How to Select a Mortgage Professional

How to select a mortgage professional? This could be a million dollar question!

I just went through 3 days of intensive training (7am - 9pm daily) and got certified as a "Certified Mortgage Planning Specialist" by the CMPS Institute. So, what does the CMPS training program entail? Well, mortgage professionals received education on mortgage related tax laws, investment strategies, financial planning concepts and more. The idea is not to turn mortgage professionals into experts in those other areas, but rather that we become knowledgeable enough so that we can better assist our clients in choosing the appropriate mortgage program that fits their overall financial goals.

As consumers, we've been trained to "shop" for mortgages by rates and fees. We were taught that mortgage is a necessary evil if you want to become a homeowner. But, how many people have actually stopped and wondered how much money will a wrong mortgage program cost them in the long run?

The other aspect of becoming a CMPS member is that it is a reflection of those of us who are truly professionals who are committed to continually educate ourselves and sharpen our skills so that we can help clients adapt to new market conditions. In this turbulent market, many people are getting out of the industry because there is no longer a quick buck to be made. I was told recently that 60% of loan agents in 2006 are gone now, and I expect more to drop off in the coming year.

This really begs the question: who are you going to use the next time you are looking for a mortgage? What criteria will you use to select the right person? Here are 4 simple questions your lender absolutely must be able to answer correctly. If they don't know the answers, RUN. DON'T WALK. Run to a lender that does!

1) What are mortgage interest rates based on?The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.

2) What is the next Economic Report or event that could cause interest rate movement? A professional lender will have this at their fingertips.

3) When Bernanke and the Fed "change rates", what does this mean. and what impact does this have on mortgage interest rates?The answer may surprise you. When the Fed makes a move, they can change a rate called the "Fed Funds Rate" or "Discount Rate". These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us a call.

4) Do you have access to live, real time, mortgage bond quotes? If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday's newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!

Be smart... Ask questions. Get answers! More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life. but we do this every single day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest.

A New Trend in Vacation Homes

As I was driving through the mountains in Tahoe last week, I realized a new trend taking place. Although the housing market in the Tahoe area seems to have cooled off, there are still quite a bit of new constructions going on. I can't help but notice that the new houses are getting bigger and bigger (4,000 - 5,000 square feet, 3 or 4 car garages). Now, many people actually need that much space in a vacation home?

As a real estate professional, I undoubtedly love to flip through the real estate magazines everywhere I go. It was no different this time in Tahoe, and I noticed another interesting thing. I saw a lot of sales of fractional ownership of high-end luxury homes. The new trend started to emerge in front of my eyes. Statiscally, the average number of days that people use their vacation homes is about 28 days in a year. Housing prices in Tahoe have appreciated a lot during the last 5 years. A typical vacation home costs $500K - $1mil today. From a pure financial perspective, it's not necessarily the best way to utilize your money on something with such a low utilization rate. But with the fractional ownership (typical 1/6 or 1/7), you get to own and enjoy a piece of the luxury living at a fractional price. For the same amount of investment money, you can potentially own multiple vacation homes at different destinations. Now, that's the way to live!

Has the Tsunami passed us?

Given what has happened in the mortgage industry and the world economy in the last few weeks, we're truly in a historical time. Most of the recent activities in the capital market have been driven by fear, and everyone has been looking to the Federal Government for re-assurance. Today, the Fed has finally lived up to the expectations by announcing .5% rate cut in the Fed Discount Rate.

What does that mean for the consumers and homeowners? Well, we haven't seen a direct impact yet as the mortgage prices and rates are unchanged today. Indirectly, the Fed's move has sent a positive message to the lenders that the "liquity crisis" may be over, at least for now. With the lower cost of money, lenders will now able to borrow money again to loan to consumers. Many economists are expecting further rate cut later in the year. However, the one thing that consumers need to understand and keep in mind is that while rates may improve a bit in the coming months, general lending guidelines will definitely continue to be tighter and stricter. This unfortunately means for some consumers, they will have more difficulty obtaining a loan, whether it's a purchase or refinance.

A scent of change is in the air

With the recent mortgage market meltdown, everyone is trying to make sense of what's really going on. some people don't think much of it, others are overwhelmed by it. It's a mess, both in terms of the market conditions and people's understanding.

As a mortgage professional, it is our job to educate the clients as well as realtors. Realtors whose job is on finding clients their dream homes aren't necessarily up to date on the latest state of the mortgage industry. But things are different now. Realtors must be fully aware of where their buyers stand financially given the current credit-tightened market. So, I ran a seminar today, aimed at helping realtors getting better understanding of the financial world.

So, what did I talk about? Well, first of all, when there is a crisis, there is usually an opportunity. It is up to those who look for it. Once the dust settles, I believe there will be lots of opportunities for the true investors. So hold onto your cash- cash is king in this day and age! Additionally, more than ever before, it is critical for realtors and mortgage profesionals to work closely, hand-in-hand.

I plan to continue running these informational seminars in the next couple of weeks, bringing up-to-date information to my clients and realtor partners.

It Takes a Village!

I spent most of my day today at our in-house bank, observing their operations. It was quite an experience. As a mortgage planner, I spend all of my time trying to understand my clients, their needs and concerns. But, rarely we think about that's only half of the equation in terms of completing a mortgage transaction. The other half is the back end support that we receive from the lending institutions. I'm proud to say that our company has built a solid infrastructure to enable us to deliver the top services.

My processor and I were blown away with the amount of detail work that's involved at every stage of a loan transaction. The staff at our deal desk literally goes through pages and pages of guidelines to help structure loan scenarios. I'm talking about guidelines for 10+ different lenders. These people have acquired an amazing amount of knowledge. We spent quite a bit of time with one of our doc drawers watching her drawing a set of loan docs for a client. Again, there are so many little but important details that she has to catch to ensure that the loan docs are drawn accurately. Watching how others work certainly makes you more appreciative and humble.

The Power of Leveraging and Partnering

I was at a spa event yesterday, and saw the true power of partnering. The spa package I received included manicure, facial, massage, hair, and make-up during a course of 4 hours. I was also fed and wined in-between sessions while being comfortably wrapped in a nice robe. Not bad for a lazy Sunday.

Now, typically, when I think about getting a full service spa treatment, my natural instinct would be to look for a spa with the full fledged services and facilities. But this event was different. It was organized and staffed by a group of independent service providers. Watching them moving clients from one station to another, all well-coordinated with an easy flow (although I'm sure there were a ton of preparation work done behind the scene), it's amazing how by working together with complimentary business partners, a small business owner can effectively market their services without a big fat budget.

I build my own business by referrals and am a strong believer in partnering with others. Focusing on how to provide extra value to customers is the cornerstone of my business practice, and it was very satisfying to see others who are also succeeding in doing so.

The Million Dollar View

I was at a party yesterday, and once again, was reminded of the expression "The Million Dollar View". The party was at a friend's house who lives in the hills. After a long drive through a windy road, a couple of houses emerged. As we entered the house, it didn't look much from the outside, other than being in the middle of a mountain valley. But once we went through the house and stepped onto the backyard, we immediately saw the breathtaking view. It was one of those moments when you say to yourself: it's worth spending the extra money to get a view.

As a real estate professional, we are often asked questions about what to look for when purchasing a property. My personal experience and opinion is if it's within your budget limit, always go for the one with a view. This is true for both primary home and investment properties. I learned my lesson when I bought an apartment unit a couple of years ago. I had the choice of getting a unit on the 2nd floor or the 25th floor. The 25th floor unit asked for a little bit more money, and at the time, I thought since I will be renting it out, I don't care about the view. So, I opted for the cheaper one. As it turned out, the 2nd floor unit is a little harder to rent because the potential tenants also care about "having a view". And I'm sure that it's true for the resale value as well.

Anyway, it was a great party with great music and great company. To top it off, we had a chance to watch the sunset and then the night lights flickering in the background as we watched the band playing. It's a good life.

This is my first blog entry, and it's pretty exciting. This is something I've been wanting to do for a while, but kept putting it off. Why do I want to blog, you may ask? Well, the first selfish reason is that while I read a lot, I haven't been writing much in the past 10 years. So, often times, when I do need to write, it feels "rusty". Blogging a good place for me to pick up writing again.

But more importantly, I want to connect with people, like-minded people! By profession, I help clients with mortgage planning and building wealth through real estate investments, but, I'm really in the people business. I love to hear those stories & dreams from those I work with.

This is certainly an "exciting" time to be in the mortgage business! With rising foreclosure rates and lenders going bankrupt, I'm often asked the question "how is your business?". "Business is going well..." and before I get to finish my sentence, I usually get this surprising unbelievable look as if I was joking. Well, that's an understandable response. The thing is mortgage industry is just like any others, we have peaks and valleys. It's been a great few years with all those creative financing loan programs, but the party is now over. Back to the basics! Does this sound familiar? It wasn't too long ago when most of us thought any internet stock we buy will eventually go up to $400/share one day... The lesson I learned is the key to survive and thrive in any business, you need to stick to the fundamentals.

What am I supposed to do as a mortgage professional in this day and age? Well, guidelines may change and rates may fluctuate, but my focus remains the same - provide life value to clients. This may sound a little fuzzy, what the heck does it really mean? More than ever before, it is time for consumers to understand and utilize their mortgages as a financial tool, as opposed to a pure debt instrument. Everyone goes through life changing events at various stages of their lives. As a mortgage planner, it is my job to coach and ensure that my clients get into a financing program that is in sync with their short term cash flow situation & long term financial goals.

If you are in the market for getting a mortgage, either for purchasing a home or refinancing, and if you want to shop around, be sure to select someone who will take the time to ask you a few questions. Often times, people get attracted to an unbelievable low rate or fees, but remember: "there is no free lunch". This may sound like a cliche, but it is unfortunately true. If someone quotes you a really attractive rate without even seeing your application, you can be sure that their heart is in the commission, not in your best interest.

So, what to do as a consumer in this market? Well, first of all, don't get discouraged by what you see in the media. As we all know, media has a tendency to sensationalize everything. We are certainly going through a turbulent time, but it's for the better in my opinion. I consider the current state of the market as a "weeding" process. You will certainly see some fluctuations in the housing market, but if your main goal is to own a house called "home" and you plan to be there for at least 3-5 years, why do you care if the price may go down in the short term? I think this is the most common fear buyers have today. The real estate market has its own cycles. Just as in an up market, the perceived appreciation on your property is only a paper gain until you actually sell it. In the long run, real estate is still one of the best investments you can have to build wealth.

OK, enough babble for the day. I hope you enjoyed the reading, I invite you to come back often. I'll be back, that's for sure.