So people are always talking about ROI and how they want their money to grow. The problem is that most people just talk and take no action when the opportunity is right in front of them. Lip service isn’t going to make you rich buddy. A good idea without action is just an idea.
Where is a good place to put your money? Real Estate! WHAT? You can’t be serious! Let me explain. We all know how cheap homes are right now and most of you also know how cheap mortgage rates are as well. So let’s do a quick “real life” example. The following scenario is based on a home purchase that I executed last month.
Home info:
3bd/2.5 bath, built in 2003, gated community, 1800 sq ft., located in Phoenix, AZ
Purchase Price-------------$73,800
Down Payment-------------$18,450
Interest Rate---------------4.50% 30-yr Fixed
Monthly Payment----------$428 PITI
Home Rented for------------$995/Month
Time on market/vacant------3 days
Positive monthly cash flow---$567.00
Annual ROI------------------36.88% ([567*12]/18,450])
Any Questions?
Friday, June 10, 2011
Thursday, January 13, 2011
To Refinance OR Not--is the question
Yeah, so rates have edged up a bit in the past weeks. Guess what? They are still extremely attractive! Why are we so worried about only paying attention to the rate and paying no attention to the monthly savings? For example (based on random numbers to illustrate my point), if you refinanced 6 weeks ago you would have gotten 4.25% on a 30-yr fixed and would have reduced your payments by say $150 a month. So, is it not worth it to do it now at 4.75% and reduce your payments by say $120?
Bottom line, you are still saving money. Granted, it’s not as much, but would you rather wait until the current savings disappear due to rising rates? Best way to weigh your options is simple.
1. Figure out what is your monthly savings.
2. Figure out what portion of your current payment goes to interest vs. principal (you loan officer should be able to do this, if he/she can’t—FIRE THEM).
3. Figure out what portion of your proposed payment will go towards interest vs. principal.
4. Know what its going to cost you.
5. With this data, have your loan officer do a break even analysis (number of months to break even on your proposed refinance).
If that number is reasonable (I suggest no more than 36 months). Pull the trigger and refinance.
Jesse Singh
President
1st Rate Home Mortgage, Inc
www.1rhm.com
Bottom line, you are still saving money. Granted, it’s not as much, but would you rather wait until the current savings disappear due to rising rates? Best way to weigh your options is simple.
1. Figure out what is your monthly savings.
2. Figure out what portion of your current payment goes to interest vs. principal (you loan officer should be able to do this, if he/she can’t—FIRE THEM).
3. Figure out what portion of your proposed payment will go towards interest vs. principal.
4. Know what its going to cost you.
5. With this data, have your loan officer do a break even analysis (number of months to break even on your proposed refinance).
If that number is reasonable (I suggest no more than 36 months). Pull the trigger and refinance.
Jesse Singh
President
1st Rate Home Mortgage, Inc
www.1rhm.com
Tuesday, August 31, 2010
Home buyer tax credit...again???
Surprise, surprise, home sales are down again. What happened? Why the drop? Things were looking so good. At this point it is pretty obvious what happened, the tax credit ended. Uncle Sam provided the motivation to buy a home now and not wait till later. In some cases we saw a little bit of a bidding war between buyers—yes, there were multiple bids on several properties! What effect did this have on the overall market? Many people, including myself, felt that this tax credit was creating a false bubble, an artificial demand. I argued that the tax credit was making “future buyers” buy now and in turn this was going to make the numbers look extremely poor for the months after the expiration of the tax credit. So now the new solution is to bring the tax credit back.
I actually agree with this solution. The other team (those against the idea of bringing it back) argues that this will cost the US Treasury too much money and it’s a bad idea—BULLSHIT. According the US Treasury, the home buyer tax credit has cost the Treasury approximately $16 Billion thus far. Can somebody remind me how much was spent on the bail out or our “too big to fail” banks? Let’s just say it was north of $700 Billion. We have hard numbers that prove that the tax credit is working and without it people are reluctant to buy homes. So what is the freaking problem? Come on Uncle Sam, get your check book out and start signing those checks and don’t you dare stop until Americans forget about the real estate disaster that took place a few years ago. The numbers prove that we found a solution—bribing the American public to purchase a home. So let’s stick with it and bring the tax credit back!
Jesse Singh
President
1st Rate Home Mortgage, Inc
www.1rhm.com
I actually agree with this solution. The other team (those against the idea of bringing it back) argues that this will cost the US Treasury too much money and it’s a bad idea—BULLSHIT. According the US Treasury, the home buyer tax credit has cost the Treasury approximately $16 Billion thus far. Can somebody remind me how much was spent on the bail out or our “too big to fail” banks? Let’s just say it was north of $700 Billion. We have hard numbers that prove that the tax credit is working and without it people are reluctant to buy homes. So what is the freaking problem? Come on Uncle Sam, get your check book out and start signing those checks and don’t you dare stop until Americans forget about the real estate disaster that took place a few years ago. The numbers prove that we found a solution—bribing the American public to purchase a home. So let’s stick with it and bring the tax credit back!
Jesse Singh
President
1st Rate Home Mortgage, Inc
www.1rhm.com
Friday, April 30, 2010
How Goldman Screwed You!
Why are you not more upset about this Goldman Sachs fiasco? Is it because you don’t really understand exactly what happened? Or because you are not sure how it affects you? Or because you are not sure how it impacts the rest of us? Well let’s see if I can answer some of these questions.
What the hell is it that exactly happened—in layman terms? Basically, Goldman was pushing a product that was designed to fail. They were selling a product to their investors, telling them how great it was and how it was going to make them a steady return, while at the same time these bastards were betting that the product would fail. So is that fraud? You bet your ass that is fraud!!
Now the details:
Step 1:
2007 Goldman creates a collateralized debt obligation (CDO) called Abacus—made up of subprime mortgages.
Goldman pitches this product to its clients as a sound investment that they are long (believe the value of the product will increase).
Step 2:
Goldman tells investors that the securities that are in Abacus had been chosen by ACA Management, LLC. According to the SEC, this is where Goldman lied. According to the SEC, the underlying portfolio was put together by John Paulson, hedge fund manager, who hand-picked the worst possible mortgages in hopes that they would default. He wanted the adjustable mortgages, low FICOs, and AZ, CA, FL, and NV loans.
Step 3:
Now Paulson places a BIG bet against the portfolio that he put together (Abacus). How you ask? He purchased “credit default swaps”—insurance policies that pay out if the borrowers default. Goldman also shorted (were betting the value would go down) the CDO—those sneaky bastards!
Misc:
Paulson paid Goldman $15 million in April 2007 to set up and market the Abacus CDO—according to the SEC. Not a bad investment, given his return was $1 Billion.
Within a year 99% of the underlying assets in Abacus had been downgraded by ratings agencies.
How does this impact you and me and the regular Joe Blow?
These guys manipulated the market by creating a demand for bad mortgages. Simply because they could sell these mortgages knowing damn well they were selling dog shit! That is why they placed bets against these products to make their billions and leave the economy in shambles. This is financial terrorism.
Here is the plain and simple answer. To bet against bad mortgages you need bad mortgages, so how do you get bad mortgages? You offer mortgages to people with bad credit that are likely to default so your bet pays off.
I wouldn’t be as pissed if Player 1 bet that the market will continue to go up and Player 2 bet that the market will crash—and there was no relationship between the two Players. However, in reality Player 3 lied to get money from investors to put into a product he designed for one reason—for that product to fail!!
This is not financial engineering this is financial fraud that impacted all of our lives in a very negative manner.
Jesse Singh
President
1st Rate Home Mortgage, Inc
www.1rhm.com
What the hell is it that exactly happened—in layman terms? Basically, Goldman was pushing a product that was designed to fail. They were selling a product to their investors, telling them how great it was and how it was going to make them a steady return, while at the same time these bastards were betting that the product would fail. So is that fraud? You bet your ass that is fraud!!
Now the details:
Step 1:
2007 Goldman creates a collateralized debt obligation (CDO) called Abacus—made up of subprime mortgages.
Goldman pitches this product to its clients as a sound investment that they are long (believe the value of the product will increase).
Step 2:
Goldman tells investors that the securities that are in Abacus had been chosen by ACA Management, LLC. According to the SEC, this is where Goldman lied. According to the SEC, the underlying portfolio was put together by John Paulson, hedge fund manager, who hand-picked the worst possible mortgages in hopes that they would default. He wanted the adjustable mortgages, low FICOs, and AZ, CA, FL, and NV loans.
Step 3:
Now Paulson places a BIG bet against the portfolio that he put together (Abacus). How you ask? He purchased “credit default swaps”—insurance policies that pay out if the borrowers default. Goldman also shorted (were betting the value would go down) the CDO—those sneaky bastards!
Misc:
Paulson paid Goldman $15 million in April 2007 to set up and market the Abacus CDO—according to the SEC. Not a bad investment, given his return was $1 Billion.
Within a year 99% of the underlying assets in Abacus had been downgraded by ratings agencies.
How does this impact you and me and the regular Joe Blow?
These guys manipulated the market by creating a demand for bad mortgages. Simply because they could sell these mortgages knowing damn well they were selling dog shit! That is why they placed bets against these products to make their billions and leave the economy in shambles. This is financial terrorism.
Here is the plain and simple answer. To bet against bad mortgages you need bad mortgages, so how do you get bad mortgages? You offer mortgages to people with bad credit that are likely to default so your bet pays off.
I wouldn’t be as pissed if Player 1 bet that the market will continue to go up and Player 2 bet that the market will crash—and there was no relationship between the two Players. However, in reality Player 3 lied to get money from investors to put into a product he designed for one reason—for that product to fail!!
This is not financial engineering this is financial fraud that impacted all of our lives in a very negative manner.
Jesse Singh
President
1st Rate Home Mortgage, Inc
www.1rhm.com
Friday, April 9, 2010
Upcoming HUD Rule for FHA Loans
So HUD no longer wants to license Mortgage Brokers to do FHA loans. Apparently, it is too much work to regulate brokers and bankers. So instead, HUD will leave it up to the Mortgage Bankers to regulate and dictate which Brokers will be allowed access to FHA originations. Obviously this puts the Mortgage Broker at the mercy of the Mortgage Banker, but more importantly takes financing options away from the consumer. How, you ask?
HUD raised the net worth requirement from $250K to $1M. This will force the smaller players to pull FHA products from their menu, simply because they cannot meet the new net worth requirement.
What happens to the price of a product when the number of competitors offering such product decreases? The price of that product will go up. Think about it like this, if you want to buy a car and have access to 10 dealerships selling the car you want, chances are you can get that car for a better price than someone who only has access to 3 dealerships selling that car. This is called the benefit of competition.
HUD’s new rule only helps the banks that can meet the new net worth requirement, because it gives them more power by putting their competition out of business. Just what this country needs, less competition in the banking world so the American consumer can be raped by the guys that are “too big to fail”.
To add insult to injury, if the bank is “too big to fail” the loan officers they employ do NOT have to be licensed to originate loans. Meaning they don’t have to meet the testing requirements that the rest of us must meet. I guess that’s perfect for the incompetent loan officers that cannot pass the test or meet the “financial responsibility,” a requirement imposed by certain states (including Arizona) to obtain a license to originate loans.
Doesn’t take a genius to figure out who this new rule was intended to help—incase you haven’t figured it out yet, the answer is the big banks. This is the perfect one two punch. Knock out the competition, and then raise the cost to obtain home financing.
Gotta love this great nation of ours—the powers that be will always find a way to screw the general public.
Jesse Singh
President
1st Rate Home Mortgage, Inc.
www.1rhm.com
HUD raised the net worth requirement from $250K to $1M. This will force the smaller players to pull FHA products from their menu, simply because they cannot meet the new net worth requirement.
What happens to the price of a product when the number of competitors offering such product decreases? The price of that product will go up. Think about it like this, if you want to buy a car and have access to 10 dealerships selling the car you want, chances are you can get that car for a better price than someone who only has access to 3 dealerships selling that car. This is called the benefit of competition.
HUD’s new rule only helps the banks that can meet the new net worth requirement, because it gives them more power by putting their competition out of business. Just what this country needs, less competition in the banking world so the American consumer can be raped by the guys that are “too big to fail”.
To add insult to injury, if the bank is “too big to fail” the loan officers they employ do NOT have to be licensed to originate loans. Meaning they don’t have to meet the testing requirements that the rest of us must meet. I guess that’s perfect for the incompetent loan officers that cannot pass the test or meet the “financial responsibility,” a requirement imposed by certain states (including Arizona) to obtain a license to originate loans.
Doesn’t take a genius to figure out who this new rule was intended to help—incase you haven’t figured it out yet, the answer is the big banks. This is the perfect one two punch. Knock out the competition, and then raise the cost to obtain home financing.
Gotta love this great nation of ours—the powers that be will always find a way to screw the general public.
Jesse Singh
President
1st Rate Home Mortgage, Inc.
www.1rhm.com
Subscribe to:
Posts (Atom)