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/

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.

Its the Economy Stupid

After a fairly frustrating week of hyper active rate fluctuations I collapsed on Saturday, tired, worried and spent. Interest rates are at their lowest level in years yet nobody is willing to pull the trigger on a refi to lower their rate.

Housing prices are at their lowest level in years and no one is willing to make an offer to buy. Rents are rising, foreclosures are rising and the only good news is gas prices are falling. So what's the problem. It's this economy!

I remember talking about this day way back in December 2007. Back then I said we were in a recession and back then everyone, including my wife, just about clobbered me saying I didn't know what I was talking about.

But as it turns out, this stupid hick with a high school education from the southside of Atlanta was right! http://www.marketwatch.com/news/story/US-Q3-GDP-down-05/story.aspx?guid=%7B282E197A%2DAE1C%2D47AE%2DB0EB%2D7C9F6C8C951F%7D
As reported on MarketWatch.com, a division of The Wall Street Journal; " Economists now say that a recession began December 2007..." Boo-ya! Sorry for the glee, but I love it when I'm right.

So why my glee? Not just because I'm right, but because business is cyclical. Once business and government realizes and admits that there is a problem, solutions begin to happen. We've been through a tough year and may have a little longer to go, but ultimately our economy will turn around.

Between now and the summer of 2009 we will hit true bottom. After that the economy should begin a slow rise out of the doldrums. We should remember our history. Other than The Great Depressiona, no other ecomomic downturn has lasted more than a couple of years including the huge recession at the end of the Carter administration.

So after some thoughtful introspection I've come to a realization. It's the economy stupid, that's why business is slow and that's why people make some of the poor economic decisions they make. But the smart players, the ones who don't let fear guide their decisions, will be happy that they refinanced their homes and made offers and bought new property for their portfolios during these scary times.

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

Ding Dong Your Debt is Calling!

Ding Dong is the universal written symbol for a doorbell. It's also the universally understood name for someone that isn't quite right in the head ....if you know what I mean.

Will, I'm not afraid to admit it, I've been a Ding Dong more times in my life than I care to remember! :) But I don't have to be that person any more, at least where debt is concerned, and I'm helping others shake that moniker as well.

Listen to this story: A client, we'll call him Bob Smith, comes into my office. Old Bob has a ton of credit card debt and the minimum payments have been climbing lately. The credit card companies are lowering the available credit, raising the interest rate and increasing the minimum monthly payment!

So Bob comes to me for a solution, what can he do? Well first he can use some of the equity in his home to pay off the credit card debts. We turn his 6.5% 30 year fixed rate mortgage into a 5.375% 30 year fixed rate mortgage. The debt consolidation saves him almost $700 per month!
Good right? Yes, but it gets better. Next we tell Bob he still has a problem. You see, the equity in the home was a safety net and we need to get that back as quickly as possible. We show Bob how to use a portion of the payment savings to build his equity back up rapidly.

With our software we run a scenario using his regular income and the $500 in payment savings as discretionary income. The program tells Bob how to pay his bills and if he follows the instructions Bob will pay off his new 30 year mortgage in just 8.5 years!

It gets better. You know that equity we used up paying off those credit cards? He gets that back in 2.75 years! Bob's life is changed and he's DEBT FREE in just 8.5 years.

Ding Dong your debt is calling! and it doesn't have very nice things to say. Do you want to know how to tell your debt to take a hike? Give me a call, interest rates are low, low, low and with our special debt repayment software we can have you debt free in no time!

Michael Gross is President of Dividend America Mortgage. He has been a builder, a Realtor and a real estate appraiser. He uses all of his expertise to show others how they can use a mortgage to create wealth through home ownership and now he's helping people get out of debt in 1/3 to 1/2 the time. Contact Michael at 770-350-7373 or mgross@dividendamerica.com.

Debt Free as easy as 1, 2, 3!

In my last post I talked about the seriousness of debt in America. I was ...and still am... incensed that the Treasury and our government think that the only way out of our current economic crisis is to have Americans spend more! It's craziness!

I have taken a new approach and it is unbelievabley exciting. I am using technology to get myself out of debt. If you have a moment I want to tell you a little story about my own situation.

You see, I own a mortgage company, and we're not doing so well right now. LOL. But that's okay, I'm blessed with a beautiful wife, good health and the God given talent to know when I have to change my business and my life to succeed.

I own a home in the burbs and two investment properties. I have about $20K in debt associated with my business. Total all the money I owe and it is over $750,000. That's three quarters of a million dollars! It's a little daunting to think I owe this much money, especially since I'm not wealthy by any stretch of the imagination.

My rentals break even every month, my mortgage biz is in the tank and my wife got laid off from her architecture job. Thank the good lord above for the severance package. Anyway, we would love to lower the interest rate on all of our mortgages, but with an income equal to our debt payment every month, we don't qualify.

So I sat down to try and figure out how I could get out of debt. Sell the rentals? Not in this market, I'd take a huge loss. Sell the primary, same thing, and I lose all that equity. Then I found a better answer....

Technology!

There is a lot to be said about technology and what it has done for our country and our standard of living. Now there is a tool that can help me become DEBT FREE in a very short period of time. Under my current repayment structure, I will be debt free in 35-37 years (that's because of some of the interest only mortgages I have.)

However, using this software and paying my bills the way the software instructs me to, I can be DEBT FREE in 16 years without changing my income structure. How is this possible you might ask? I know I did, I couldn't believe it!

Well I did some research. The software recognizes long-term debt in two categories, open ended and closed ended debt. In the closed end debt your interest payments are static and are set on an amortization schedule that gives the advantage tot he bank. You pay them the interest first and the majority of the principal is paid at the back of the loan. Good for the bank, bad for you.

In an open ended loan, an equity line or a credit card, the interest calculation is dynamic. Interest is calculated based on the average daily balance. The software picks strategic times throughout the year and within the am schedule of the closed end loan and uses the open end debt to pay off chunks of principal in the closed in loan.

This strategy is important because the larger the chunks of principal that are paid on the closed end loan, the more principal reduction you will achieve with the regular payments on that loan. Once the debt is transferred to the open end loan, the software has you transfer income into that loan to lower its balance immediately.

At first blush this sounds a little scary, but here's the important part. You pay your monthly bills out of the open end loan. This has a two fold effect on your debt. First, it lowers the average daily balance of the open ended loan. This means that you are actually paying a lower effective rate on the principal balance that was 'in' the closed end loan. Second, it gives the ability to operate your home finances in the same fashion you always have, there is very little change to the way you live your life.

Under this program I will save over $450,000 in interest payments. Even if I sell the investment properties in 7-10 years, I will increase the equity in those properties by more than 10 times the current schedule! That will mean hundreds of thousands of dollars in my pocket.

Do you want to be DEBT FREE? I am so excited about this program I have added it as a product in my company. If you can't refinance and you want to get out of debt, or if you can refinance and create lower payments and you want to use that payment savings to get out of debt faster, I would like to show you what I can offer.

Give me a call and become debt free today.

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

Debt In America

Everybody is wondering about the economic crisis. What caused it, how do we get out of it? What’s next?

By all accounts, the experts say that America and the world have been on a spending binge. This ‘all nighter’ was precipitated by the availability of easy credit. The entire world is guilty.

Our appetite for spending and our willingness to ignore the lessons of the past concerning debt have fully leveraged the world’s economic systems. The pain is being felt everywhere. Europe is in recession, China is experiencing hyper inflation, Russia and Brazil’s economies are faltering.

This debt is a time bomb and the pain is everywhere and the only answer the so-called experts have is to find ways to increase the availability of money to the consumer to continue to encourage them to spend. Just recently Treasury Secretary Paulson suggested a shift in the bailout funds.

Now they will not focus on buying non-performing mortgages, but instead they will use the TARP (Troubled Asset Relief Program) to extend easy credit to consumers. What?!

Isn’t this the EXACT problem that caused this mess in the first place? America is leveraged, fully leveraged! Our government, our people, our businesses are fully leveraged and we can’t borrower or spend our way out of this mess.

In this season of Thanks Giving, we need to embrace the gift that has been given us by the recent political environment. Whether you agree with the winner of the election or not is not important. The message that was sent is.

The message was that it is time for CHANGE. While many people did not know what kind of change was needed or even what kind of change they voted for, they knew something had to change.

I humbly submit to you that I know what change is needed. A change is required in the way that we see and use debt, both as individuals and as a nation. The most patriotic thing we can do as citizens is change.

How can we change? Stop borrowing, start paying off debt. Find every way possible to pay off debt and change the way we live our lives.

This may sound funny coming from a mortgage guy. I agree, but I’ve changed. I’ve put my money where my mouth is. I’ve invested $3,500 of my own hard earned money in a program that will help me manage and reduce my debt!

This program is not right for everyone. If you have a great income and all you have is debt on your primary home, then changing over to a 15 year mortgage and making extra payments every month may be enough.

However, if you are like me and you have multiple homes (a primary and two investment properties) and you have business debt (approx. $20,000) then this may be an answer for you. Under by current debt structure I will be debt free in about 40 years. I would be 85 years old!

I will be debt free in 18 years instead of 40 years! If I can earn more money I will be done even sooner. Just an additional $2,000 per month income will lower my ‘finish’ date to 7.5 years.
If I can do this, I will be 53 and debt free! I will save hundreds of thousands of dollars in interest payments. I will change my life!

Will you?

Even if you don’t own a home but you are $20,000, $30,000 even up to $80,000 in credit card debt, or school debt or automobile debt. I can help.

Those of you who know me and trust my advice know that I don’t promote my ideas lightly. I have advised people who don’t need a mortgage not to change. I have helped others consolidate debt to take the savings and invest or apply the payment savings to further reduce debt.

I truly believe that debt can be used responsibly but we must get out of debt immediately. Now I have a way to help my client further. I can help you get out of debt faster.

If you won a home and have -0- discretionary income and can’t save a dime, we can use your home to consolidate your debt and create payment savings (discretionary income) and then show you how our unique software can help you be debt free by cutting that new mortgage payoff time by 1/3 to 1/2!

It’s time for a change! Give me a call and let’s see if the time is right for you.

Michael Gross, President, Dividend America Mortgage
Contact me at 770-350-7373 or mgross@dividendamerica.com

Don't Play the Rate Game!

Don't playt he rate game, here's why! The chart to the right shows the 10-Year Treasury Yield for October 8th, 2008. The Yield shot up to 3.72%, up 21 basis point from the previous day!

How could this be possible? Didn't the Fed announce that they were dropping the Fed Funds rate by 0.50% today? Didn't that reporter just say that rates were lower and this was being done to heat up the economy?

Now everyone is demanding a lower rate! After all the Fed just lowered the rates and everyone should expect their rate will be lowered too! Correct?

But hold on just a minute. That's no really how it works. You see the Fed Funds rate controls short-term lending. This would be the rates tied to your car loans, furniture and appliance purchases and credit card rates. If you want a lower rate on something, call that credit card company and demand a lower rate from them.

Mortgage professionals deal in long-term rates. These rates are set in the MBS (Mortgage Backed Securities) market and they closely follow the yield on the 10-Year Treasury Bond. (see the chart above) As you can see the yield on this bond jumped drastically. A 20+ basis point jump is unheard of in a market that thinks a 5 basis point swing is volatile.

In layman's terms, this means that the interest rates on long-term debt is increasing today, not decreasing. Let me try to simplify why this is.....

When people buy bonds they are seeking two things; safety and income. When the Fed lowers the interest rate on short-term debt they are trying to stimulate the economy. Essentially there ain't enough consumin' goin' on and they are trying to get the party started .....to coin a line from an old 90's club tune.... let's get this party start right! let's get this party started quickly! RIGHT!

When the econ heats up you get inflation. Inflation eats away at the value and the income of fixed assets like bonds. So investors sell the bonds rapidly because they are better off putting their money under the mattress than having it in stocks or bonds at the moment.

So as these bonds get sold off rapidly the laws of supply and demand come into play. There is an abundant supply of bonds for sale but a lack of buyers. This causes the price of the bonds to decline rapidly. As the price declines the yield increases. Since long-term interest rates are tied to bond yields, BAM, long-term interest rise.

So for the time being rates on long-term debt will rise or in a best case scenario, the will remain unchanged. If the economy continues to deteriorate we may see interest rates ease. The bottom line is that you should lock in gains now. If you feel that the rate you have chosen on your long-term debt is good then lock it down and close the loan.

In this credit crisis it is to risky to play the 'rate watch' game. Make a solid decision about what is right for you, your family and your business and lock it in. Then spend the next couple of years doing all that you can do to eliminate the debt as quickly as possible.

And then let's pray that whoever is the next President of our great nation understands how to get our economy moving again.

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

No Closing Cost Loans – The Truth

It is 3:00 AM Eastern Standard Time and I’m wide awake. I can’t stop thinking about that ad. It keeps rolling through my mind and I can’t stop it. You know the one….

‘Don’t pay closing costs. Don’t give those pimps your money. We’ll close your loan for free, No Closing Costs! Then we’ll manage your loan for you. We’ll sit back, watch the market and the when the time is right, we’ll do it all over again. It’s the biggest no-brainer in the history of man!’

Well, he’s right. It is a no-brainer! It’s a no-brainer for many reasons, but let me point out a few of the biggest reasons why.

No-Brainer #1:
What bank, mortgage company, lender or broker do you know that works for free? I can’t think of one. You are paying for that loan somewhere.

It is usually in the form of a higher interest rate. Even though the ad says they don’t raise the rate, check it out. Get their GFE (notice I didn’t say their rate quote, get a valid Good Faith Estimate) and compare it to someone that is charging you closing costs.

There WILL be a rate difference of between 0.250% and 0.500%. That equates to a lot of money over the next 7-10 years, probably much more than you would have paid if you would have just rolled the closing costs into the refinance loan amount and got the lowest rate.

Think about it this way. If the closing cost equated to $4,500 but you take a no closing cost loan with a payment that is just $50 per month more and you stay in the home 10 years then you just paid $6,000 for your closing cost. Does that make any sense at all? Now imagine the payment is $100 per month higher, that's $12,000 for closing costs that should have cost you $4,500.

No-Brainer #2:
If you are purchasing a home don’t do a No Closing Cost loan with any lender. There is no need to take a higher rate. In this buyers market most sellers are willing to pay your closing costs for you! Now that is the REAL No Closing Cost Loan.

No-Brainer #3:
Manage your mortgage for you? What kind of lunacy is this? Sure the mortgage is a financial tool, but its not a mutual fund or a stock portfolio. It is DEBT!

Who knows how to manage debt? Well, almost everybody with any since knows how to manage debt. If you think you don’t then here’s a true FREEBIE for you! I’m not going to charge you a dime for this little gem. Ready?.....

You manage debt by paying it off! And in this economy you pay it off as quickly as possible! You can’t get the return in the stock market equal to getting the lowest rate possible on all of your consolidated debt and then starting a 25, 20, 15 or (if you can handle it) a 10 year repayment schedule.

As I said, I can go on and on. The No Closing Cost loan is a huge no-brainer. For the lender it’s a huge no-brainer because they actually make MORE money off your loan because they can hide what they actually make in the loan. They never tell you how much money they are really making on your loan.

It should be a huge no-brainer to most of the public because it makes no financial sense at all. The only reason this type of loan exists is for those who plan to be in their home for 3-4 years at a maximum. For longer term stays you should look at low- and full-closing cost loans.

So don’t get tricked by fancy ads put out by slick operators. You don’t need a debt manager or a mortgage manager. Instinctively you already know what to do. Get the lowest rate with the lowest payment and then eliminate the debt as quickly as possible!
That’s the BIGGEST no-brainer in the history of the Universe!

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

Playing The Real Estate Game - The Offer Phase

Today I want to talk about making offers. I often think I should devise a game to teach people how to make offers. I'm not talking about negotiating, just making a plan old, vanilla, down and dirty offer.

Real estate can be a trying business at times. Especially at times like these. With tons of foreclosures on the markets and agents fielding calls from every nare-do-well on the block asking inane questions and basically wasting their time, it's tough to get anyone to accept your REAL offer to purchase a property.

Right now I'm playing the real estate game in the offer phase in hopes that I'll get to up the stakes and get into the negotiation phase. But first I have to get somone to take me seriously.

I've had several conversations with 'duty' agents who promise to call me back but the promise is never kept. I call the office to try and locate the listing agent but they will not accept any calls and will only deal with other licensed agents. Highly FRUSTRATING!

So what do we do? We play the game, and trust me, it is a game. Here's how the game works. Sometimes you are just dealing with inept agents or agencies that make their money off maintaining the listing. They can care less if the property sells, they make a fee to maintain the property.

Other times you are dealing with agents that see opportunity in a particular piece of real estate and they want to squelch offers on the property so that they can buy it for themselves at a future date. Unethical? You bet! Do they care, NO!

So it's a game and I understand the rules. So here's what I do. First, I'm tenacious! I bully, cajole, call-call-call and then call again. I'm relentless, I've got nothing better to do all day than to try and get my offer presented on this property.

I'm calling to gather information. I want to see the inside, I want to know the taxes, the MLS or FMLS number. I want details.

Once I've gathered the details, I call MY agent. I always teach that investors should use an agent. You should have a Team of Trusted Advisers and high on the team list should be a Realtor. Notice I said a Realtor, not just a licensed agent.

So the rules that the listing agent gave me were that they only deal with agents. Fine, I've got one! And she's tenacious just like me! If she feels like I'm offering to high, she gives me a cross look and shakes her head. Okay then, what? Lower! How low? Well, how about 50% of the asking price! LOL You go girl!

I'm playing the game. Now instead of being frustrated, I'm the one doing the frustrating. I'm winning, offers are being accepted. I'm playing the offer phase! When I win this phase of the game its on to the next phase, The Negotiation Phase. Stay tuned........

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