Georgia FHA Home Loans - (& Opinion)

FHA 203K Streamline Renovation/Purchase

Ken Cook, FHA Home Loans 678-439-8683 — Thu, 19 Nov 2009 15:42:23 -0600

So you or your client have found a home in a great area in the client's price range. Only one problem: it's in bad shape. The HVAC system is 50 years old, the roof is 40 years old and the windows may as well not even be closed. Plus the kitchen has vinyl floors in 3 different patterns and the counters are all laminate with burns and holes and scars.

Not to fear! Meet the FHA 203K Streamlined renovation loan.

Eligible Improvements Virtually any kind of improvement is eligible provided it becomes a permanent part of the real property and adds value.

Additions to the structure
Kitchen or bath remodels
Finished basement or attic
Patios, decks or terraces
Roofing and landscaping
Safety, energy efficiency and electrical upgrades
Handicapped accessibility improvements

Luxuryitems are not eligible

Swimming pools, hot tubs, tennis courts, gazebos, barbecue pits, saunas or alterations to support commercial use

The maximum loan amount must be within the FHA loan amount maximum for the MSA where the home is located and must include the purchase price and the renovation amount. The maximum renovation amount is $35,000 and the minimum is $5,000. Under $5,000 we can do with an escrow of repair funds. A minimum of 10% contingency reserve is required and must also fit into the FHA loan maximums for the area where the property is located. (Any balance remaining on the contingency will be applied to the principal balance and may not be used for additional repairs.)

Yes, it takes a little longer to close an FHA203k Streamline loan than it does to close a standard FHA loan. If you are an agent and you are concerned about that extra couple of weeks just think of it this way: You may make a sale you would not have otherwise made. You may help a buyer get into a home in the area where they wanted to live instead of where they "had" to live. You can be a real hero for someone.

If you are in Georgia I can help you with the necessary paperwork and give you a short class in how to use the FHA 203K Streamline Rehab loan to purchase, sell or represent homes in today's economy. Never hesitate to call me at any time and I'll be happy to answer your questions.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Increasing Home Sales with the FHA 203k Streamline

Ken Cook, FHA Home Loans 678-439-8683 — Tue, 10 Nov 2009 14:41:21 -0600

"Oh I don't want to mess with all that trouble", the agent said to me during a phone conversation. She meant she did not want to mess with selling a home that needed a new roof, some plumbing repair, new carpet and new appliances which I could finance into the loan amount.

I asked, "why not? What trouble?"

It seems she had a few misunderstandings about how this powerful purchase loan works. The truth is it doesn't involve any extra work for her than a regular FHA loan. What it does it take an unsellable home and turn it into a sale. Conventional loans do not allow for some of these types of repairs on an "as is" home sale. Even there it increases the sale amount by the mere virtue of dealing with a homeowner financing the property instead of an investor paying cash for the property.

The FHA 203k Streamline purchase loan is perfect for the large majority of homes in the US. Any home that qualifies for a standard FHA home loan, the 203b, also qualifies for the FHA 203k if it needs less than $35,000 in non-structural upgrades or repairs. So what CAN you do with an FHA 203k loan?

Repair or replacement of roofs, gutters and downspouts
Upgrade of plumbing and electrical systems
New flooring or floor covering
Exterior decks, patios and porches
Minor remodeling (no structural such as room additions)
Paint and wall covering
Weatherization including storm windows, storm doors, insulation and weather stripping
Purchase and installation of new appliances
Disability access improvements interior and exterior
Basement finishing and remodeling
Basement and crawl space moisture control and waterproofing
Window and door replacement
Exterior residing such as replacing old, defective siding
Septic system or well repair or replacement

One caveat which we don't understand is the FHA 203k Streamline does not allow for completion of a home which was started in construction but not completed. This is one they really need to take a look at because I get at least one call every month or so with this exact question which tells me others get it, too!

Repairs cannot take any longer than 6 months and there are only 2 draws available regardless of how much the contractor(s) beg. Your contractor will need to be able to fund the job for up to 60 days out of pocket while they wait on the draw from the bank.

Most lenders require the contractor to be licensed in the state where the property is and do not allow the home owner/buyer to do the work their self. You *may* be able to find a lender who will allow the work to be owner performed *if* the owner can prove they are a professional in that type of work. My company does not allow this.

Plan on a little extra time to close these loans because of the necessary underwriting. There are a few documents extra which are needed which I will not disclose here because while I enjoy helping the general public I have to be careful about educating my competitor's and their inexperienced loan officers.

When you need an FHA 203k (or any other mortgage) call me. My team is the best of the best and if it can be done we'll get it done or let you know as soon as we know differently.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

What is FHA Concentration and How Does it Affect Condo Sales?

Ken Cook, FHA Home Loans 678-439-8683 — Wed, 11 Nov 2009 14:25:50 -0600

"They just keep on changing these rules, don't they?" It was an honest question from a frustrated agent.

Here is what I do know: FHA Concentration can shoot you in the foot. HUD Mortgagee Letter 2009-46B in Section 1 Subsection V Paragraph 10 parts a, b and c tells us about FHA Concentration and how to see it coming from miles away. Keep in mind you can still get financing in developments which have reached the maximum concentration levels specified by HUD for FHA insured loans but not with FHA.

The easies rule to remember is thirty percent (30%). If the project development (not phase) has 30% or more of the available units financed with an FHA insured mortgage there will be no further issuance of FHA case numbers in that project. In a nutshell this means there will be no more FHA loans issued for those condominiums until the concentration level again falls below 30%.

For condominiums consisting of three or fewer units only one unit may be financed with an FHA insured loan. With condo projects of four or more units the 30% rule comes in to play. If you are math challenged just remember for every 10 units in the project only 3 can be financed with an FHA insured loan.

So remember, in Georgia and especially the metro Atlanta area, even if I have not yet closed a condo loan in your new or existing condo project I know a few things about condos. This might be the first time you and I have ever met but one look at my gray hair and you'll know I didn't just step off the chicken farm yesterday.

I do condo loans. Give me a call and let's chat then let's get your loan closed. Right Mrs. Martin? (Mrs. Martin came to me with a very unusual and challenging condo loan and we are closing on Friday. No other lender she worked with including banks with two or three words in their name could get it done for her.)

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Closing Points, Origination Points, Discount Points ... What are points?

Ken Cook, FHA Home Loans 678-439-8683 — Thu, 29 Oct 2009 22:38:02 -0500

"I'm not paying any points!"

Well, okay then. I guess you're paying cash because everybody who borrows money from a broker, lender or bank (regardless of their misleading advertisement) pays points. Simply defined the word points means a percentage. What they are a percentage of is the next question. And, in this case, they are a percentage of the loan amount.

For example if we are talking about $100,000 and we say "one point" we mean "one percent" or $1,000 (one thousand dollars). If we say "two points" we mean "two percent" or $2,000 (two thousand dollars).

Since we know what a point is (1 point = 1 percent) and we know what it is based on (the loan amount) why exactly are points charged and why is it a good or bad thing? To the mortgage insider there are lots of points. There are origination points, there are discount points, there are yield points and there are service release points. Some of those points are directly visible to the borrower(s) and some are not so let's take them in order.

Origination Points - this is your loan officer's paycheck. She does not get it all (usually) but rather splits it with other people. Even if she does keep it all she has some other fees to pay out of it to her broker or lender. When people say, "this is a no point loan" they are not talking about this fee. They are talking about ...

Discount Points - this is the fee to buy the interest rate down. In plain language if you are offered an interest rate of 5.5% and you want the interest rate at 5% you will pay discount points or buy down points. On a purchase loan this may be paid by the buyer(s) or the seller(s) where permitted. Again 1 point = 1% of the LOAN AMOUNT. This is the fee almost everyone except mortgage industry participants are talking about when they say, "I'm not paying any points!"

The tricky part about "discount points" is it costs more than 1% of the loan amount to "buy down the rate" 1% - so you don't pay 1% of the loan amount to go from 5.25% to 4.25%

An example of discount points not intending to confuse: Say your loan amount is $100,000 and the interest rate is 5.25% but you want a rate of 4.625% - every loan officer will know exactly what these numbers mean. If they don't then they are not, in fact, a real loan officer. But I digress. The RATE column is obvious. The 25d column means once that rate is "locked" the file MUST be closed in 25 days or a rate lock extension must be purchased.

RATE 2d 10d 25d 40d
4.250 3.375 3.500 3.875 4.000
4.375 2.500 2.625 2.875 3.125
4.500 2.000 2.250 2.500 2.625
4.625 1.625 1.750 2.125 2.250
4.750 0.875 1.000 1.375 1.500
4.875 0.375 0.500 0.750 1.000
5.000 -0.125 0.000 0.375 0.500
5.125 -0.500 -0.375 -0.125 0.125
5.250 -1.500 -1.250 -1.000 -0.875
5.375 -2.000 -1.875 -1.625 -1.500

The -1.000 in the 5.250 row and 25d column means there is a cost to the borrower of -1% of the loan amount. Since the cost is negative one percent that means one percent comes back. Generally that would be shown on the mortgage broker's HUD1 as 1% of the loan amount in YSP. So if it is a $100,000 loan that would be $1,000 to the mortgage broker. You won't see it at all if it goes to the bank or lender.

The 2.125 in the 4.625 row and 25d column means the rate of 4.625% will cost 2.125 percent of the loan amount PLUS the 1% of the loan amount the broker won't be making. So in this case it will cost the borrower 3.125% of the loan amount to "buy down the rate" to 4.625% (there are many other ways to slice this pie but you don't have the patience and I don't have the time for the full book version :)

In the above example on a $100,000 loan to "buy down the rate" from 5.25% to 4.625% would cost the borrower $3,125 - on a refinance this could come from the new loan and on a purchase it can be paid by the seller or the buyer depending on loan guidelines.

Yield Points - called Yield Spread Premium, are probably the most maligned and possibly misunderstood "fees" there are. Funny thing is it's not a fee. What many bankers, bloggers and ill informed talk show hosts (plus a so-called "Real Estate Expert" on About.com) either do not understand or simply choose to lie to you about is these are the only "back end points" ever revealed to the borrower. Has YSP been abused? You bet! But bankers abuse rates and never tell you how much profit they are making. I know, I are one. I have also been a broker. If your rate is competitive you really should not care at all about these points. If you disagree or do not understand call me and we can chat.

Release Points - called Service Release Premium, are the most ignored points even though they are virtually identical to Yield Spread Premium listed above. For secondary marketers and mortgage bankers there is a huge difference between the two but to the end user really the are very similar. Both affect the interest rate paid by the borrower and the profit made by the lender/banker/broker. What should matter to borrowers is 5% 5.5% 6% - whatever the rate is and your other closing costs.

One of the big problems with mortgages is so many people have no idea how to shop for one. They think if they know the words, "points" "rate" and "closing costs" they know everything needed to know. What they really do when they ask those questions in the wrong manner is tell a savvy loan officer just how little they know. They would be better served by saying, "tell me about your mortgages and all the costs associated".

You are going to pay points one way or another. Either you are going to pay a higher interest rate, your loan amount is going to be increased or you are simply going to pay them exactly as they are.

Let me interject a note about "hidden fees". It is not that hard to have "hidden fees" on loans but even with "hidden fees" you can still shop if you look at the three most important numbers: How much money you have to bring to the closing table, your total loan amount and your monthly payment (and whether or not that payment can ever change). For example if your loan is $100,000 and you have to bring $10,000 to the closing table and your monthly payment is $500 for one loan but for another loan of $100,000 you have to bring $20,000 to the table and your monthly payment is $550 - YOU have to decide which one works for you. A true mortgage professional can advise you. Don't fall for some hopped up claims like, "all of our fees are up front" or "we have flat rate mortgage fees". So? So what? That in no way qualifies that company as more honest or trust worthy.

If you want to know how to shop for a mortgage, even if you are not in my market area, I will be happy to speak with you. Just give me a call and ask! Maybe I should write another post about how to compare mortgages ...

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Let's Explore Sect 11 of HR 3548 The Extension and Modification of the FTHB Tax Credit

Ken Cook, FHA Home Loans 678-439-8683 — Fri, 06 Nov 2009 15:49:06 -0600

HIGHLIGHTS ONLY - I don't want to distribute incorrect information so if you have a viable correction please make it known in the comments.

HR 3458 "The Worker, Home Ownership and Business Assistance Act of 2009"

While it is called an "Extension and Modification of the First-Time Homebuyer's Tax Credit" it really is an extension and overhaul or re-construction. Modified doesn't seem to cover it. If you are interested the full text of the Resolution signed into law is found at this link on Thomas Library of Congress. (This is also based on S 1678 dated September 16, 2009 and passed unanimously in the Senate.)

All the good stuff related to the Tax Credit seems to be found in Sections 11 and 12. I am not interested in sharing my political opinion in this post (had to clarify this post) but working with you to develop a fuller and more accurate understanding of this new law. We know the second version of the First Time Homebuyer's Tax Credit was scheduled to end with homes purchased, and closed on, before December 1, 2009. The key word at that time was "closed". The newest version has a different twist which we will examine. So, here we go line by line where application matters to our common clients:

Section 11(a)(1)(A) extended to May 1, 2010

Section 11(a)(2)EXCEPTION IN CASE OF BINDING CONTRACT - if the binding contract is entered BEFORE May 1, 2010 then the closing must occur BEFORE July 1, 2010

Section 11(b)(6)EXCEPTION FOR LONG-TIME RESIDENCE OF SAME PRINCIPAL RESIDENCE - if the person buying the primary home lived in their primary residence for "any 5-consecutive-year period during the 8 year period ending on the date of [qualified] purchase" they also qualify for the credit under SEC.11(c)(1)(D)

Section 11(c)(1)(D) sets the maximum credit for long-time residents to $6,500

Section 11(c)(2) sets the maximium individual AGI to $125,000 and the maximum married couple AGI to $225,000

Section 11(d)(3) sets the maximum purchase price [not loan amount] to $800,000

There are other subsections specific to military personnel who are deployed found primarily in Section11(e)(E)

Section 12 is also pertinent but contains mostly clerical changes and restates the recipient of the credit must be at least 18 years of age at the time of purchase of the home.

IN SUMMARY

You must close before May 1, 2010 (so no later than April 30 2010), if you are not a "first time home buyer" (defined as someone who has not owned a primary residence during the last 36 months prior to the closing date) you must have lived in your primary residence at least 5 continuous years out of the 8 years preceding the closing date unless you enter into a binding contract before May 1, 2010 then you must close before July 1, 2010. Individuals may take advantage of the tax credit if you earn no more than $125,000 per year Adjusted Gross Income and married couples may not earn more than $225,000 AGI. Your sales price may not exceed $800,000 and you must be 18 years of age.

BIG DISCLAIMER: I AM NOT A TAX ATTORNEY OR ACCOUNTANT and everything you just read is my opinion on what the law says. Do not make any decisions based on the content of this blog post. Seriously, do not use this as a substitute for tax advice or legal advice.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

When can we close?

Ken Cook, FHA Home Loans 678-439-8683 — Mon, 24 Jul 2006 18:34:59 -0500

Sounds easy to ask, doesn't it? "When can we close?"

Sure, everyone would like to hear, "Oh, just whenever you're ready!"

The truth? Whether you are a real estate investor looking for a mortgage for acquisition, rehab or construction or you are a homeowner just looking to purchase a home there are a couple of points you need to be aware of when it comes to closing speed and dates for any mortgage loan.

Closings are not demandable even by your real estate agent - a common fallicy among inexperienced agents. Many moving parts are involved in closing on a purchase or a refinance. Pay special attention to the list of items at the end of this article which can cause delays. Take special note to how many of those are under your control or within the control of the lender/broker. The person who will actually be making the final scheduling of your closing will be the lender who will pass that information to the processor who will pass it to the attorney. Real estate agents do not control or have the ability to affect closing dates and times (although some want to force the issue around their schedule it's actually up to the lender first and you second - I don't care when you close so long as you close!)

Here is an average sampling of how this works. You've already called us and been prequalified - since you know that's the correct order of things - and now you're shopping and you've found a house.

1. We know the most often required documents so we gather those from you ahead of time.
2. You make an offer on a house.
3. A couple of days later that offer is accepted.
4. Generally, the offer is going to show a closing date 30 days from the day the offer was made. Not from the day it was accepted.
5. You tell us the offer was accepted so we start "start the ball rolling".
6. An appraisal must be done and this requires an executed sales contract. Sometimes we get that in our office right away, sometimes - for one reason or another - it is delayed. Appraisals take 2 days to a week as a general rule.
7. While we're waiting on the appraisal we'll "update your docs" which means we'll ask for current pay stubs, bank statements, and any other documentation to prove income and assets. If you get those back to us right away there's no delay. If you drag your feet - there is a delay!
8. We'll need insurance documentation - this is entirely dependent on the co-operation of your insurance company. As I am writing this our processing department is "having fits" with an insurance company who has held up a closing for over 5 days while we wait on proper documentation. That's rare, most insurance companies are prompt and professional.
9. Once we have all the required documentation we send the "package" to the underwriter. Underwriting can take as little as one hour and as much as several days. The deciding factor is underwriter workload.
10. The underwriter may ask for additional documentation. If they do you can (a) argue with the processor about having to provide it and end up sending it anyway or (b) get it back in as quickly as possible.
11. Once the underwriter has issued a "Clear To Close" with no further conditions you're good to go.

Average closing time from application to close? About 14 days industry wide. It can happen in as little as 48 hours but that is rare.

Lenders and brokers who advertise 24 hour closings are omitting the first 10 steps from above. NOBODY can close a purchase loan in 24 hours from the time your offer was accepted.

Delays in closing can be caused by many things. More often than not delays are caused by one or more of the following:

1. Fully executed contract delayed. This happens more often on foreclosures where the seller is a bank and it takes them a few days to sign the contract and return it.
2. Appraisal coming back with a value lower than the sales price. Very rare but it has happened.
3. Appraisal coming back with "subject to repair" comments which exceed those allowable by the lender.
4. Lack of co-operation from the insurance company. Loss-Payee Clauses are requested in writing and are generally returned within 24 hours. Anything longer is considered a delay.
5. Lack of co-operation from current mortgage company in returning pay-offs or Verification of Mortgage (VOM).
6. Lack of co-operation from employer in returning Verification of Employment (VOE).
7. Income and/or assets on application used for pre-qualification being overstated and not supportable by documentation.
8. Borrower's earnest money check not being deposited into the Real Estate Broker's escrow account.
9. Problems with the title to the property - discovery of liens or multiple title changes in short succession.

These are just a few "hiccups" that are fairly commonplace on my side of the desk. The most important thing to remember is that the staff at your mortgage broker or lender is working for you. They don't get paid unless and until your loan closes. So guess what? That's right! They really want your loan to close.

It takes dozens, often hundreds, of man-hours to take a loan from application to closing. There are many people involved in the process that you never know exist. Some of them work on commission and only get paid if your loan closes. Others are on salary and of that group some just don't care.

Most broker's are very committed to you. I can speak for my own staff and say they definitely take it personally ... the good and the bad.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

1031 Exchange - What, Why and How

Ken Cook, FHA Home Loans 678-439-8683 — Mon, 24 Jul 2006 18:33:40 -0500

If you've only heard the term and don't know what it is this will help. If you've never heard the term this will help you, too! It's a brief, very brief, introduction to using 1031 Tax Deferred "Like Kind" Exchanges to defer any capital gains taxes you may have otherwise faced with the sale of a piece of real estate.

In the investment industry I answer this question at least 2 or 3 times every week.

1031 exchanges must be administered by a Qualified Intermediary. You cannot hold the proceeds from the original sale - they must be placed in escrow by a Qualified Intermediary. I prefer and use Starker Services since it was Starker who first identified this tax opportunity and began to market his services commercially.

It does not have to be residential for residential or commercial for commercial exchange but can be mixed. Like kind, in this case, means real estate properties held for investment or for some other productive business use. Your personal property cannot be used in a 1031 exchange.

You have, as a seller who has placed the proceeds of a sale into the management care of a Qualified Intermediary, 45 days to identify the property you intend to purchase and 180 days to close on the sale. This is from the date of the sale of the initial property.

If you do not identify your property within 45 days or do not close on it within 180 days your exchange defaults and you will be responsible for paying the capital gains tax on any profits you earned on the sale at the rate of the tax on the date of closing.

Tax will eventually be due. Either you or your estate will one day pay the capital gains taxes on any profits you've realized through the sales of the property(ies) traded through the 1031 exchange tax deferment method.

If you have individual questions I'll be happy to answer them.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Three Things Every Real Estate Professional (and human) Needs

Ken Cook, FHA Home Loans 678-439-8683 — Mon, 24 Jul 2006 18:31:10 -0500

So you're thinking, "What's this guy going to tell me that I don't already know?"

Probably nothing. Sometimes it's about reinforcement. Sometimes it's just knowing that someone else understands.

So many experienced people start out by saying something like, "I've been doing this for 25 years so I'm going to tell you blah blah blah blah blah." Then they leave you with the impression that if you deviate from their Commandments Of Living that you are a moron.

False!

We are all individuals and all have our own point of origin. By point of origin I mean the place in life you come from not just physically but emotionally, mentally, spiritually and ancestrally. All of those origins bring you to the place you are today so to expect any of us to be exactly alike is a long shot. To demand so is outright lunacy.

However - there are best and worst approaches to any situation which have been tried and proven by our predecessors and which should never be abandoned and at worst be modified in nearly immeasurable changes. Albert Einstein knew that it didn't matter how many years of experience you had if that experience was incorrect when he said, "The definition of insanity is doing the same thing over and over again while expecting different results."

Having observed a wide variety of success levels among my own real estate agents who are licensed with my firm as well as the hundreds of others for whom I have provided assistance I can tell you that it's pretty easy to pick out the ones who will be successful and the ones who will not within about a 5 minute period of time. However the results can change when the methods are modified.

Now then to get to the point of this posting and the Three Things Every Real Estate Agent Needs and how to get them if you don't have them.

DRIVE - A car never gets anywhere until someone takes it for a drive. Neither will you. If you don't care whether or not you ever get a listing or make a sale chances are you won't. First you need to create a goal. Don't forsake a small goal but by all means set a goal and be hungry for it. A weak goal won't do you much good so create a solid goal even if it's "I will get one listing and sell one property every 3 months."

For some of you that's all you need and all you want to do and that's fine. For other you want to reach a particular revenue level. Maybe you want to gross a minimum of $100,000 per year. Perhaps you want to make the million dollar sales mark every month. You know what it takes to reach the goals but you won't follow the necessary steps until you have some DRIVE.

Where do you get drive? I get it from coaching myself, reading books and magazines, going to conventions, seminars and association meetings. I leave notes for myself in strange places so when I find them it ignites a spark in me.

Does it work? Well, I went from struggling to closing over 350 deals every year since 2001 so something happened. And trust me, if I can do it YOU CAN DO IT!

PERSISTANCE - If you get in your car and you put it in drive and start out toward the bank but get to the end of the parking lot or driveway and just sit there you'll never reach your destination - to get to your destination you must continue to drive.

For those of you just now getting drive it may come as a challenge to be persistent. This need and gaining persistence can dramatically change your life. Let me share a quick story with you about two different men whose lives were changed by gaining persistence or forsaking persistence.

First there is Carlos (not his real name). Carlos worked for me for about 3 years. When he first started he had been in the pesticide industry for some time and then took a job with a very unscrupulous mortgage broker. Since I already knew him I offered him a job to keep him out of trouble and to enhance my company. Since Carlos speaks fluent Spanish, being Mexican, it was a good fit for us. He came in with a bang!

Carlos and his wife had a new baby, lived in a tiny little home and had one old clunker car. Within the first year Carlos had closed enough deals to earn about $55,000 in commission ... more than 2 times as much as he had ever earned in the past.

During the second year Carlos soared. He joined the Million Dollar Club and on more than one occasion surpassed his monthly goal. The family moved to a much nicer home, purchased a much nicer vehicle and filled their home with new furniture and ate whatever they wanted whenever they wanted.

Skip around to Kevin (again, not his real name). Kevin has worked with me for one year - just now going into his second year. When he came he had been in a situation where he earned a small salary and a small commission on each closing. He was doing okay but felt limited where he was. He heard our ads on the radio and on television and wondered what it would be like to work for an aggressive company like mine. Then he saw the help wanted ad and applied for the job.

During his first few months Kevin seemed like he was still working on a small salary. He worked every day and made a lot of phone calls and marketed himself but still didn't get the closings he needed to really move forward.

Kevin and I talked one day about leaving notes for ourselves and talking to ourselves about our goals and creating our own drive. Since Kevin has a one hour drive to the office he has a lot of time for self coaching but it can be done anywhere. I do mine in the shower and while I'm getting ready for the day.

Then I made the discovery; Kevin was creating need and excitement but was failing to be persistent until the closing so leads were drifting away. We dealt with that by limiting his number of leads and getting him to concentrate on the smaller number.

Bingo! Now he was being extremely persistent because he knew he had to close those deals to get more. No closings = no leads. Now he's in his second month in the Million Dollar Club!

Back to Carlos who in his third year, having had a second child an purchased a beautiful new home with a great yard on the hillside lost not only persistence but drive. If he had been on the way to the bank he would have put his car in park within site of the front doors. He also lost our third element. He was headed for a dismal year in performance mostly because he lost the third element. Now he's struggling in the construction industry as a manual laborer.

Persistence means never giving up, never letting the deal get away. Soon I'll deal with how to overcome objections when you know you have the right deal for your client.

FOCUS - So you've got your car in drive and you're on the road headed to the bank. Along the way you spot a yard sale and stop for a minute just to look. One hour later you're back on the road headed to the bank when you see a sale at the local Harley shop and remember your niece wants an HD skull cap for her birthday. While you're there you look at all the bikes and choppers and watch a video about how to order a customized springer soft tail. 2 hours later your headed toward the bank again. Along the way you get hungry so you stop in at Spicy Tini's for a salad and burrito and bump into a couple of old friends who are headed out to see a movie and invite you to join ... right now.

Did you get the point or should I continue?

Focus - go to your destination. In almost every staff meeting which we have on Thursday mornings (mandatory attendance) I ask, "What are we doing here?" The answer should never change it should always be "Facilitating real estate transactions."

That's what we do. We don't sell popcorn, we don't do oil changes and we don't run a fashion store: We sell real estate. In fact, if we're doing something other than selling real estate we're not doing our jobs. Some of us are no longer a part of us because we weren't selling real estate.

Unlike some of the big national companies my company has minimum performance requirements. Since we are a split commission company which provides almost all of the sales leads we don't make money leasing desk space to people who really aren't focused or have low or no goals.

If you want to be successful learn how to have Relentless Persistence with Focused Drive - that is our mantra. We all know it. That's why we have more high level performers on a percentage basis than the vast majority of companies. You can do it to.

You can be DRIVEN.

You can be PERSISTENT.

You can be FOCUSED.

You can achieve your goals, please your clients, make new friends, and support your family and lifestyle by acquiring and keeping these simple elements or Three Things Every Real Estate Professional(and human) Needs.

Copyright©2006 Ken Cook All Rights Reserved. Permission to reprint this article is granted under the following conditions: The author is notified immediately upon posting or printing and, if a web posting a link is provided along with any username and password required to have full access to the article and commentary. If the republication is digital such as an email or PDF a copy must be sent to the author immediately. If the republication is hard a copy of the entire publication in which it is contained must be delivered to the author. In no even shall delivery or notification be more than 7 calendar days from publication time. You must republish the entire article including this section is reprinted in full with no modifications or in column commentary.

Novation Mortgage, 2501 E Piedmont Road, Suite 201, Marietta, GA 30062 - Georgia Residential Mortgage Licensee 20014. Florida Mortgage Broker Business MBB 0703760 - FHA Lender ID Number: 25600-0000-2 - Equal Housing Lender

Nothing in this content should be considered investment advice. Users of this content should consult with their own attorney, broker, or other financial adviser prior to making any investment decision. Novation Mortgage, LLC and its owners, partners, principals, employees, associates, contractors nor assignees, shall have no liability for investment decisions made by any user of this website based upon the information contained within this article.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Interest Rate and Annual Percentage Rate (APR) - What you need to know.

Ken Cook, FHA Home Loans 678-439-8683 — Tue, 27 Oct 2009 14:38:52 -0500

Every loan officer who has done their job for more than a week or so has heard the question. Some loan officers avoid it altogether by simply not sending the Truth In Lending (TIL) until they absolutely are required by law to do so. Why? Because in the top left corner in prominent font is a number that confuses almost every borrower and non-financial insider - the Annual Percentage Rate (APR).

The APR disclosure requirement was sort of a good idea when it came out back in 1968 when there was pretty much just one type of home loan: a 30 year fixed interest mortgage. With time and exotic mortgage solutions the APR became highly obfuscated and even a tool of obfuscation.

Recent changes to the RESPA laws and the injection of the Mortgage Disclosure Information Act (MDIA - call the Mediah by insiders) was supposed to fix what has been broken for years. What it is doing, however, is bottleknecking the process for almost everyone who is using a mortgage to purchase or refinance a home.

The main problem and fault with the APR for the last several years has been the ease of manipulating it by how closing costs and other mortgage related fees can be hidden in the loan or rate to obfuscate the APR. The idea behind the forced disclosure of the APR was to give an apples to apples comparison of mortgage costs. It doesn't work, hasn't worked and another ignorant piece of legislation designed more to give the appearance of help rather than actual help like MDIA is just another road block to home ownership for home buyers.

If every mortgage was exactly the same, all closing costs had to be line itemed and there were no variations in terms them APR would be a more valuable but still useless tool. Here again the intelligent homebuyer is punished because of the few ignorant ones who refuse to take a moment and look at what is really important about home finance. Am I bitter? No. I'm still going to be making home loans and my clients are still going to be paying for them. It's just that sometimes it will take them longer to get to the closing table if anything changes with the loan post application and prior to close - in some cases.

In a nutshell the MDIA law says if the APR changes more than .125% (an 1/8th of a point of interest) then the disclosures must be resent and a period of no less than 3 business days must expire. This means changes to any of the APR tracked fees or loan amount. The law does not say whether or not this applies if the APR decreases or increases just if it changes. Some lenders are redisclosing in both directions other only if the APR increases more than .125%

A quick definition of the APR is the actual interest rate plus the other mortgage associated costs expressed as a percentage of the loan amount over the life of the loan. For example if you have a $100,000 loan and your APR included costs are $3,500 you would first find out what percentage of $100,000 is made up by $3,500. This one is simple it's 3.5% but that has to be annualized so divide it by 12 to get .29% and add that to your initial interest rate - let's say 6% to get 6.29%. So in this scenario our interest rate is 6% but our APR is 6.29% - so you can imagine why people see that TIL and call immediately and say, "I thought I was getting a 6% loan!" When you indicate that is correct they invariably say, "But this paper says 6/29%" When explained to the masses they simply say "oh" and just forget about it!

So what fees affect the APR? I'm so glad you asked. But the answer is variable by the state wherein the property is located. I can give you the ones for Georgia as a reference but your state may be different. Remember all of these fees may not actually be on your loan but if they are they are to be added to the APR.

Georgia APR fees include: processing, underwriting, origination, discount points, broker fees, commitment fee, lock fee, attorney's fee, wire fee, disbursement fee, warehouse fee, amortization schedule fee, copy fee, fax fee, courier fee. There are other fees that may be charged but these are the fees that affect the APR. (These fees may even change from lender to lender believe it or not.)

If you are an agent, home owner or home buyer with questions about APR feel free to call me anytime on my cell at 678-439-8683 and I'll be happy to help you as much as possible.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

When Should You Get Pre-Approved For A Purchase Loan?

Ken Cook, FHA Home Loans 678-439-8683 — Sun, 25 Oct 2009 10:13:05 -0500

This one kind of goes along with "When Can We Close?" from a couple of years ago and another "How Long Does It Take To Close Today?" from a few weeks ago. It is further inspired by feedback from many agents and clients over the last many years.

First it is important to understand the difference between a pre-approval, an approval and a clear-to-close. That explanation is given here at "Pre-Approval, Approval, Conditional, Cleared - What the ____?!" Let me augment that by saying you, the home buyer, have a lot of power over how certain your pre-approval is.

Pre-approvals are generally good for 30 days. This almost always depends on lender guidelines. To make sure you are getting a real pre-approval listen to how long it takes to get your pre-approval and to what you supply to the loan officer before you receive your pre-qualification letter.

Recently I received a call from one of the largest banks in the world and the phone call started by telling me I had been pre-approved for a very low interest rate to refinance my current home. When I asked the phone bank operator to send me the pre-qualification he said he would have to ask just a few questions first. There was probably only a pre-qualification based on my credit score and estimated property value. Worth nothing.

A real pre-qualification can take as little as a couple of hours and a seasoned loan professional can easily guide you through the process. Anyone who gives you a pre-qualification over the phone without having seen any evidence to prove what you have said is giving you a decision based on credit and payment history with your statements only. This type of pre-qualification is what gives loan officers a bad name.

If you are thinking about going shopping for a new home you should get pre-qualified before you even begin. Unless you have significant income, strong credit and payment history and plenty of cash you need to know what the lender is going to offer based on your specific qualifications. The loan officer will also be able to tell you which property types and costs are okay for which loan products.

To sum it up - get qualified first then start shopping. Otherwise you may be wasting your time and the time of others as well.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

What Does FHA Say About Foreclosures in Credit History?

Ken Cook, FHA Home Loans 678-439-8683 — Sun, 18 Oct 2009 17:27:50 -0500

Here are the facts about FHA and foreclosures on credit:

If there is a foreclosure on the borrower's credit (any of the borrowers) it must be at least 36 months previous in most cases. There are a very limited number of instances which would allow a foreclosure to have been within less than 36 months (from application date) and the lender may continue to underwrite the application even though it may have not been approved by the Automated Underwriting System (AUS).

Those events are pretty much limited to:

Death or serious illness of a wage earner.

Yes, that's it. HUD 4155.1 REV-5, the guideline from HUD which governs this topic, states:

D. Previous Mortgage Foreclosure. A borrower whose previous principal residence or other real property was foreclosed or has given a deed-in-lieu of foreclosure within the previous three years is generally not eligible for a new FHA-insured mortgage. However, if the foreclosure was the result of documented extenuating circumstances that were beyond the control of the borrower and the borrower has re-established good credit since the foreclosure, the lender may grant an exception to the three-year requirement. Extenuating circumstances include serious illness or death of a wage earner, but do not include the inability to sell the house because of a job transfer or relocation to another area.

So, while it is possible to be qualified for an FHA mortgage with a foreclosure on the buyer's or refinancer's credit within the last 36 months the reasons for making that exception are very narrow. Meanwhile please don't try and qualify your clients yourself as there are many , many caveats which may be overlooked even by the most estudious.

As a seasoned loan officer I don't even deny an applicant just because I see a foreclosure without hearing the full story and submitting the information to the AUS. Then again I like my application to close ratio to stay as high as possible within the lending guidelines available to me.

For exclusive and current updates affecting buying power from one of America's foremost mortgage experts sign up for my Constant Contact Newsletter.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Marietta, Georgia - Today Show's Top 4 Pick In America

Ken Cook, FHA Home Loans 678-439-8683 — Sat, 17 Oct 2009 09:36:53 -0500

Looking for a great place to live with some of the best values in America? Look no farther because I am sitting in it right now keyboarding this post to you! On October 6th NBC's Today Show with Al Roker highlighted Marietta, Georgia as the number 4 place in America to buy a home and get the most "bang for your buck".

I happen to agree with them because I live here, have lived here my entire life except a little college stint, and I am very actively involved in my community and lending here. During the boom builders constructed some very beautiful homes which in turn emptied a number of existing homes and left us with a surplus of larger, newer homes. In fact on October the 12th I wrote about "My Home, Marietta, Georgia" which was a featured article here on Active Rain.

We were hit late in the price drops but when we got hit we got hit hard! Sarasota is number one, San Fransisco is number two, is number three is Lansing (another great city), and Marietta (that's me) is number four. By the way, the Gone With The Wind Museum is way down on the list of "pride and joy" of this community. Seriously, only an outsider would say that! Don't get me wrong, it's very cool but the life is in that old town area is very vibrant and that is just one of hundreds of attractions in that immediate area.

You can watch the video here on the City of Marietta's website. When you get finished call me. I'm not a real estate agent - I'm a very seasoned home lender based right here for my entire career in Marietta, Georgia. 3300 homes in the Atlanta/Marietta area have been financed across my desk I have a pretty decent "handle" on the market here.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Finance Challenge: Reserves - the right amount, the right type, the right timing

Ken Cook, FHA Home Loans 678-439-8683 — Fri, 16 Oct 2009 21:31:53 -0500

So you have the down payment - sourced and seasoned just like it needs to be. All saved up, stored away nicely in the bank for the last 60 days, and ready to be invested into a home. The closing costs are there, too, and all perfectly documented for the last two months. Great job! Your down payment and closing costs are in order. This is something to be proud of!

It's always something that needs to be covered right up front. When the loan officer is taking the application and they know what it requires for down payment and the approximate closing costs they also need to calculate in the speficied amount of reserves. What are reserves? Straightforward it is enough to conver the principal, interest, taxes, and insurance (at a minimum).

Most loans require two months of reserves on the purchase of a primary residence and as much as six months (PITIA) on investment property purchases. But it's not enough they be available they must also be sourced and seasoned just like the down payment and closing costs.

Here's a little good news, though: reserves don't have to be in cash form. In fact 100% of the following can be counted for reserves:

Stocks, bonds, mutual funds, U.S. government securities, and other securities that are traded on an exchange or marketplace general available to the public (such as NYSE, NASDAQ, Midwest SE, CBOT, or OTC) whose price can be readily verified through financial publications.
Cash-value life insurance (rather than face-value) that is verified. The borrower must be the owner of the policy and not the beneficiary.
Personal IRA and SEP-IRA accounts that are owned by the borrower and verified.
The borrower’s portion of undistributed trust funds.

Additionally a portion of the value of the following may be counted as reserves:

401(k), KEOGH, 403(b) and other IRS-qualified employer plans may be counted as reserves; however, to account for withdrawal penalties and estimated taxes, 70% of the vested amount of the account should be used to determine the borrower’s available reserves. The borrower will be required to provide documentation that the funds are accessible for withdrawal. If the retirement account only allows for withdrawals in the event of the borrower’s employment termination, retirement, or death, these funds should not be considered as reserves.
Savings bonds may be counted at 100% of face value if mature. If the bonds are not mature, the amount counted towards reserves is based on the redeemable value at the time of underwriting.

Ask your Loan Officer about reserves. If you are an agent and want help understanding these please never hesitate to call me or have your client call me. I'm more than happy to help even if I do not have the ability to assist in your area.

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

Hear Me Clearly: First Time Homebuyer's Must Qualify and Offer NOW!

Ken Cook, FHA Home Loans 678-439-8683 — Thu, 15 Oct 2009 10:27:30 -0500

By NOW! I mean if you have not called a loan officer to get qualified, found a property and made an offer you're dangerously close to missing the First Time Home Buyer's Tax Credit. I know what you hear in your mind, "it's good through the end of November." You would, of course, be correct in so saying. Your correctness would be equivalent to leaving New York City for a trip to Tokyo to see your best friend's wedding which happens at 5PM your time and you are getting on a jet at Noon your time the day of the event. In other words it's "possible" you can make it on time but not very likely with the available equipment.

I know there will be loan officers and others reading this who will say, "shoot man I can close a loan in 8 days". Well, so can I. But it's by far the exception and not the rule. If you are a first time home shopper and you are reading this pick up the phone right now and call your local loan officer. If you just have questions feel free to phone me at 678-439-8683 and I can answer some questions for you.

Here are some pointers to speed the process and hopefully close before the end of November:

Get prequalified right now, today. Not in a minute RIGHT NOW.
Once you are prequalified ask your loan officer for a list of "findings" this will likely include:
- Last two years of tax returns all pages all schedules
- Last two months of bank statements on all accounts all pages (ALL pages)
- One month's worth of pays stubs (if you get paid weekly that's FOUR)
- Name of your landlord and their contact information for rent verification
- Explanation of any credit checks that have been done on you in the last 90 days
- A clear (CLEAR) copy of your driver's license (photo ID) and Social Security Card
- If your down payment is a gift a GIFT LETTER and supporting documentation (the giver's paper trail from their bank to you)
- Name and contact information for your preferred home owner's insurance agent
Be prepared to get more stuff and don't argue with the loan officer or processor - JUST GET IT

If your home purchase closes on or after December 1st, as it stands today and there is no reason to believe it is going to change, you will NOT be eligible for the tax credit. Trust me, there will be hundreds, if not thousands, of people nationwide who think they are going to qualify for the tax credit who do not get it because they started too late. Today is getting just about too late.

So what are you going to do right now? Right CALL A PROFESSIONAL, EXPERIENCED LOAN OFFICER!

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683

I Found Me! (At my new job)

Ken Cook, FHA Home Loans 678-439-8683 — Wed, 14 Oct 2009 17:07:08 -0500

While for the last several years I have been blogging as partner and "President" of a busy but small mortgage lender licensed in Georgia, Florida and for a time North Carolina things have changed mightily over the last few weeks. Many of you knew I was considering mothballing my Novation Mortgage and indeed had spoken to some about various opportunities around the industry.

Early on in the change process I decided if I were to continue with my experience in the mortgage industry it would be at Regional Director or above or good old Loan Officer. Several people contacted me through Active Rain or as a result of Active Rain I should say and others with whom I interviewed rapidly found my 3 plus years of blogging here as well as proliferated around the Internet. Some liked the idea and others did not - understandably - as keeper of the keys to my own company I was often more outspoken than I will be henceforth.

Be all that as it may I have landed at a new company. So far I like it very much. I know most of the underwriters and even my own underwriter for the last several years works right here in the office with me. Most of you know my lovely wife Myra. Of course she can't do my files here but that's okay I can still see her smiling face every day.

The best news is yet to come about my new employer and cannot yet be publicly discussed. Still, as of today, the company has multiple branches across the nation and we are licensed in over half the states in the US and growing every day. I checked out every company which recruited me and felt my talents and experienced best matched to be a Loan Officer with America Home Key based in Dallas, Texas.

Why did I decide on Loan Officer vs. continuing to hash it out with overly pretentious young bucks and wannabe middle managers trying to get to the Executive Board? I'm 50. I've had very successful years. I've been kicked in the teeth by the economy, Congress and deflated investments. Something is very appealing to me about concentrating on nothing but my relationships with networks of good people, real estate agents, builders, and other industry people. As a Loan Officer I can concentrate on what gives the customer the best outcome.

Middle management was good. Ownership definitely had its perks but it also has and had its drawbacks. Let me do what I do best and that's service my relationships and clients. (To the numbskull who says, "they're not clients you're not a lawyer", I say "buzzz - you're wrong". Merriam-Webster defines a client as "a person who engages the professional advice or services of another".) Having time to get out and see the agents and brokers in my area as representative of a well funded bank is going to be enjoyable. Playing golf with some will be even better!

Ken Cook - Georgia - FHA, USDA, VA and Conventional Home Loans (678) 439-8683