Mortgage Monday: Scanning The Market

Every once in a while I go on some of the real estate websites to see if there is anything new on the market in our area and how much people are asking for those properties. In one regard this is simply a habit that started a few years ago when we were still in the process of finding our first house. Now it is more of just trying to see what the market is doing around us now that we have found that place to call home. In some ways what I am seeing is kind of surprising but at the same time it is an expected trend that I started to see develop during those initial months of searching years ago.

When we first saw our home come on the market we knew that we had a tremendous opportunity right in front of us and we moved fast. It was meant to be as earlier in the week a deal that we had on another property fell through. Since the day we signed the last of the mountain of papers and accrued a new mountain of debt, I have watched the market slowly rise and the inventory evaporate. While much of this can be attributed to the season, it isn’t the whole story as this particular market did not react the same way in previous years.

Now there is nothing on the market and prices continue to climb even faster than I had expected based on the market evaluation just prior to settlement. Heck, in a matter of months it may get to the point where we would have been priced out of the market had we not found our home when we did. It has been a great feeling seeing the hard numbers both for the obvious financial security but also because it shows that we were right in selecting the growing community in which we now live.   

And that second half of the equation is the most important part for me as we are not in this for the financial gain… we purchased our home for the permanence and potential of never having to move again. This is now our home and our community and we were lucky to have found this property when we did because I don’t know where we would have ended up had we waited for another year. As I watch the market continue to develop and rise, I doubt that we would have been able to find the space, the land, or the price that we did when we found this house.

Mortgage Monday: The Other Monthly Checks

In addition to writing a check to the bank each month to slowly pay down our mortgage, there are also a variety of other checks that have to be taken care of on a monthly basis. Again, this is not something that I am used to doing but a monthly project that brings a sense of satisfaction as this is a home we now own. And while there are checks of the monetary kind that I regularly write, these are not the ones to which I am referring…

We want to make sure that we keep up on the maintenance of our home while also heading off any issues that may exist. This is why I tend to go around the house every once in a while, usually a few times per month, looking for little things (and big things too). Are the windows drafty? Are there any water stains? Is the heat working in all four zones? Are the gutters clear? Are any of the fixtures leaking? These are the kinds of questions that I try to ask myself as I walk about the house looking in corners and keeping an ear open to any sounds of water, pinging, clanking, etc.

While I don’t expect to find anything it is well worth the time to invest in these basic checks as we are still under warranty (part of our original deal during purchase) and any issues that come up would most likely be covered under that policy. Basically, it is all about making sure everything is running the way it should be. After all, this is no longer simply a place in which we are living as in the past, this is our home and we want to make sure that everything continues to be kept in great shape.

And, as the seasons and weather changes, I will be sure to check the same things as well as different systems around the house. The various filters are something that will be checked regularly but, as the weather warms, the air conditioning will also have to be looked at. We didn’t have any issues with inspections, only minor things here and there that were taken care of before we moved in, but we want to make sure that things are operational and that they are the right systems to have in place.

Maybe we will upgrade or change the air conditioning, heat, windows, flooring, etc. We will have to wait and see and continue to go through our check list every month. Then we will know what needs to be replaced (if anything), what we want to replace, and what we might consider doing in the future. So far everything is great but you never know… this is why I have to take care of so many checks each month.

Mortgage Monday: No More Rent

Since we’ve been together, my wife and I have always written a rent check every month. The amounts may have varied over the years but the one thing that remained constant was the fact that we didn’t own the place in which we lived. It is a rather disconcerting notion when, at the end of the year, you look back and see all of the money that you gave to someone else without having anything really to show for it. It is primarily because of this that we have been wanting to buy a place of our own for years.

While it has taken longer than expected and it had happened under circumstances that we both wish could have been different, we are no longer writing rent checks. Now we find ourselves flipping through the payment book sent to us from our bank knowing that with each page that we turn we own a little bit more of our home. And with each month we add just a little extra, as much as we can, in order to shorten that three decade commitment a little bit at a time.

It really is a different experience when writing these checks (actually, setting up the automatic payment and watching the funds evaporate from our account). There is a goal in mind with a clearly defined payment period. There is certainty and stability in the payments we are now making and, to a certain extent, we look forward to making these payments as each check or transfer is one less that we have to make in order to own our home in its entirety.

Owning our own house also allows for the freedom to change or keep things the same as we see fit. There are few limitations especially without the presence of a homeowner’s dictatorship/association. It is true that we have to maintain everything ourselves but we can also fix things ourselves without the potential repercussions from a landlord and we can chose who we want to do the work if we find it is beyond our limited knowledge and experience. We are able to make things right in our own way in our own time.

We also have the peace of mind knowing that we are staying in the same place. There is no lease and we don’t have to worry about our rent going up next year or the owner deciding that they no longer want to have tenants. We have a place that offers us permanence and stability for the two of us and, more importantly, for our son. This is the home where our son is going to grow up and that is an amazing feeling.

Mortgage Monday: Taking A Chance

This was the first attempt... really glad it fell through!

I am going to take a step back for a moment in this series and actually talk about a few months prior to us moving into the house. By the time the summer was coming to an end, my wife and I had a big decision that we had to make. Our lease was set to end today and while we had been looking at houses for some time, and we were under agreement on a property, there were no guarantees. While we usually take a more careful approach to situations, we decided to take a chance and give our notice that we will be not renewing our lease. So, when we sent our rent check in late August for the month of September, we included a note that, in accordance with our lease, we were not going to be renewing.

Technically, we had a place that, at the time, we thought we would be living but, as September slowly trudged on, that reality quickly dissolved and we soon found ourselves without a place to live come December. It was an interesting feeling of uncertainty and one that had us contemplating whether we should try to extend our lease but it was also freeing in the fact that it was one less thing to think about as we continued to search for a home. If anything, it certainly served as a motivator to get things done and step up our efforts to find a home.

Things do happen for a reason and our house hunt definitely proved that point. Within a week of terminating the agreement on the first house (based on inspections), we reached an agreement on a second, far superior, home. After talking with the bank the following week and shortening the escrow to 45 days, we knew that we would be moving and would be making the transition from a house to a home by the end of November. As it turns out, taking that chance in late August was going to pay off.

Contrary to the first ordeal which was rife with misleading statements and answers that didn’t match up with the facts and documents from the county, the process for the second house went as smooth as we could have hoped for and now that second house is now our home. No more renting, no more moving, and no more uncertainty about where we are going to be living this time next year or the year after. We are home.

Pulling Papers Together

 

When my wife and I decided to resume our house hunt this summer I knew that, at some point, I was going to have to spend a fairly significant amount of time in my office pulling all the documents together needed to apply for a mortgage. While the prequalification process was relatively painless and pretty straightforward the subsequent list of items needed seemed a little daunting when I first read through them in my email. There was nothing out of the ordinary and it could have been really quick had I been up to date with all my filing and organization but that certainly was not the case.

Following my conversation with the bank to get prequalified, I received the following list of items needed for underwriting:

1.)    Copies of drivers licenses and copy of a credit card (for ID purposes)

2.)    Copies of W2s from 2013 and 2014

3.)    Copies of full federal tax returns (form 1040) from 2013 and 2014

4.)    Copies of pay stubs from the most recent 30 days – (last 2 pay stubs if you are paid bi-weekly)

5.)    Copies of bank/investment account statement covering the most recent 2 months (most recent quarter for quarterly statement) – please include every page of the statement even if it is blank

6.)    Copy of fully executed agreement of sale (when available)

7.)    Copy of will and death decree to document inheritance

Again, not a problem if everything were neatly filed away and labeled. It took some time and a lot of patience but I was finally able to get everything ready to go. It was a time consuming process and one that could have probably been put off for a while but I wanted to be able to get things moving rather quickly as soon as we found our home.  

Of course, while pulling all of these items together I could help but think to myself that I should probably just put aside all the items I need to finally file our taxes this fall. There is a heck of a lot of overlap in the two lists and this mortgage process would be the perfect impetus for starting that tax file. And I do mean start as our taxes are an annual pain in the rear consisting of hundreds of pages of supporting documentation for the purpose of itemizing all our deductions. The mortgage underwriting documents are done but the tax documents still have a long way to go. Thankfully, I have a really comfortable office chair and my files are now in better change then they have been in months. I just hope I don’t have to break out the check book again!

Still Looking

Lately our weekends have been filled (at least half of each weekend) with our search to find a home. Our weeks have also been packed with numerous searches on various real estate websites trying to find that perfect place. We have also been looking to find properties that have the potential to be exactly what we want (at a lower price point of course). It has been, and continues to be, a long process.

While we have our list of things that we want in a home, we also have a strict budget. One that we determined not just by how much we want to spend but also how much we have been prequalified for by the bank. Fortunately, this part went relatively smoothly as both numbers ended up being about the same with the slightly higher figure coming from the lenders. It is nice to know what we actually have to work with when we look at properties rather than running the possibility of seeing something we like and wondering if we can get approved.

What we have also been running into here and there is the fact that we are getting toward the end of the real estate season so there isn’t as many listings and sometimes when we have expressed an interest in taking a closer look there is already an agreement in place. On the one hand it says a lot about the areas in which we are looking but on the other it is, at the very least, cause for the occasional moments of frustration. We can’t really do anything about it besides look at the others that are available and hope that we find what we are looking for.

However, we have introduced slight adjustments to our criteria which have opened up a number of other options. You never know what you might find that falls just shy of some of the things on our wish list (this is most notably found in the size of the property). On the other hand, one thing that we haven’t adjusted and will not adjust is the commute time for my wife. I guess the same can be said for everyone’s search to find a home… you have flexibility in some areas and you have to hold firm in others.

Overall, this is whole process is both exciting and frightening. We are both looking forward to owning our own place and finding our home but I am terrified of two very simple things. The first being the fact that we would be taking on around $200,000 of debt. Enough said about that one. The other is just part of my nature… if we agree on a deal and purchase a house, is there a better one out there, is there another place about to come on the market that would be a better fit for us. I guess we will have to just wait and see what we find but, for the most part, these are two things that I am eventually just going to have to accept and be happy with what we have. From beginning to end and afterward, it is not going to be easy.

Can A Hedge Fund Have A Heart?

(L-R) President Elect Sean M. Teaford, Guest Speaker Deepta Hiremath, President Dr. Sherman Leis. Photo by Past President Richard M. Trivane.

Anyone who has ever watched Shark Tank can recognize when someone has it and when someone doesn’t. Even with a great idea the entrepreneurial spirit is not always present. As soon as Deepta Hiremath began presenting yesterday at our Rotary meeting I could tell she had it.

Our guest speaker two weeks ago who spoke about the mortgage market and the potentially drastic changes on the horizon and how the process for people to get mortgages in the future will differ from today’s market. However, that doesn’t address the distressed mortgages and struggling families that are already in the marketplace and are trying to find a way to get their heads above water. This is where the focus of our discussion was yesterday.

Deepta owns and operates a real estate hedge fund by the name of King Peak LLC. While that term has fallen from favor in recent years there are still people out there running hedge funds that exemplify the four way test. Those people are not focused solely on the bottom dollar but are also looking for a mutually beneficial arrangement that is fair for all parties concerned. While the objective of any business is to be profitable it doesn’t mean you can’t help people along the way.

It is no secret that as a result of the crash in 2008, over-leveraged banks have been selling off second mortgages at drastic discounts in order to recoup guaranteed money which can be funneled back into the capital reserve. Who buys these mortgages? Debt collectors and entrepreneurs like Deepta.

While credit collectors will commonly flip the paper using high volume deals without any thought given to the lives and livelihoods that those mortgages represent, Deepta invests more than her money into these transactions. She invests her time, her energy, and her heart. Deepta focuses on the mortgages that commonly have the most devastating impact… second mortgages.

Due to the steep discount at which she purchased the paper, it opens up the opportunity to help and try to work with homeowners so that they can remain homeowners. She evaluates many of these mortgages on an individual and very personal basis and tries to find the best solution for everyone. Given the margins and the huge number of buyers, Deepta is almost guaranteed a profit. She doesn’t need to take the extra step but she does because she knows that what she holds in her hand is more than just paper.

It is part of the American dream to have the spouse, the house, and two and a half kids but sometimes we all need a little help to maintain that reality especially in these still trying times. As Rotarians we try to do right by others and ourselves every second of every day and while sometimes we may falter and show our human shortcomings it helps to have a business plan which helps us to live those principals. We can learn a lot from Deepta as well as other intelligent and driven entrepreneurs like her which will not just help to reinforce the Rotary principals but also as a reminder to ourselves of what can be done when we embody those principals.

Brace Yourself To Be Kicked In The Fannie

Interesting discussions abound every week during our regular Rotary meeting. The diversity both in our members and our guests makes for a wide variety of views and varying levels of passion about any given topic. With so much going on in the country and world today there is an endless stream of talking points to spur impassioned dialogues.

Our guest this week, Matthew D. Weglarz, brought to the forefront one such topic when he discussed the ever changing lending market and the possible implications if Fannie Mae and Freddie Mac are allowed to fold. Most notable of the probable outcomes would be the privatization of the mortgage industry and the subsequent elimination of terms extending beyond 15 years. This would be in addition to the increased interest rates that would reflect levels that haven’t been seen in over 30 years. Of course, these are suppositions at this point and like many events in the past we won’t know the true outcome until it happens as there are too many variables to fully comprehend.

Matt, who works for Merrill Lynch Wealth Management and serves as Vice President and Resident Manager for the Philadelphia and South Jersey Regions, was very concise in his outlining the current situation that exists in the lending industry but also touched upon his own journey that shapes the way he conducts himself and treats others. The journey that lead him to his current position was not one that is commonly heard of in the executive ranks of his industry.

It is the understanding on a personal and professional level of the highs and lows that exist in life and the extremes in means that exist in society that makes Matt particularly effective in not just helping people make the right decisions but also to give perspective to the raw numbers. Many people are great with numbers but it takes a certain kind of person to see the humanity in the arithmetic. It is something that we each have inside of us, something that Matt has obviously tapped into, and something that we should all keep in mind when we go about our work.

Look for the humanity in what may seem emotionless; find the flex in the immutable; challenge what is accepted as the norm; strive to achieve greater and greater things in life. Don’t just see these as ideas, see them for what they are… actions. We can see these actions in the lives of others, in people like Matt, and know that it can be done because it has been done. If you want to serve others know how to serve yourself as well.