybody wants a 5% return then a cracker …uhumm, I mean share, in that stack might sell for $102 dollars. Why is this important?

Well, it’s important because these interest rates represent a yield to the owner and that yield affects the interest rates that you and I pay on a long-term mortgage. Get the picture?

The higher the price above $100, the lower the actual yield or return to the owner is. When the price of the shares in the stack increases the yield decreases and the net result is lower interest rates. In simplified terms this is the way the MBS market works and it is how banks determine the interest rates we pay on our loans.

Now, on to the problem at hand! Why aren’t rates going down? Rates are not decreasing because everybody has figured out the game. In order to make rates go down, the Fed has to buy up stacks of Mortgage Backed Securities.

In order to fund these purchase the Fed did two things. They sold Treasury Notes (TSY) and they printed money. When this happened ‘the jig was up’ on many levels.

First, foreign governments saw us diluting our dollar and flooding the bond market so they stopped buying our debt. Big problem! This caused the price of TSY to drop and the yield to increase, it also caused the Fed to have less buying power.

Second, many banks spied an opportunity! If they could get some extra stacks out in the market, maybe the Fed would buy them and pay a premium. Bonus time, right?! Not so much.

What ultimately happened was the ‘Market’ (that’s right, with a big M) figured out what was going on. The MBS market was flooded with stacks. Everybody want a piece of the Feds action. i.e. all the banks wanted some more of our tax dollars, like the bailout funds weren’t enough!

When these stacks flooded the market the Fed could not absorb them all and the price on the stacks dropped sharply. This increased the yield and ultimately increased the interest rates we are offered on mortgages!

Now the markets are starting to settle again and the overload of stacks is being slowly absorbed. Here's the $64,000 question, when will rates dip below 5% again?

I’m not sure, but my guess is as soon as the government stops tinkering with it all. If they would just let the markets work, rates would have come down naturally. Every time the Fed does something like this it seems to put us 30 days farther out.

I want my 4.5 and I know you want yours too. My suggestion is to get out there, choose a lender and get approved and then be patient and wait for the rate that is right for you. When you see it, grab it! Chances are it won’t be there for long….

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Paying a Discount Can Set You Free!

I was tooling around the web the other day and I was looking for new strategies to maximize the use of a mortgage. Many of you know that I see the mortgage as a financial tool and I’m always looking for new angles to use this tool!

A mortgage helps an individual employ one of Kiyosaki’s main principles of using OPM, other people’s money. In recent years as the banking and real estate industries have collapsed, it’s getting harder and harder to get a loan and use these principles.

If you search this blog or my web site at ttp://dividendamerica.com/DAM/html/learningctr.asp you will find many articles about how to effectively use a mortgage. Many articles discuss the proper use of a No Closing Cost loan or how to get sellers to pay the closing cost for you with the main theme always being focused on how to minimize your investment in the use of OPM.

You real estate investors understand this terminology and it is music to your ears, but for others who may be new to investing or who may just want to know the best way to get and use a mortgage, these terms are a little foreign. Suffice to say, usually I preach to invest as little in the mortgage as possible in order to get the biggest bang for your buck!

Sometimes that means paying full closing costs to get the absolutely best rates (like in the case when you’ll be in the home for more than 3 years). While other times I say, lower your costs when in the home less than three years and in the case of a purchase, get the seller to pay your cost for you.

Well my research has led me to advise my readers and customers to do something I never thought I would agree with! In this day and time, in this turbulent economy, in this time of record low interest rates, yes… here it goes…. it DOES make sense to pay some discount points to lower your rate.

Hold on now! You must read on. There is a condition to all this….

It makes sense if you believe as I do that this economy will lead to a ‘new’ economy of stagnant growth, tepid value appreciation in real estate and maybe even higher interest rates with some inflation. America is tapped out. We can’t spend anymore and we can’t spend our way out of the current mess.

The strategy we should all use is one that helps us to become debt free. The fastest way to -0- for some people is to refinance their 30-year fixed rate mortgage into a 15-year fixed rate.

I know, many of you instinctively understand that this type of significant change in your mortgage structure will result in a higher payment. But wait! it doesn’t have to.

Here’s where it might make since to buy down the rate by spending some equity on closing cost. The 15-year mortgage includes a higher principle reduction portion with each payment so you’ll recoup the lost equity in a very short period of time.

Think about it this way, if you can change your term from the current 28 years you have left by converting it to a 15 year mortgage and buy down the rate to level that doesn’t significantly change your payment, then why not make the change?

Here’s an example I recently did for a customer. He has 28 years left on a 30 year mortgage and his payment is $1,620 per month. We are refinancing the loan into a 15 year fixed and he’s paying 2 points to lower the rate. The new payment on the 15 year mortgage is $1,665!

The new payment is only $45 per month higher but we shaved 13 years off his mortgage! He just spent $5,570 to create a savings of $245,700 and recoups his current equity position in less than 14 months. That makes a whole lot sense.

My conclusion is that in this economy and the next we all need to be debt free. Spending some equity now in order to create a faster pay off of your mortgage is the best way to achieve a debt free goal!

Michael Gross is the President of Dividend America Mortgage and has been in real estate for over 20 years. He has been a builder, a Realtor, an appraiser, and currently he is a lender and an active real estate investor. He uses all of his experience and knowledge to show individuals how to properly use a mortgage as a tool to help create greater wealth through real estate investing. For more information on residential and small commercial loans please call 770-350-7373 or email mgross@dividendamerica.com

Learn What Banks Want

Banks are crumbling all around us. The Royal Bank of Scotland is receiving a $41 billion dollar bailout.... That's Billion with a capital 'B'! The EU is crumbling, the Bank of Japan needs more liquidity and CitGroup is trying to divide itself again.

With all these problems with banks, how does anyone get a loan. It's simple, there are three things that banks are looking at right now. Provide the bank with these things and the underwriter will say yes to your loan.


If you are tired of chasing dollars, pay heed to this advise and you'll get the loan you need.

1.) Decent Credit: You don't have to have perfect credit, but you do need decent credit. If you have some problems you need to begin to make the effort to solve them. Showing the bank you are concerned about your credit and doing what it takes to set things right will go a long way!

2.) Low LTV: LTV means Loan To Value. The banks want security and they want you to invest in your property. You can get a loan if you have some down payment. In cases where you are needing a refinance, show the bank you are willing to leave some equity in the home and you'll be the golden child! Approval here I come!

3.) Income!: How are you going to pay the loan back? The bank wants the answer to this question. They calculate all of your monthly debt payments (including the mortgage you are applying for) and divide by your income. They want to see a debt to income ratio of 40% or less.

Now there are some compensating factors. Having a lot of money in the bank as a reserve will help and showing continuing declining balances on revolving debt over a period of months and big bonus. The bottom line is that banks are making loans, you just have adjust to the new lending realities.

Michael Gross is the President of Dividend America Mortgage. Dividend America provides all types of loans to all kinds of people in every type of situation. Visit http://www.dividendamerica.com/ or email Michael with your questions. mgross@dividendamerica.com or call 770-350-7373.

The Year Was 1950 and…

The year was 1950 and World War II had just come to an end. The next great conflict was just around the corner, the Korean War. The news was filled with warnings about the coming onslaught of communism.

Filled with fear from the looming Cold War and knowledge that the devastation of the Atom bomb had been achieved by our new adversary, the Soviet Union, Americans were working hard to put a tattered economy back together. Fannie Mae had been formed just 12 years earlier and was providing our citizens with a new way to buy a home!

The interest rate on the 30-Year Fixed Rate mortgage averaged a mere 5.00-5.50% across the nation. The economy was awash with rising unemployment as soldiers came home. And the was the baby boom was adding even more stress to household incomes.

Today as in those days, we face some unsure times. Rising unemployment, a huge deficit, increasing taxes, all these factors are conspiring to put your family at risk.

However, there is one bright spot. The 30-Year Fixed Rate mortgage has come down …way down! Today rates are at levels not seen since 1950!

A standard mortgage rate for a borrower with a 680 credit score has been hovering around 4.875%! If your score is a little lower, say 620, you can expect to see rates around 5.375%.
The bottom line is this. Interest rates are low. Refinancing now can help you lower your monthly housing expense. This is like giving yourself a raise.

Don’t wait, make application with a lender today, then watch the market. When you see the rate you want, then lock your loan.

If buying a home is your goal, NOW is the time! Don’t worry fret and worry that you may not qualify. Just get your application in with a reputable lender and they will tell you if you are qualified and if you are not, they’ll tell you what you need to do.

These are trying but exciting times! Become proactive and change your life today!

If you need a lending professional, we can help! WE MAKE IT EASY! Call 770-350-7373 or email mgross@dividendamerica.com.