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