Draw Me Self

When you know what every mortgage lender has to offer, get the best deal that you can. On any given time, mortgage lenders & brokers may offer different prices for the same loan terms to different persons, even that those consumers have the same qualifications. Most likely the reason for this difference in price is that officers and mortgage brokers are many times allowed to keep some or all of this difference as extra compensation. In general, the difference between the lowest available price for a loan and any higher price that the consumer agrees to pay is an overage. When overages exist, they are built into the prices given to borrowers. They can occur in both fixed & variable rate loans and can be in the form of fees, points, or interest rate. Whether quoted to you by a loan officer or a mortgage broker, the price of any loan may contain overages!

Ask the lender or broker to write down all the costs part of the loan. Next ask if the lender or broker can waive or reduce one or more of its loan fees or agree to a lower interest rate or fewer points. You don't want that the lender or broker is not accepting to lower one fee while increasing another or to lower the interest rate while raising points. Don't be shy asking lenders or brokers if they can improve terms or can give you better terms than those you have found elsewhere!

Once you are happy with the terms you have negotiated, you may want to obtain a written lock-in from the mortgage broker or lender. The lock-in should include the interest rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid by you. A fee may apply for locking in the loan rate. This fee may be refundable at closing though. Lock-ins can protect consumers from rate increases while your loan is being processed; if rates drop, for example, you could end up with a less favorable rate. In case that will happen, try to negotiate a compromise with the lender or broker.

LendAdvisors.com - Blog that helps you with Real Estate, Mortgages & Refinance.

Hard money lender real estate loans provide borrowers with poor credit the chance to purchase a home. These types of loans are considerably more expensive than traditional home loans financed through mortgage lenders. This type of financing is intended for interim use while borrowers rebuild or establish a credit history.

Hard money lender real estate financing is also used by investors to purchase commercial properties or realty intended for house flipping. Investors sometimes use this type of financing to buy properties that are not in marketable condition because this type of realty does not qualify for conventional financing through banks.

Hard money loans are referred to as 'bridge financing' because they bridge the gap for individuals who do not qualify for funding through a mortgage lender. Bridge loans can be used in addition to conventional loans and are often used with seller carry back financing.

Seller carry back is a lending option that helps individuals buy real estate by combining bridge loans with conventional mortgage loans. The property owner provides a portion of financing for one to two years and the balance is financed through a bank, credit union or mortgage lender.

For example, the Seller lists his property at $250,000 and offers to carry back 40-percent financing, or $100,000. The buyer obtains a conventional home mortgage loan for $150,000. The buyer has two mortgages against the property. The bank carries the first mortgage and the seller carries the second mortgage. Carry back financing is generally limited to 70-percent maximum of the property's current market value.

Interest rates applied to bridge loans are substantially higher than interest applied to conventional home loans. Private financing interest rates are regulated by state usury laws. On average, bridge loans are charged an interest rate of 11- to 21-percent. At present, Florida has the highest usury rate which is capped at 25-percent.

Seller carry back real estate contracts often include default clauses which allow sellers to increase interest rates if borrowers become delinquent with loan payments or default on the loan and enter into foreclosure. Default interest rates can soar as high as 29-percent. Buyers can determine maximum hard money loan interest rates at UsuryLaw.com.

The amount of interest charged with bridge loans can vary depending on the amount of borrowed funds, as well as the funding source. Private real estate investors generally charge a lower interest rate than investment groups. Hard money loans for residential property typically carry a higher rate of interest than commercial property loans.

Bridge loans sometimes include a prepayment clause, penalizing borrowers who pay loans off early. One primary goal is to refinance hard money loans through a conventional mortgage lender as quickly as possible. A six-month prepayment clause is tolerable, while a two year penalty clause is unacceptable. It is highly recommended to consult with a real estate lawyer before entering into hard money borrowing.

Overall, hard money lender real estate loans are not the preferred method for financing. However, bridge loans allow borrowers with less than perfect credit the opportunity to buy a home and provide funds to investors for residential and commercial investment properties.

Are you one of the millions of Americans who has been contemplating a home mortgage refinance? Perhaps you have lost your job, or had to take a cut in pay. You might not be able to sell your house in the current real estate market and are now facing foreclosure. These are all the scenarios for which President Obama enacted his "Making Home Affordable" plan.

What is "Making Home Affordable"?

What this package has done for the American homeowner is to loosen the restrictions on home mortgage refinance options. It has also required banks to allow for mortgage modification in certain circumstances. Many of those who own a home and are in the midst of a difficult financial situation are eligible for this program.

The president's goal in enacting this piece of legislation was to ultimately provide a positive effect on the real estate market. He is also hoping that the millions of citizens negatively affected by the recessionary economy will find relief, and be able to avoid foreclosure.

The Making Home Affordable plan is part of the $75 billion bailout package which was approved by Congress. Mortgage companies are being given incentives in order to minimize their risk while modifying current mortgages or approving new ones. This is good news for homeowners, or potential homeowners, who will find they now have many more options for mortgage loan terms and the number of lenders who are willing to work with them.

What the Making Home Affordable Plan Can Do For You

If you were previously considering a home mortgage refinance but found that it didn't make sense financially, or was impossible due to restrictions placed by the lender, then it may be the perfect time to revisit this option.

According to the package, homeowners are eligible to modify the terms of their mortgage so that the monthly payment equals 31% or less of their gross income. Because of economic woes and the failing real estate market, many Americans are now paying up to 50% of their monthly income for their home alone.

Banks and mortgage lenders have received a set of guidelines as part of the Making Home Affordable plan. They can offer a 2% mortgage rate, if that will help reduce the ratio of payment to income. Cash incentives from the government will help pay for this reduction.

For the homeowner who is looking for a home mortgage refinance, they must first qualify to be eligible under this stimulus plan. They must be current on their loan in the last year and must not have made any payments more than 30 days past due. They are required to sign a letter of Financial Hardship stating that their income has been reduced, for whatever reason, in order to qualify for the 2% interest rate. If the property value has fallen by 15% or more, than the fixed 2% rate may also be an option. Anyone who financed their home with Freddie Mac or Fannie Mae is eligible for modification.

Under the terms of the Making Home Affordable package, a home mortgage refinance might now be a very realistic proposition, as well as a sound financial decision. Act now to find out what your options are and if you qualify to save thousands of dollars annually with a lower mortgage payment.

As mortgage rates have consistently held themselves around 5% for fixed loan products, the idea of refinancing to a lower rate has appealed to many home owners. Traditionally, obtaining a lower rate should lower the monthly mortgage payment. In many real estate markets, home prices have been falling making it more difficult to obtain a new mortgage as proposed loan amounts to the home value ratio has changed significantly. Additionally, credit policies with lenders have also changed making it even more difficult to obtain a mortgage.

While most borrowers will stay in their current mortgages, refinancing in a "difficult" market can improve your financial health in different ways.

1) Use home equity to pay down consumer debts.

Credit card companies are taking advantage of consumers who have outstanding balances. With interest rates around 20% in many cases, using home equity to eliminate consumer debt is a smart move in a calm real estate market.

2) Fund a retirement plan using home equity.

There are many investment opportunities available that will put your home equity to work in a tax free retirement account. Many mutual funds are available that are paying significant dividends and are attractively priced. Take advantage of quarterly and annual dividends for your retirement account as keeping the majority of your money in real estate can be risky. If your 401k has dipped, being proactive about increasing the value of retirement accounts is a smart move.

3) Avoid refinancing on condos or co-ops.

Guidelines for refinancing on these types of properties are stricter than ever. Making a drastic move into a new mortgage could diminish the possibilities of a future refinance. Lenders are tightening up on how much insurance buildings must now carry, its occupancy rate, and how much space the building can use for commercial purposes. As changes are being made in this market, its safer to keep your existing mortgage before locking in on a new loan where changing guidelines can negatively affect your financial strength.

Remember, mortgage financing strategies are contingent on how long you plan on staying in your home. Leveraging your mortgage to increase cash flow and your overall financial health is wise, but there may be long term consequences if you greatly reduce the equity in your home. Many lenders prefer keeping 20% of your own equity within the property before considering a mortgage refinance. Programs and policies will vary, but using home equity to your advantage has never gone out of style.

Whether your are obtaining a mortgage for your first home, or your tenth in a series of real estate investments, the type of mortgage you choose will have a lasting impact. The consistency of your payments, the amount of interest you pay, and the amount of money you put down will all affect your decision. Here's a quick glossary of the terms you need to know.

Fixed vs. Variable Mortgage Loans

The standard 30 year fixed real estate mortgage isn't so standard anymore. It's still extremely popular because you can lock in a one-time interest rate that will stay consistent over the life of your mortgage. But this doesn't work for everyone, which is why the other real estate mortgage options have evolved.

The variable mortgage, also called an adjustable rate mortgage (ARM), or floating mortgage, is often attractive because the payments and interest rates can be significantly lower. The problem is that the interest rate will fluctuate along with the prime lending rate. This means your mortgage payment could increase at any time. This is a good option only if you know you can handle the jump in payment without consequence.

Interest Only Mortgage Loans

If you have ever looked at the amount of interest and principle paid on an actual real estate mortgage payment, then you know why interest only loans are so popular. Someone who pays $1,250 monthly, at a 5.875% interest rate, is actually making a payment of about $670 to interest, $400 to escrow, with only $180 going towards paying off the principle of the loan. By paying off the interest in the early years of the loan, your monthly payment will be significantly lower. A traditional mortgage would require that additional payment to principle each month.

While your payments with an interest only real estate mortgage loan are guaranteed to jump once the interest is paid off, this can work towards your advantage in some situations. For instance, a young person just starting out in a career may expect to be making more money by the time the monthly real estate payment increases. Also, the flexibility can allow you to borrow more money, or create more cash flow in your real estate investment, in those early years.

On the down side, you don't accrue any real estate equity when you're not paying off the principle amount owed. Also, the unpredictability of the real estate market makes this a riskier loan. Most financial advisors also counsel against taking out an interest only loan if you can't afford the house without it.

Negative Amortization

A negative amortization loan is most often used in areas where real estate costs are very high, with the goal of helping people who could not otherwise afford to buy into the area. Basically, the real estate lender agrees that the mortgage holder will pay less than the amount of interest due each month for a short, usually 5 year, period of time. The owed amount is tacked on to the remaining real estate loan at the end of that period. Also known as a deferred interest or Graduated Payment Mortgage (GPM), this is considered risky since the "jump" at the end of the lower payment period will be significant.

Balloon Mortgages

Balloon Mortgages have inspired come controversy in the real estate industry, because some shady real estate professionals have advised them inappropriately. With a balloon mortgage, you pay a fixed rate for a specified period of time (5/7/10 years) and then pay off the remaining principle in a lump sum when that time is up.

Balloon mortgages are attractive because the interest rates are usually lower. One way to use a balloon mortgage for your real estate purchase is to take advantage of the lower interest rate, and then attempt to refinance at a low fixed rate at the end of the term. This is especially appealing when interest rates are high. Just remember, have a plan, and a back up plan, for paying off the final amount if you are thinking about a balloon mortgage.

The best advice is probably to talk to someone you trust who has a good real estate background, and who can assess your specific situation. Every real estate transaction is different, and so are your mortgage needs.

I often tell people that becoming a millionaire in the real estate business is an easy thing to accomplish. They usually give me a look of bewilderment. I say that you don't have to understand every aspect of real estate in order to begin investing. The best thing to do is start with a basic buy-and-hold strategy purchasing whatever type of property you are capable of buying with as little money down as possible. How you buy something with as little money down as possible depends on your financial situation and what types of mortgages you're capable of qualifying for. Since guidelines for mortgages and government intervention changes daily, it's impossible for me to tell you the best way to do that. I can tell you how I did it for years using the all-money-down technique I described earlier in the book. But I'll give you a quick refresher course below.

If you bought $100,000 house through conventional means, you may have to put 20 percent down is $20,000 plus closing costs that will cost you approximately $3000. In this example, you put $23,000 down to buy $100,000 investment property. Using the all-money-down technique, you would buy a $100,000 property for cash putting all $100,000 down plus the closing costs of $3000. At this point, you have $103,000 down on the property and you begin to invest an additional $5000 to fix the property up. You now have a total of $108,000 of your money into the property. You put the property up for rent and you find a good tenant, so now you're empty investment property is a business making money and shows a profit. Now you go to the bank and you get the property appraised with the intention of doing a cash-out refinance. Because you fixed up the property and it's a money-making business, the property appraises for $114,000. The bank is willing to lend you an 80 percent mortgage on the $114,000 appraisal giving you a mortgage of $91,200. You originally put down $103,000 and received back a mortgage for $91,200 making your out-of-pocket costs $11,800.

When using the all-money-down technique as compared to buying a property through conventional methods, you save $11,200. Now of course, you're going to have a higher mortgage and less cash flow coming from the property, but you're also going to have $11,200 to buy the next property with.

Sometimes the homes you buy are going to cost you $10,000 to buy; other times you're going to break even on the deal. You might even be lucky enough to actually get paid to buy a house, which has happened to me once or twice. The goal was simply to just keep buying as many properties as possible until you build up a portfolio worth millions of dollars. You will make a profit from the cash flow, but most likely that's going to go back and do things like repairs and vacancies in all the other issues that come up with real estate. If you do end up banking $10,000 during the year from the cash flow of your buildings, there is your down money to buy an additional property and expand your portfolio further.

I have constantly repeated that you're not going to find the cash flow to be something of tremendous value to you. The cash flow will help pay for the necessary things and give you down money for future deals, but in the end you will work hard for very little money. The real surprise will come when you've ridden the cycle from bottom to top and created a gap between your portfolio's value and the amount of mortgages that you owe for the building. Accruing equity in your buildings, you will slowly begin to see your net worth increasing as the years go on.

For example let's just say you bought one property a year for five years valued at $100,000 a property. Since the five years that you bought the properties, values have gone up somewhat and the mortgages have gone down, and your net worth is the equity in between. As you begin to see this throughout your investing career, especially when the market is on the rise, it can be an exciting time.

Your expectations should be to live off of the income from your job while the profit from the rental property business is used to fuel its needs. You'll usually get to a point somewhere when a real conflict will develop between your current career and your real estate investments. It's hard to be in two places at once, and ultimately it will begin to catch up with you. For me this conflict was easily resolved since I only wanted to be doing real estate anyway, but if you love your day job and you plan to continue it through your life, you're going to have to make some tough decisions. You could keep your day job, but someone is going to have to run your portfolio.

I maintain that getting a seven-figure net worth in equity strictly in your real estate holdings is not that difficult to do. I recommend you join real estate investment clubs and read as many books as you possibly can. As you begin to make investments, you'll find friends in the businesses that relate to your industry such as people in the mortgage business. I recommend that you associate with as many of these people as possible so that your knowledge of the industry expands tremendously.

A friend of mine who's an intelligent guy took some of this advice and began moving quickly. In his first year, I think he bought two properties, but by his second year he was already doing $300,000 flips and buying multiunit investment properties with a partner that he has. First of all, I'm not a big fan of partnership for the deal size he was doing, and second, I think he was growing a little too fast. If he didn't have a job, I wouldn't have a problem with the speed of his growth, but because he had a well-paying job, I cautioned him not to move too fast. The second half of 2009 was a rough year for him as his $300,000 flip was not selling, and he's already had to do two evictions. Carrying the mortgage and his $300,000 flip was expensive and was already causing some tension in his partnership. It's not going to be all fun and games; as your portfolio grows, your problems grow with it and the workload grows.

Another thing I can say about the issues in the real estate business is that they seem to come in waves. Even when I owned dozens of homes, I would go six months where I wouldn't need to change a doorknob and then all of a sudden all hell would break loose. I'd be dealing with an eviction, two vacancies, and apartments that were destroyed. When it rains it pours in the real estate business; at least that's the way it worked out for me. I remember on two separate occasions during the summertime one year followed by the next summer a year later I was bombarded with all kinds of issues. In this business, you can't let a vacant property sit and wait because you're losing money every day it's not rented. The process of getting it renovated and re-rented is the highest importance.

As bad as I make it sound, I think you'll find it all to be worth it in the end. It seems that no matter how much money I made, I have learned in my career I never really save. As you earn more money, your lifestyle increases and you begin to upgrade your homes and cars to the point where your bills go right along with your salary. The real estate business is almost like a bank account you really can't touch easily without selling a building, so it continues to grow and feed off of itself. It's a terrific feeling when you realize that your $550,000 portfolio experienced a 10 percent increase in values in the last year and you're up an additional $55,000.

I'm using the same principles today in the commercial arena buying larger buildings with similar strategies. I can't buy a $3 million building with the technique, but there are many other things that can be worked out in the commercial world. Nowadays I use strategies that involve complex negotiations with the sellers where I convince them to carry paper or lease option the building. I can also borrow money from banks for commercial investments giving the bank that piece of real estate I am buying as collateral as well as existing pieces of real estate as collateral. I call it redundant collateralization and am seeing more and more of it every day from banks.

If you can go from broke to seven figures in one real estate cycle as I've suggested easily making yourself $1 million during your first real estate cycle, then just imagine what you can do in your second real estate cycle. I plan to be carrying a real estate portfolio with the value north of $10 million and have that portfolio under my control before the real estate market begins to show any gains. I expect the gains will begin to show sometime around 2013 or later. Can you imagine if you're holding a $10 million portfolio and the real estate market goes up a meager five percentage points? It doesn't matter how much money I made that year in income because as long as I can keep my business afloat I am up half a million dollars in equity in one year. If I'm ever lucky enough to see the crazy increases that we saw in 2005, can you imagine what it will feel like to see a 20 percent increase in values in one year when you're holding a portfolio worth eight figures?

"Far better it is to dare mighty things, to win glorious triumphs even though checkered by failure, than to rank with those poor spirits who neither enjoy nor suffer much because they live in the gray twilight that knows neither victory nor defeat." Theodore Roosevelt

Let's dream about holding a portfolio worth $12 million when the market goes up 20 percent giving me a one-year tax free gain of $2,400,000. I believe that this is a realistic expectation for my second cycle of the real estate business. In the year 2025, I will be sixty years old. I feel certain that if I continue to just do what I've been doing my whole life, I surely should have a net worth of many millions of dollars strictly for my real estate holdings. I know of no other way to make money in these types of numbers as easily as I do in the real estate business. I don't deny that other people have the means to make this kind of money or even more, but I am not familiar with those methods. I consider myself an expert on real estate, and I certainly feel as some of the things I'm talking about here will happen to me as long as I'm lucky enough to still be breathing when 2025 rolls around.

This is why I love the real estate business, and this is why I'm pumped every day to get out and keep it going because I can see my future is filled with bright and sunny days. I feel terrific about getting up in the morning and going to work, and when you have that kind of attitude, there's no way you can fail. This morning I woke up at 5:30 a.m. and went to my office building to reorganize some equipment in our communication room. I'm spending some afternoon hours on a Sunday working on my book and feeling great about my possibilities. If you love what you do, you will be much happier and much more successful at whatever you try.

I don't even consider the things that I did this morning or writing this book as work in the regular way people think of it. Obviously, it is work that I'm doing, but I don't have a negative feeling about the word work or what it entails. I get a terrific sense of accomplishment from getting up in the morning and making things that happen furthering along my career each day in baby steps toward the ultimate goal of massive wealth accumulation. I hope that some of you reading this book will really grasp the things I'm talking about above. I feel that may be the most important message in the entire book.

Here's an idea you should think about after you buy your first property. Make sure that you take some time after you bought it to really analyze what's going to be involved in being a real estate landlord. If you like it or even love it, let's get the party started, and if you don't get out right now. If you're going to proceed in the business just for the money but despise dealing with tenants and working on buildings, you really have to be careful and reconsider what you're about to do. This business is not for wimps, and it takes a heck of a lot of guts to be a real estate investor. To get to the level that I have achieved, you may have to take half of your net worth and roll the dice on some large commercial building risking the twenty years of hard work on one deal. Until you go through that process, I can never truly explain to you what that will feel like. My name is Phil, and I'm addicted to real estate.

Divorces and real estate go hand-in-hand because when a husband and wife get a divorce, they divide their assets. Most family's largest asset is their home which can't be split down the middle, so divorce will most likely lead to the disposition of an old home and the acquisition of new ones.

To answer some frequently asked questions about divorce and real estate, we interviewed Kelly Chang Rickert, a prominent Family Law attorney in Los Angeles. Kelly was kind enough to share her expertise as a Certified Family Law Specialist with our readers.

California is a community property state... what typically happens to a home after a divorce?

Typically when you go through a divorce and you own a home, the parties would try to settle and reach an agreement as to what happens to the home. If the parties cannot agree, then the court will order a sale.

Does the agreement usually happen through mediation or in court?

It can happen at any moment. Divorces run the gamut. You can have an amicable divorce where a spouse will say, "You keep the house until the kids are in college and then we'll sell it" or "You keep the house. It's in your name. You can buy me out." Or, you can have a hateful divorce where you can't agree about anything, and you go to Court every week. Expect to spend between 5k - 20k per court appearance.

I think a lot of people get confused about divorces and think "We hate each other we're going to court," but that's not necessarily true. A divorce is a break-up with children and assets. You should sit down and figure out what's going to happen because if you don't figure it out, the courts are going to figure it out for you. And they don't know anything about you and your life except for the paperwork you filed. Don't leave your fate in the hands of a judge. If you get divorced and you own property together, I would sit down and amicably divide it.

Which means selling the home?

Well, if there's a ton of equity, you can refinance and buyout the other person. If the home was purchased during a marriage, it is community property. If there is $100,000 in equity and all of it was earned during the marriage, then $50,000 belongs to each side. The person who wants to buy the home would pay the other side fifty-grand. Then he or she can keep the house and make the mortgage payments on their own.

Would a prenuptial agreement affect who gets the property?

Yes, absolutely. If you get married and already own a home, during the marriage, all of the payments that you make on the home are community. So if you want to keep the house separate, because it hasn't been paid off yet, you want to make sure that you get a prenup saying that all the payments are going to be made from a separate account and there's not going to be any community funds involved. NEVER CO-MINGLE ACCOUNTS. When you leave, you still own the home--your spouse can move out and own nothing of the home.

Once the home is finished being paid for, does it eventually become community property or does the prenup protect you forever?

Well the prenup is pretty limited in coverage. You have to make sure that your actions follow what the prenup says. In California, anything that's acquired after the marriage, before the date of separation, is community property--which means, all earnings.

Typically you'll have a couple where one spouse bought a home before the marriage and they took out a mortgage, so basically they don't own the home outright because they still owe the bank a ton of money. During the marriage, all of the payments that he or she makes come from income earned during the marriage which is community property. Basically a portion of the home from the community payments become "community". It's still separate because it was purchased before the marriage, but the payments made on it--if they're coming from earnings while married and they don't have a prenup--become community. And that's how we get the Moore/Marsden Equation which calculates what the community component is.

If you have any properties before the marriage, you want to make sure you get a prenup that says nothing is community property. If you own a home, get married, but still owe the bank--you want to make sure the payments made during the marriage on the house payments come from a separate account and nothing is ever comingled. That way if the time comes and G-d forbid you get a divorce, there's no community component. It is very clear, and there is nothing to argue about.
"A divorce is basically one family split into two."
Can you provide any tips for a husband and wife to prepare for a divorce?

I would make a list of all your assets, and most importantly--be amicable. When people are angry and jealous they try to use money to cut each other's throat. The best thing to do, especially if you have children, is to sit down and really work out the logistics.

A divorce shouldn't be handled by attorneys - except for the simple paperwork. A divorce is basically one family split into two. You have to sit down with your spouse and be like "We have kids together; how do you want to handle this? I can't presumably be the mommy and the daddy."

In my experience as a divorce attorney, it's difficult when a parent says, "I want full custody." It's not going to happen. Unless the other side is a drug addict, in jail, or killed someone, or moved cross-country, you're not going to get full custody-it's going to be joint. America likes that. Now, other countries are different. Japan is different. Japan doesn't believe in joint custody. Japan usually awards custody to the mom, period. But in America, unless there are extenuating circumstances, it's always going to be joint. Now, Joint Custody doesn't necessarily mean 50-50 share. You may have Dad seeing kids once a week, or once a month - but that is still considered "joint custody".

When you go through the divorce, make sure to value your house. If you bought it for $500,000, and you owe the bank $450,000, and right now the market says it's worth $400,000--you have a loss. You should figure out what you want to do about that loss. I would probably sell it and walk away.
"When the divorce happens and you try to refinance based on one person's income, it's going to be very hard, especially these days when the banks don't want to loan to anybody."
If one of you thinks that you can hold onto it and the bank will refinance while the other side can walk away without debt--then I would refinance and keep it. It's often hard to do that though, because many homes are purchased with both spouses' incomes and credit scores. When one person leaves the equation, the banks are not as likely to offer you a loan in that same amount.

So refinancing becomes more difficult in that situation because you don't have the combined income?

If it was always a single income family then we have no problem, but most of the time you have a two-income family that buys a home. When the divorce happens and you try to refinance based on one person's income, it's going to be very hard, especially these days when the banks don't want to loan to anybody.

I hear people say, "My wife divorced me and took the house." Does that ever happen or is that just how assets were divided up? Like one person gets the house and the other person gets other assets...

Exactly--it's the latter half. So when one person is like "Oh we got a divorce and she got the house" they're not really telling you the whole story. She may have gotten the house, but he may have gotten equity in other things in the same amount that the house is worth. These days homes are not worth anything unless you bought it 30 years ago. Typically what we have these days are very short-term marriages where couples bought a house at the height of the market around 2007 and 2008, and the home has actually lost a lot of value, so there's no worth.

Do you ever see couples walk away from a divorce because they can't afford to?

Yes, definitely. I had a guy once who realized he had to pay a ton in alimony so he said, "It's cheaper to keep her." And dismissed the divorce.

I heard that you often encourage people to work it out instead of get a divorce?

Oh yeah--it's always cheaper! I mean basically, you're going to fight in a divorce. Nobody ever wants to go to court-why would you? Lay people think that court is like Law and Order and everybody has to go, but the reality is, you never have to go to court unless you can't agree on something. If it comes down to something like "who gets the garage door opener"--do you really want to spend thousands of dollars to go to court and see who the judge is going to award the garage door opener to? No! You want to work it out-it's much simpler.

Does a divorce hurt your credit?

It depends... if you let your home go into foreclosure, your credit is going to suffer, but it has nothing to do with the divorce. If you get a divorce and all your payments are still being made, that's not going to affect your credit. However, if you get a divorce and suddenly the wife can't make the payments and she goes into foreclosure, but the home is in both the husband and wife's names, both of their credits are going to be hit.

The divorce itself doesn't affect your credit-it's what can happen in a divorce that could affect your credit.

How should someone choose a family law attorney to work with?

First thing I would do is research them. These days Google is your private eye. If you go online and research divorce attorneys, I would make sure they are a Certified Family Law Specialist.

If you were having heart surgery, would you go to a general practitioner to do your open heart surgery? Probably not. Would you go to a brain surgeon? Probably not. You'd go to a heart surgeon. The reasoning is the same thing with a divorce attorney. Pick an attorney that specializes in family law and not a general practitioner because they will screw up your divorce.

A lot of people come to me and ask, "My first attorney screwed it up, but since the case already started is it cheaper?" I have to say, "No--it's more expensive because I have to undo the screw up." It's like if a roofer is supposed to patch your roof but instead messes it up. Now the second roofer has to take off the roof and then fix it--so it's double the money. If you pick the wrong attorney who's going to screw up your case, it's going to cost you tenfold to fix it.

Specialists charge more. General practitioners charge anywhere from $100-$200/hour while a specialist is going to start you off around $500-$1000/hour. It's expensive but it's worth it.

Is there ever a time would a divorce attorney would handle both spouses or is it always one or the other?

No, it's always one or the other because otherwise there's a conflict of interest.

What is your outlook for the real estate market in the coming year?

I think it's going to stay low. I don't think it'll pick up and I don't think it's going to drop anymore... I think it's going to stay status quo. So if you have real estate, hold for now. It should pick up in the next 5 years, but not this year.

Thank you Kelly for the great interview full of valuable information about California divorce!

Early last year Temecula Valley Real Estate started off pretty strong. As we moved into Spring and Summer, the traditional busy season was slow. And in August 2006 was saw a severe oversupply of homes on the market. This increased competition and lowered prices. Through the rest of 2006 and now midway through 2007, the supply of homes on the market has remained very high with the market firmly moving into a buyer's market. Prices have retreated about 10 to 15%.

Over the first six months of 2007 we have seen business finally increasing. As we move through Summer things are looking brighter. Prices seem to be holding steady and some houses are beginning to move. But they are still moving very slow and sellers need to exercise patience and do what they can to make their house standout.

Right now there are some big challenges to home prices, namely foreclosures and short sales. Many people bought homes using 100% financing at the peak of the real estate market and those homes have lost some value. Buyers who used adjustable mortgages or even pick a payment loans with a short fixed period are now experiencing rising payments and due to the reduced market price of their home, can no longer refinance. If these buyers owe $300,000 (100% financing) and it is only worth $280,000 now, there really is no option to refinance their loan. On top of that their adjustable rate continues to climb making their payment even higher.

This is a tough financial bind. Once in this situation, many southern California properties go to either a short sale or even foreclosure. When these transactions close they lower the comparison properties on the market and thereby further impact market prices and people's ability to refinance.

Even with all this said nice homes in sharp condition are still selling. But sellers need to adjust their expectations from last year's pricing. And if a seller needs to sell their home in order to buy another home they often lose money on their sale but will gain it back on the new home they are purchasing.

With all this said, right now is an excellent time to be a buyer. Interest rates remain historically low. Buyer's ability to negotiate is also a major factor. As we move through summer some of that negotiating ability may dry up as demand increases andand rates stay low. If you know someone that has been considering making a purchase now is an excellent time for them to start looking again.

Overall, the market is moving in the right direction and many economic professionals say we are on the road to recovery. Southern California has always been a leading Real Estate market and historically averages 3-5% appreciation a year. It will take some time to get through the existing supply and the banks will be tightening lending options signficantly. You should expect the loan and sub-prime mortgage market issues to remain a drag on Real Estate for the next year minimally.

One thing that is very important to keep in mind while we negotiate through this challenging time, Real Estate remains the best investment with the most benefits. And while Temecula, Murrieta, Wildomar and Menifee Real Estate we won't see gains like we have over the last 5 years (29.5%), we should begin to level up a bit in 2008 and have a soft landing as the market starts to straighten out in 2009.

For most people, financing real estate using mortgages is a fact of life. Most people don't have the cash to pay for the entire purchase price of a property, and many people want to leverage their cash to boost their return on investment.

So mortgages are here to stay... at least until tenants pay them off. In the mean time, mortgage payments must be made every month, easily accounting for 50% or more of a rental property's monthly cash flow.

While it's true that for most mortgages, a portion of each payment is principal repayment (and not really an 'expense'), with such a significant impact to the bottom line, a good investor does everything they can to minimize the monthly out of pocket cost and keep the cash flow positive.

Choosing an appropriate mortgage that reduces out of pocket costs is not always an easy decision to make. Anyone who has ever obtained a mortgage knows what it's like... they may ask questions like:

• is the cheapest interest rate always the best one?
• what amortization period should I pick?
• should I choose a long or short term?
• what about fixed interest rates or variable?
• is an open or closed mortgage better?
• do I need pre-payment or payment increase privileges?
• which lender should I choose?

These are not always easy questions to answer, as the mortgage industry varies widely and the answers depend on the individual. The answers for a new home buyer may be substantially different than for a real estate investor. Even among investors, the answers can different based on their tolerance for 'risk' (ie. the chance their monthly payments may go up, etc.). The following are some things to consider when making decisions:

• Interest rates - The interest rate affects your monthly payment and therefore your cash flow. Obviously, lower interest rates are better, but all mortgages are not created equal (see the section below about lenders). Most banks will lock in rates for you (even on a refinance or renewal) for 90-120 days. Use this to your advantage while shopping around for the best mortgage.
• Amortization period - This also greatly affects your monthly payment and therefore your cash flow. Longer amortizations are better, but as a result, it takes longer to pay off the mortgage. Normally investors don't care about paying off the mortgage early, so it is best to select a longer amortization (ie. 25 years or more)
• Long or short term - Deciding the answer to this almost requires a crystal ball. An investor must predict things like where interest rates will go over time, and how long they will hold a property. There is a measure of risk when using short-term mortgages, as rates could go up at renewal time, causing a severe reduction in cash flow. Long-term mortgages reduce that risk, but can prevent taking advantage of drops in interest rates, so it ends up costing more. Ultimately, flips should use short term mortgages, while the term can vary for buy and hold properties based on investor preference and risk tolerance.
• Fixed or variable - Most people use mortgages that are locked in for a fixed term. This can be a disadvantage if an investor decides to sell a property or interest rates drop substantially. On the flip side, variable rate mortgages allow an investor to take advantage of rate drops, but they can also easily increase. Variable rate mortgages also tend to have lower interest rates than fixed mortgages, thereby boosting cash flow. Flips should use fixed mortgages, as this allows accurate forecasting of holding costs. Long-term buy and holds can use fixed or variable, depending on investor preference and risk tolerance.
• Open or closed - Open mortgages tend to have higher interest rates than closed ones, but have no penalties for full repayment. Closed mortgages should be used for long-term buy and hold properties, while open should be used for flipping.
• Pre-payment or payment increase - For long-term buy and hold properties, ensure the mortgages terms allow partial pre-payment (at least 10%-15%) and an option to increase monthly payments. This provides flexibility to use excess cash flow to pay off the mortgage faster. For flips, a good sized pre-payment privilege will help reduce penalties if the property is sold before the mortgage term is complete.
• Lenders - This is a tough one and an investor will have to rely on their mortgage broker and referrals to find good lenders to work with. Some lenders may have the lowest rates, but the mortgage is difficult to qualify for, they may have high fees for breaking the mortgage, etc. Find a lender who is flexible, without high fees for everyday items (like extra statements, NSF charges, etc.), good customer service (this is important), and of course the easiest qualification criteria (would you rather jump through 37 flaming hoops to get a mortgage, or just 3?).

The above sections don't really provide the answer to choosing fixed/variable or long/short term because it really depends on the individual. However, the following articles published by Moshe A. Milevsky, Ph.D, a Finance Professor at York University and Executive Director of the IFID Centre, may help an investor make a decision.

• Mortgage Financing: Floating Your Way To Prosperity - Published in 2001, this article describes his approach to finally answering the question of whether to go long or short on a mortgage. He uses sophisticated mathematical analysis based on historical interest rates to come to his conclusions.
• Mortgage Financing: Should You Still Float? - Published in 2004, this article discusses his original suggestions in light of today's very low interest rates, and provides recommendations for different types of people (ie. new home buyers, etc.)

Once an investor has had a mortgage for awhile, they may discover that their cash flow is low, so they make want to find ways to boost it. The following are some suggestions on how to do this:

• Skip a payment - This is our favorite and one of the easiest. Many mortgages have the ability to skip one or more payments. Even if this isn't part of the mortgage agreement, many banks will make exceptions. The advantage of this is that you can boost your cash flow with one phone call. If you pay $1500 per month on a mortgage, that's $1500 you can keep in your pocket.
• Interest only - This requires refinancing, and may not be available in all cases (especially for rental properties), but it can dramatically boost cash flow. No principal repayment is included in your monthly mortgage payment -- only interest costs. The disadvantage is that no equity is being built up through mortgage 'pay down'. Instead, the equity is kept in your pocket every month by not having to pay the principal.
• Extend amortization period - If you've had a mortgage for a few years, normally upon renewal or refinance, the amortization period is reduced by the length of time you've held the mortgage. To reduce your monthly payments, extend the amortization period back out to 25 years or more.

Using the above information to select the proper mortgage, and the extra techniques to boost cash flow, an investor should be able to keep their monthly debt servicing costs to a minimum so they can keep more money in their pocket and for long-term buy and holds, keep the property long enough to benefit from one of the best parts about real estate -- long-term appreciation.

Real estate is a great investment vehicle. Often, real estate investments outperform stocks, bank CDs, bonds, gold, and many other investment alternatives. Please read on to find out why.

Leverage is a powerful wealth building tool when used correctly. Let's compare purchasing stocks to purchasing real estate to highlight the power of leverage. If you are faced with the decision of how to invest $100,000, how much buying power do you have? Put another way, how many dollars worth of stock can you buy versus property? The answer is you can only buy $100,000 worth of stock however, you can buy $1,000,000 worth of property when leverage is utilized. Assuming a 10% appreciation in both markets (stock & property) let's look at realized returns. In the stock market, your $100,000 increases to $110,000 and you realize a 10% gain. Conversely, the same 10% appreciation increases the value of your $1,000,000 property to $1,100,000. The realized gain is $100,000 and since your initial investment was $100,000, you've doubled your money. You realized a 100% gain.

When you buy $100,000 worth of stock, what is the value of your portfolio the day you buy it? It is $100,000. This is not that case with real estate. The price of a property can vary tremendously making it possible for an investor to over pay or under pay for an asset. The $1,000,000 property purchased with a $100,000 down payment may only be worth $825,000 if the investor overpaid for the property. Alternatively, it may be worth $1,500,000 if the investor purchased the property from a distressed seller and negotiated a strong transaction. My students always pay 40, 50 or 60 cents on the dollar for properties they acquire thereby giving them instant equity.

Another positive to investing in real estate is the fact that the tenants pay off the mortgage. Assuming the purchase was made correctly, the tenant's rent payments are paying off the mortgage while you are enjoying monthly positive cash flow after all expenses are paid. Typically, the rents are being increased year over year and your mortgage expense remains constant, therefore after annual rent increases your positive cash flow increases. At the same time, the equity in the property is increasing as every month passes due to the amortization of the mortgage and the appreciation of the property. The market appreciation is driven by local influences. In some parts of the country, appreciation rates are negative and in others they are positive. I encourage my students to invest in areas where the economy is improving, jobs are being created and the values are on an upward trend.

Additionally, there are plenty of tax advantages to owning income producing properties. Depreciation and tax write offs make real estate investing very attractive. Please consult with your tax advisor for details on all of the advantages applicable to your specific circumstances.

When you buy stock in a company, there is nothing that you, the individual stock holder, can do that will increase the value of the stock. This is not the case when it comes to real estate. Value is added to properties every day all over the country when someone takes a rundown property and updates the property, removes functional obsolescence, adds additional living space, adds a garage, etc. A large majority of the properties I have purchased over the years have been physically distressed. I have created enormous added value by redeveloping these properties and thereby creating tremendous equity in my portfolio. Not all property issues are related to the physical condition of the building. In the example from the second paragraph, a savvy investor can buy a $1,000,000 property with a rent roll that is below market rate. Within the first year, this investor can systematically raise rents and decrease expenses achieving an increase in the value of the property. This increase in value can be accomplished without having to rely on market appreciation or renovations. This type of value play is common and simply addresses an existing management problem.

Another fabulous advantage is the ability to access your equity in the form of a refinance. You can "pull money out" of a property by refinancing with a bank and then use this money to continue acquiring more revenue producing assets in your portfolio. The best part is this money is not taxable at the time you do the refinance. One word of caution here: Make sure that you do not over leverage your portfolio and create a house of cards that will tumble if you experience a tightening in the market.

If the world of landlording or the day-to-day dealings of being a hands-on real estate investor sounds scary, the good news is there are still ways to put your money to work for you by being a real estate investor. You can invest in real estate as a private lender in a specific real estate transaction by partnering with another hands-on investor. For those interested in this approach, I have several articles and videos posted on my blog explaining this option in more detail.

Real estate is such a wonderful tool to increase your net worth and create additional streams of income. I hope that this article has given you some insight and desire to get started in real estate investing.

You bought home way back and now you continue to pay high amount towards the installments of the loan you took for home. For escaping the loan, however, you have the option of refinance real estate loan so that you save lots of money as you get rid of the current loan of high interest rate. But the question you should ask is that when is the appropriate time to go for refinance real estate loan.

Before applying for refinance real estate loan you should make sure that market interest rates have fallen sufficiently so that your monthly interest payment gets reduced. Usually you should see that interest rates have come down by at least two percent for getting all benefits of refinance real estate loans.

You may go for the refinance if you want to convert adjustable rage mortgage into a fixed rate mortgage because of uncertainty of future interest rates. Another reason for refinance real estate loans may be that you require money for unavoidable overwhelming expenses like collage tuition. Or you may be going for home improvements that substantially enhance home value.

One common reason for refinance real estate loan is that you want to consolidate debts under lower monthly payments to escape high rate debts. Refinance real estate loan surely saves you lots of money that you are going to pay as higher interest. There are many lenders who offer the refinance at low rate of interest and fro larger repaying duration.

So it is obvious that each borrower personal circumstances determine the requirement of going for refinance real estate loan. Make sure that you have searched well for suitable lender who understands your need for refinance real estate loan. Go through the terms and conditions of the lenders carefully as there are complications involved in refinancing the current mortgage.

What's My Prognosis Doctor?

Oh boy! Here we go again. We had a great reversal day in the stock market on Thursday which led into a great day on Friday on news of a mortgage market and financial institution bailout plan. This all combined with a massive short squeeze on the 799 financial stocks that the SEC instituted a short sale ban on.

We then had a Monday where Goldman and Morgan became banks, the dollar and bonds got routed, oil exploded (although the rise may have been technical) and apparently some people may have found ways around the short selling ban. The market gave back everything it had picked up on Friday.

What Does This Mean For Me (and you) and the Mortgage Market

Once the final form of the bailout plan is established ( hopefully sooner than later), what is it going to mean for me and you and the mortgage markets.

Good Question.

As a participant in the commercial mortgage and real estate markets, I want to know if it will mean that financial institutions that remain will once again be willing to lend. Once we know that they are willing to lend, the question will become who they are going to be willing to lend to.

If I have a buyer that wants to buy a mixed-use property that has a DSCR of 1.32, the buyer has a credit score of 660 and has the 6 months reserves that most lenders will require today, will they get a loan? Is the liquidity going to come back for a borrower like this, or will everyone remain in protection mode?

Some of the bridge loan lenders I know want to know if the exit strategies that they counted on a year ago, which then evaporated, will once again be plausible.

They have a borrower who borrowed on his income producing building at 50% LTV because he needed to make improvements but his credit score was less than stellar. The exit strategy was to get the credit score up and refinance into a conventional loan. The credit score is up, but will a lender now lend?

Then we have another borrower who has a construction loan to build a single family home, has a 650 score and an appraisal on the finished home that says she needs a 75% LTV. Can't find a lender.

This is a segment of the market that not everyone thinks about, but until the banks begin to lend they cannot close out good loans and make new ones. Worse they will have to begin to foreclose on borrowers who never thought that these expensive loans would be outstanding this long.

Enough of the Negativity!

A week or so ago I wrote a piece that said to put the doom and gloom behind us and focus on the task at hand which is a plan to drive business. I said that with all sincerity and still mean it today.

The problem is that the government decision making process and the news flow in general sometimes makes it hard to do. I think the thing to do is to stop watching the financial channels like CNBC, and stick with reruns of All In The Family and MASH.

Sports News

You know what I am going to do? Concentrate on my teams, the Mets and the Jets, to bring my head up and get me focused on the eye of the tiger. Went to Shea last night and left early to come home and watch the Jet game. Oh boy!

I think I'll just put CNBC back on.

1. This property will use as owner occupied or Investment- it's very important question because it will effect the interest rate and the Loan program.

2. Do I have all the current operating statements and Rent Roll, if you don't have them work on it fast- you can't do the Loan without them, commercial banks usually asking for these statements to know the Rents, the Income, expenses of the subject property and how you manage the property as an Investor.

3. At least 2 years Tax Returns- some banks will not ask for it but they will get you a higher Interest Rate and put you in a different program, other banks will not even talk to you without Tax Returns.

So make sure you have Tax Returns.

4. How Long do you plan to hold the property? so you will know what program you will take- if you hold the subject property for 2 years only so you need to let your lender know that because he will qualify you for much a better rate and I think a better program, but if you plan to hold it for a long time that will be a different story- now you would want a longer amortization period, a lot will change with it.

5. What is the Occupancy level?- How many vacancies you have in the property?, it's important for the DTI.

6. What is the balance due to the current Mortgage you have?

7. What is the History of your Mortgage Payments?, do you have lates ? very important.

8. Check your credit few months before you're starting anything?, don't be afraid of having another inquiry on your credit because for the long run you will do your self a huge favor by running this credit. if you have anything wrong with the credit you can fix it, inquiries, derogatory, collections that you don't even know about, debt that you put aside forever, discharge accounts and disputes- everything is possible to do when you in control. SO CHECK YOUR CREDIT.

9.If you're Refinancing the property:

1. When did you purchase the property, and how much did you pay?
2. What do you think the value of your property is now?
3. How was the value of the property derived?
4. Is it supportable?
5. Is it a cashout Loan or Rate & Term(to get a better Rate)

All those things are very crucial to know before you're making your first call to your Loan Officer, you going to make his life easier and your Loan will finish probably within a month with no complications.

Some of us are not aware to the small details that are becoming a huge deal to the banks, specially these day's. Banks today are more careful, they ask lots of questions and they want lots of answers, most chances they will not make an exception for you or me, we're just a number in this Multi Billion Dollars Industry and we need to know what we doing, just to get things done in the right way.

Commercial refinance lending and commercial real estate is headed for a bailout, possibly a "TARP 2.0". There is crisis building in the commercial Real Estate market and commercial mortgage refinance. First, a very small market exists to refinance commercial loans. Secondly, the underwriting standards have tightened. Finally, the Obama policies are scaring away investors.

With around $1 trillion coming due in the next four years, there will be plenty of borrowers won't be able to refinance. With all these loans coming due, we are headed for another government bailout.

A bailout only hurts commercial real estate as it devalues the dollar. China and other big foreign investors are only going to shy away from the market if they feel the dollar will further devalue. In addition, capital from American companies is going to flow oversees as they want to buy assets valued in non-dollar currencies.

Now is the time for property owners and banks to execute a plan for commercial loan workout to resolve current loans coming due. The issue for most property owners is not the ability to make the payments rather it is the ability to refinance with the current lender, another lender.

During the looming trillion dollar financial crisis, refinance commercial property will become more difficult if not impossible. During and after a meltdown all the rules change and bank become afraid to lend.

Best thing to do is to refinance commercial property or get a commercial loan review and restructure your loan ahead of the pending storm. Lower your rate, extend the term or get interest only payments (very attractive to commercial banks) If you get in line behind the other trillion dollars of commercial loans coming due conduits may be gone and commercial mortgage backed securities may be all but shut down completely.