America's #1 Mortgage Broker

Most mortgage companies offer a VA no down payment option up to $417,000 but did you know that VA loans can be for much more?

The Veterans Administration works off of a "guaranty", meaning that they pay the lender 25% of the loan amount should the veteran default on her mortgage.  Pragmatically, it would make sense that the borrower be allowed to invest 25% of the difference between the purchase price and the VA loan limit.  That's just what the VA jumbo mortgage program allows.

Some high-cost counties have higher loan limits until 2012.  In San Diego, that loan limit is $593,750.  For Los Angeles and Orange counties, that loan limit is $737,500.  Some Bay Area counties go as high as $1,094,750. That's over a million bucks for a zero-down VA loan.

What's a veteran to do if she doesn't live in a high-cost county but wants to buy a $700,000 home?  Normal jumbo loan programs require as much as 30% down payment (in distressed markets).  That high down payment prevents many buyers from owning a luxury home, offered at a healthy discount.  Veterans, however, have another option.  Use this formula to determine the down payment requirement for a VA jumbo mortgage.

In the aforementioned case, the required down payment for the $700,000 home purchase, for a property that is not in a high-cost county, is just over $75,000.  That down payment requirement is just about 11%; far below some of the higher down payment conventional loans.

What about mortgage insurance?  VA home loans don't require mortgage insurance; they charge a funding fee (which can be financed).

Are the rates really high?  That depends on your definition of "really".  VA jumbo mortgage and FHA jumbo mortgages are typically about .5% higfher than the loans under the county loan limits.  Most of the VA jumbo mortgages we've funded this year are in the 5.5%-6.0% range.

Consider offering your property with a fiancing proposal drafted by a VA jumbo mortgage expert.  Sometimes, showing that low down payment option could be the thing that attracts the right buyer for your luxury home.

Solid real estate agent relationships are the cornerstone of any professional loan originator's business plan.  While the mortgage industry has done an excellent job at consumer direct marketing, home buyers still consider the real estate agent the "gatekeeper of the transaction" and even rely on them for advice on financing.  This is especially true in the first-time home buyer market.

The value, however, of each individual agent relationship has waned in the past 6-7 years.  When I first started originating, each agent in my "Rolodex" averaged three transactions annually.  An originator looking to close 100 purchase loans annually needed to be marketing to about 30-35 agents. 

Fifteen years ago, the primary method of marketing was to show up at the agent's office and "panhandle" for business.  Successful transactions begat baskets of flowers to the agent, followed up by visits with hopes of being introduced to "office mates".  Three things changed that model:

1. Lower margins in real estate brokerages left owner-brokers seeking affiliated business relationships.  Originators found the "in-house mortgage guy" greeting them at the reception desk and escorting them back to the agent's desk.  That guided visit served as a deterrent to visiting originators and a reminder to the agent of the responsibility to their employing broker.
2. The early-decade real estate boom swelled the ranks of real estate agents and loan originators offering customers far more "friends in the biz" than they had before.  This commoditized our business and caused home buyers to "shop" better.  With greater "hidden" competition, the professional loan originator found the move-up buyer less loyal even after all the personal marketing he did.
3. Technology moved real estate agents out of the office and into their homes.  No longer could an originator show up at an office right after a sales meeting, to meet agents, because there were far fewer sales meetings.  Voice mail made floor time extinct. 

Today, originators have an extraordinary opportunity to work with large numbers of real estate agents.  The internet expanded our reach and reduced our marketing costs to near zero.  Today, a simple GOOGLE search can tell you who the active real estate agents are in a micro market, along with contact information.   The value of that agent relationship, however, is severly diminished.  In addition to Affiliated Business Arrangements, listing agents are requiring a "mirrored" pre-approval with a lender of their choice, often at the behest of the seller.

The value of a real estate agent relationship is about half of what it was ten years ago.  Each agent relationship can be expected to produce about 1.5 transactions annually.  The loan originator then must be marketing to about 75 agents to produce 100 purchase loans annually.

Today, it's never been easier to earn that business.

Our ranks have contracted and only the knowledgable originators are surviving.  That badge of honor, worn properly, is a magnet to real estate agents.  The internet has expanded our reach so that we can find, communicate with, and remain in a "top of mind status" with real estate agents all over the country.  Here are some ideas that have worked for me these past 18 months:

1. Get rich in niches.  Agents will identify you with your area of expertise just like we do with lenders.  California agents know me as the VA expert.  Specific knowledge has allowed me to market that expertise with testimonials from customers and agents.
2. Touch those agents weekly with a good e-mail marketing program; I use Contant Contact.  It is important for you to be able to track "opens" to discover who really pays attention to your content.  Follow up calls, to the agents who "open" your e-mails blasts, have a higher probability of converting.  You can "prune' the list by deleting agents who have left your last five e-mails unread.  Use content from the Mortgage Rate Watch , MBS Commentary, or MND newsletter as your weekly newsletter (if you can't write).  Properly cited, with a link back to the article, a truncated introduction can be used as content.  The important thing is to find agents who appreciate your emails.
3. Don't forget the old postcard mailer.  I mail agents a cheap yellow postcard, with my name, phone number and URL, about every 5-6 weeks.  Timed to deliver on a Thursday, that postcard has prompted many agents to call me on a Friday to ask if I'll be available to pre-qualify a buyer over the weekend.
4. Use webinars and teleseminars as tools to educate agents about new loan programs or guideline changes.  I host one monthly using Lenders Insight.  I schedule them in the evening so that I can get agents' full attention.  Whether you have three agents or thirty on the call is immaterial; you'll get the reputation as the "educating originator".
5. Call them.  Set aside two hours daily to call ten agents to see of they need anyone pre-qualified.  This will keep you in front of your 70-100 "targeted agents" every two weeks.  Consistently done, you'll be contacting them more often than their "favorite originator" and position yourself to earn the business.

Our industry funded $4 trillion at the height of the boom (2003) with only 35% purchase business.  2009 origination volume is expected to be about $2.3 trillion with about 70% of that attributed to purchase business.  As interest rates rise, expect that percentage to rise.  While the volume has dropped 40% from the high, the number of qualified originators has been cut by two thirds.

There's a whole lot of business for all of us.  Come get it.

This article is on Mortgage News Daily (opens in a new window)

I'm a Del Mar Race Track junkie.  Actually, I've been a fan of horseracing since I was a kid, playing at the Garden State Park, in my hometown of Cherry Hill, NJ.  When I moved to Solana Beach, I was attracted to the the beach, San Diego, and best of all, the proximity of the World Famous Del Mar Race Track. 

One of my favorite things to do is to take my daughter to breakfast for the morning workouts.  The horses start working out at 5AM and the track opens at 7:30AM.  You can enjoy a delicious breakfast buffett for less than $10.00 (includes coffee and juice).  From the Del Mar Turf Club website:

Early risers have a chance to catch morning workouts and breakfast in the Clubhouse Terrace Restaurant every Saturday and Sunday during the season. From 7:30 to 9:30 a.m., trackside announcer and former jockey Jeff Bloom will provide you behind-the-scenes information while you get an up-close look at many of your favorite horses while they tune up for their next race.  A buffet with many breakfast favorites is offered.

To attend, park in the main lot off Jimmy Durante Blvd., then proceed through the Clubhouse entrance to the second floor. There is no charge for admission to the event, but an $8 parking fee applies. (Those buying two or more breakfasts will have the parking price deducted off the price of their bill.)

Above is the mural Pierre Bellocq painted for the 70th Anniversary of the Track.  When I walk around the clubhouse, I'm reminded that I'm tracing the footsteps of Bing Crosby, Desi Arnaz, and Jimmy Durante.  In fact, all of those men were ushers at St James Church (now in Solana Beach) during the race season.  My daughter Maggie and I "substitute" as ushers when someone goes on vacation.  As you can see below, Maggie always wants to be part of the Del Mar Scene:

The majesty of a thoroughbred race horse awes me:

Workout riders have their hands full.  The success of a horse's next race is often in their hands:

The rider beckons the horse to run a bit as he starts the workout:

Here is nationally-known horse Zenyatta, breezing past the finish line.  My home is just on the other side of the hill beyond the finish line:

When all goes according to plan, your horse will win and you'll be standing in the Winner's Circle, like Maggie. 

The following Mission Valley Condo complexes are eligible for FHA and VA financing (as of 8/6/09):

Friar's Pointe
Friar's Hollow
Friar's Mission
Creekwood at River Run
The Franciscan
Friar Gardens
Union Square
River Scene
Mission Gate
Mission Greens
Mission Heights
Mission Playmor
Mission Plaza
Mission Village
Mission Ridge
Mission Verde
Park Villas North
Rancho Mission Villas
River Colony

This information is not guaranteed for accuracy.  FHA condominium approvals can be searched at the HUD portal and VA condominium approvals can be searched at the VA portal.  It is advised to search at the portal before visiting the complex.

Many conventional lenders are defaulting to the FHA approval as the bellwether approval for Fannie Mae or Freddie Mac eligible loans as well.  While conventional loans aren't subject to the rigorous testing the FHA uses, the credit crunch has caused lenders to usurp the traditiional loan-by-loan approval process and only accept FHA approvals.

Contact me for specific requirements if you are looking to purchase a Mission Valley condo.

REQUIRED READING FOR MISSION VALLEY CONDO BUYERS:

Wondering if there really is a shortage of condos for sale?  Read this.

Want to make sure you don't overpay for that condo?  Read this.

How should you prepare for your loan application?  Read this

Where are mortgage rates headed?  Read the mortgage rates report

This isn't a sales pitch; it's some straight talk about the reverse mortgage market.  If you're considering a reverse mortgage, you ought to do it now.  Not tomorrow, not next year,

....now.

The reverse mortgage market has a ticking time-bomb in it much like the sub-prime market did; it's priced all wrong.  Sub-prime loans used to be a very healthy product when the risk they carried was priced appropriately.  In 2005, secondary market investors bought too many of these loans, causing a "price war".  The darned loans were so cheap that good credit borrowers used them to buy homes bigger than they could afford.  The result was increased risk upon a system that was priced for lower risk.

We all know what happened to the sub-prime market.  It crashed and disappeared.

Two factors have increased risk on the reverse mortgage market:

1- A national price decline eroded home equity.  That's pretty easy to mitigate because the loan-to-value can be cut to reflect that decline. People look at their home equity differently now.  Five years ago, Americans felt "wealthy" because home equity kept growing.  Today, the reduced home equity makes people realize that it could disappear tomorrow.  Home equity harvesting is what's driving the current reverse mortgage boom.

2- Like the sub-prime market, reverse mortgages haven't appropriately priced in the increased risk.  Follow me on this.  In the reverse mortgage market, borrowers who live past the actuarial age start costing the lender money.  Simply put, if the borrowers don't die on time, the system could crash.

Look at this actuarial table and pay close attention to the life expectancies for the years 1940 and 1950.  Males born in 1950 are expected to live 4 years longer than their older brothers, born in 1940.  1950-born females are expected to live a full six years longer than their older sisters.

Here are the problems with the current reverse mortgage pricing model:

• The underwriters haven't adjusted for these actuarial differences. 
• There are a lot more people turning 62, in the next 10 years.  In 1940, there were 2.6 million births in America.  In 1950, there were 3.6 million births.  In 1954, the birth number broke 4 million.
  
• Scientific advances could skew the life expectancy data even worse (or better if living is your plan).

Like sub-prime, this mortgage product is going to be a victim of its own success.  As the product gains popularity, more market participants will join the reverse mortgage boom and margin pressures will exist.  You know how that story goes, the first thing compromised when margin pressures contract is the loan pricing model.  We could start pricing this product cheaper when we should be pricing it more expensively.

I'd like to think we can learn from our past mistakes.  If that happens, the reverse mortgage product will get much more expensive, really soon. Get the reverse mortgage money while you can; it might not be around tomorrow