Solid Advice + Solid Service = Better Mortgage

Still in the business? Still writing loans? You BET!

2008-12-19T21:09:00.001-08:00

Now that rates for simple, understandable, safe and predictable 30-year fixed mortgages are dropping to multi-decade lows, I'm getting a lot of emails asking if I'm still in the mortgage business.

Some folks heard that I had been hired as a consultant to do some online community building, technical project management and a bit of product management work. True that! Others then more recently heard that I was asked to come on full time as a Senior Product Manager for Internet Test & Measurement. True too!

Thing is, despite the full time "day job" in tech, I remain in the mortgage business for the very reasons I got in to it:

Provide detailed analysis to folks who want to understand their options now and over time.
Provide transparent access to wholesale lenders without any spin or attempts to earn more than a fair, fully disclosed fee for my services.
Have some fun getting people safely through the maze and hurdles of purchase or refinance transactions.

Many years ago I had the good fortune to visit Montego Bay, Jamaica on business. A buddy and I decided we wanted to see the nightlife (and a lot of it) by staying out most of the night on the town. The best decision we made? To hire a taxi driver, who was well known and trusted by the folks we were staying with, to take care of us for the whole evening for one flat rate. Jamaica is the kind of place where it seems everybody wants to be your friend, but it turns your wallet is the true object of affection for a good number of the folks you encounter out and about. THAT is why having our guy to guide us, watch over us, take us to safe places and bring us home in one piece with no negotiating between one nightspot and another was WELL worth the flat fee we paid him.

By now you can probably guess the point of my story. My model is to negotiate a flat fee with you (typically 1% of the amount funded) and then from that point on to work on your behalf to get you safely to your destination with no funny business. Getting a mortgage doesn't have to be a game of wits where you pick amongst offers dangled at you by hungry hucksters. There are plenty of solid professionals who make an honest living by talking straight and by openly disclosing their compensation. I'm just one of them.

Back in the saddle

2008-04-28T21:08:00.000-07:00

It has been over a year since I posted here, and much has gone on since.

During a year of huge transitions, I never went to far, but I didn't make it to blog-land.

I'm happy to report that many good things have been happening, allowing me to achieve several big dreams in one fell swoop:

I have moved the focus of my daily routine to my favorite part of the Peninsula: Redwood City
I have opened my own mortgage origination firm (Redwood City Funding)
I have initiated a strong "giving back" program in the form of Rewarding Community InvolvementTM
I have added a second revenue stream, to allow me to remain, as the accountants would say "well capitalized" during an unstable mortgage market: Since March, I have been providing professional services two days a week on contract to a valley tech firm. That work lets me focus on doing the right things for my mortgage business, not fighting for survival or chasing dollars down avenues I don't care to go.

So even though times are far from settled in the mortgage space, things are GOOD. Heck, I'm even beginning to see some thawing of pricing in the jumbo mortgage industry.

Drop me a line if you want to connect. I welcome questions about mortgage strategy any time.

Most balanced and detailed article on sub prime mess I've seen

2007-04-17T09:13:00.000-07:00

The New Yorker published a very well written article on the "sub prime meltdown".

Recommended reading:
http://www.newyorker.com/talk/2007/04/09/070409ta_talk_surowiecki

Short term, long term. Today's paper talks both

2006-12-15T07:24:00.000-08:00

This morning, as I carried the paper inside, the headline just underneath the rainy-day plastic read, "Bay Area housing market keeps sliding - Median prices of both homes and condos fall in November." The article contains the quote everyone is looking for: "Absolutely, the bubble has popped" (Christopher Thornberg, an economist from Los Angeles).

So what's the big drop that shows the bubble has "popped" ? Lets see, a drop of 1.4% across all Bay Area counties, but continued gains in San Francisco and Marin counties. San Mateo dropped 1% while Santa Clara gained 1.8%. The big drops (real ones in my book) occurred in Solano County (-9%) and Sonoma County (-7%).

Bottom line: the trend for the SF Peninsula remains the same: stable or up.

Why? Simply turn to section B of the paper, where the headline on that page reads "Population expected to swell by 2 million - ABAG report says number of jobs and people will increase through 2035, but region's housing stock may not keep pace." That pretty much sums up the history of the "close in" Bay Area, where geography, weather, talent and opportunity keep people coming. Not just people, but JOBS. One more quote sums it up: "Roughly 1.5 million new jobs will be created in the Bay Area, with large increases in health and educational services, professional and managerial services, and arts and recreation and restaurant services."

So, if you have any plans to stick around, you'd do very well to buy your first home or move up to your next home sooner than later. Its simple supply versus demand and the long term trend is up, up, up.

/dtk

A disaster plan isn't a political thing (or is it?)

2006-10-01T18:49:00.000-07:00

Last month was Disaster Preparedness Month.

When I lived on top of Kings Mountain in Woodside a few years ago, disaster preparedness was something the locals took very seriously. We were just a few people up the end of a long mountain road; first responders would have plenty to handle down below before sending anyone up to help us. So we had drills, and block captains and such. We used portable CB radios to communicate. We even had green "OK" and red "Need Help" signs to hang in the window. This was a long time before 9/11 and "ready.gov" and all.

Speaking of 9/11 and ready.gov, perhaps it is time to get back to disaster preparedness for preparedness sake, and put aside the suspicion of politically motivated fear-mongering that many of us had in '01 and '02 (and '03 and...).

I would like to provide a few good links for anyone interested in protecting their own family and friends from the implications of the next earthquake, massive power outage or whatever.

We have a very good resource that is local. The City and County of San Francisco maintain a website called http://www.72hours.org The name serves as a reminder that the first three days after any major disaster will be the most challenging. Count on nothing working (phones, power, water), nothing being open (no trips to Safeway or 7-11) and no-one helping you (including police, fire, ambulance) for the first three days. Anything that does work, or is open, or does arrive to help will be the exception, not the norm.

Don't let that prediction depress you. Instead, try to see the opportunity to make your own 72 hours more comfortable, safe and sane by following the common-sense preparation tips posted at 72hours.org.

The best thing about 72hours.org is that they have put all of the key information from their web site into a single document you can download and print. I have reviewed a few different sites and the 72 hours download kit pdf covers it all. If you would rather click-and-read, check out the web site's handy information kiosk style layout.

If you are curious what our Department of Homeland Security (DHS) has on the subject, I have those links handy for you too:

While the DHS and San Francisco have almost the same content, the DHS site does suffer a bit from the political spin factor. If you want to feel patriotic, by all means use it. If you would rather read the content in a politically neutral presentation, use the 72hours site. Here's a taste of what I mean: September's National Preparedness Month page at DHS's ready.gov has a list of organizations who are working in partnership with the DHS to get the word out. What did they choose to call that list of city, state and local organizations? "Coalition Members" Argh.

Emigrant Direct raised their savings rate again. Now its 5.0%.

2006-07-05T11:13:00.000-07:00

Emigrant Direct just raised their savings rate again. Now its 5.0%.

As I have mentioned in my previous posts on the "American Dream Account", their savings account is federally insured and does not require you to move any accounts, do direct deposit, make any time commitments like a certificate of deposit or any of that sort of thing.

All you do is hook the new account up to your existing checking account and then you can play big-time money manager and "sweep" excess funds into and out of a high yield savings account with a few mouse clicks.

Check out my page for the full explanation: http://davekarow.com/savings

Savings at Emigrant Direct now paying 4.8%

2006-06-22T13:32:00.000-07:00

Emigrant Direct has just raised their savings rate to 4.8%.

That's federally insured and transferred in or out of your existing checking account with a few clicks once set up.

Check out my page for the full explaination: http://davekarow.com/savings

I just updated the banner there to show the new rate. Great stuff folks!

Slowdown, not a Slump (where the economy is headed)

2006-06-21T21:33:00.000-07:00

Some very interesting bad news/good news reporting from Business Week's Jim Cooper in the June 17th issue:

Bad news:

Current inflation is not looking good. 3rd increase in a row in the last three months.

Good news:

Stock market sees that all the bad news has been priced into the market and selling recently has been panicky and now there are buying opportunities.

Bad news:

100% chance that feds will raise .25% in June 29th
Markets are predicting >50% probability of an additional .25% hike at the following meeting.

Good news:

Federal Reserve's update on net worth of households has some great news for those who worry that we have a "housing bubble" and that too much net worth is in high housing values:

Distribution of asset gains have been fairly well balanced between financial assets and household assets.
As of 1st quarter 6.3 TRILLION dollars that households were holding in very short term liquid assets... as a percent of disposable income, that is the highest level in about 13 years.

Bottom line: consumers as a whole have a lot of spendable money at hand, just the sort of thing needed to weather rising gas prices. Second half of the year is looking very good.

Watch the video interview from Business Week's "feedroom" website without a subscription. You may need to click the "High Band" button to get a larger screen and clearer sound. This video will only be up for a while, so if you are reading this blog entry a few months down the road you may get an error.

Get mortgage junk mail? Call me.

2006-05-31T07:18:00.000-07:00

note: I originally wrote this article for my February newsletter, but since a lot of you have joined me since then, I thought it beared repeating here. Just this last month, I've helped a family translate a tempting offer in the mail to a real solution, fully explained, that fit their needs without any "gotcha" lurking in the dark. I'd love to do the same for you or someone you care about. /dtk

If you are like me, you get a LOT of junk mail about mortgages. What's worse, most of it comes wrapped in ever more layers of deception these days.

Recently, I got a very official looking letter stating that “City and county records indicate your residence as being located in an NCOP qualifying area.” It went on to explain that the “National Community Options Program (NCOP)” provides “low interest money to go toward mortgage refinancing, home improvements, small business loans and debt consolidation.”

I called the number and they continued to spin a tale about how they had developed the program with “private investors” and that their “analysis department” could send me 2-3 scenarios showing what they could do for me.

Behind all the fancy terms and appearances of some sort of “national program” they were just another call-center based mortgage house looking to sell the same money all brokers have.

HERE IS ALL YOU NEED TO KNOW TO BE IMMUNE TO MORTGAGE JUNK MAIL:

Call or email me. The wholesale mortgage market and the secondary market behind it (where the vast majority of mortgage finance money ultimately comes from) is open to any well-established mortgage brokerage. Diversified Capital Funding is the largest privately held brokerage in Northern California. If a mortgage product truly exists, I can get it for you and explain it in detail without all the layers of deception.

While fly-by-night refinance shops focus their creativity on gimmicks to appear like something they are not, I focus my energy on helping you find and understand the best product for you.

This way of doing things is the core of my long term strategy: build a professional practice of repeat and referral business based on establishing and maintaining trust. I'm happy to explain anything you receive that sounds like it might meet a need for you. Better yet, contact me to discuss your goals and then toss the junk without wondering if you are missing out!

Latest doom and gloom from the SJ Merc: prices hit new record (but, but, but...)

2006-04-20T22:19:00.000-07:00

I'm afraid I'm beginning to sound like a broken record on this topic folks, but the San Jose Mercury News seems determined to stir up hysteria about impending doom, despite the very facts they themselves report.

Here's what I mean: Today a colleague shared an article with a headline that read:

Prices rise to record
But appreciation slows along with area sales as market loses steam

So lets see... prices keep going up (despite wishful thinking that we're due for a correction). And, um, appreciation "slows" (keeps going up but not as fast). So now your $500,000 house is appreciating by $3,300 a month instead of $6,250 a month and that is... really, really bad?

After "dire" predictions earlier this year that we would see 5-8% annual appreciation instead of the double-digit rate we've grown accustom to, this article points out that prices went up 2% in one month from Feb to March. Hello? That puts us back on track for double digits again. That $500,000 house went up $10,000 in one month during a time when oil prices are rising and many folks are sitting on the sidelines wondering what will happen next.

Next we read this ominous oversized quote/sidebar:

"The big question down the line is as this line trends down, is it going to go negative?"

My money is on "no" it won't.

Wishing you could buy a home by waiting rather than buying now when it seems so expensive, might feel soothing, but all the evidence says that except for very short lived dips, home prices always go UP over time. Waiting costs you buying power.

The article goes on to document how volume is down, but that available inventory in the entire county could be completely sold in just 37 days. There are numerous quotes and charts showing how volume is down, down, down right along side prices that are going up, up, up.

This is supply and demand at work. Want to live in a desirable neighborhood? So do a bunch of other folks. In the White Oaks neighborhood in San Carlos, a recent $1,100,000 house for sale on a modest lot attracted over 70 realtor business cards on tour day. I asked why so many. The listing agent said that so few White Oaks homes come up for sale that this sort of avalanche of cards is now the norm.

The only way prices are going down is if everybody runs for the exits at once. But we are not talking about a dot bomb stock at 300 times earnings the day before the CFO is indicted for fraud. We're talking about a piece of real property in one of the world's most desirable climates surrounded by a vibrant and dynamic economy. And now the biotech wave is bringing in yet another wave of educated, well-paid professionals looking for nice places to live.

How many people living in a home that has made them more money in some years than their salary would sell and move to a rental, or leave town? A few perhaps, but like a parking place in North Beach, that house would be snapped up quickly by someone very happy to have it.

Every time I see these sensational headlines I wonder if someone at the editors desk wishes they had bought a home a long, long time ago and now pins their only hope for ownership on a big "correction" such as those seen in financial markets. Or perhaps, they have a home but feel bad for all the folks that do not. If you exist out there, I'd like to encourage you to stop praying for a dip and start the wheels in motion to make a purchase. THAT is the way to book your own ride on the graph of home prices which inevitably moves up as it goes any significant distance from left to right.

Want to stop worrying about a dip in prices moments after making the biggest purchase so far in your life? Just ask yourself two questions:

1. Can you afford the payment terms for the foreseeable future.
2. Do you want to live in the home? Do you really like it?

If you can say yes to those two questions, you are immune from temporary dips and well positioned to participate in appreciation in the months and years that ahead. Don't let the price get in the way. $700,000 or $1,000,000 may seem "absurd" for a home but its the current value in this marketplace and history says that unless you are in a rush, you will sell it for more some day. Ask your parents or grandparents. Their house purchases seemed like all the money in the world.

Bottom line? If its doable, do it folks. You won't regret it down the road.

The "plunge" in volume - Should you wait for the big buying opportunity?

2006-02-17T09:04:00.000-08:00

I was reading the Merc at the gym this morning and saw the front page headline "Home sales hit 5-year low" which thankfully had a sub-head that told the more important fact: "But bay area median prices rise in January".

I'm concerned that people who haven't yet bought might get the wrong takeaway after reading the sensationalism of the story's first sentence: "Bay Area home sales plunged last month to the lowest level in five years, another signal that 2006 won't bring a repeat of last year's sizzling real estate market"

So what's the takeaway from this? Sales have PLUNGED! Here comes the big drop in prices, right?

Nope! The story goes on to explain that the median price was UP from 700,000 to 705,000 in one month, and up from 615,000 just twelve months earlier.

That, my friends, is the real takeaway. Sales may have slowed down, but prices continue to edge up. Waiting for a lower price is a long shot gamble.

The home owner at the median price point is getting about 15% MORE for their home than they would have a year ago. If the December to January move were the new pace for the coming year, it would be roughly two thirds of last year's appreciation rate. Not so coincidentally, that is at the upper end of the "significantly lower" rate of appreciation that realtor economists are predicting for the coming year: 5-8%.

So be careful how you interpret the "cooling" market. It may be slowing WAY down for the big players who make a living off of volume, and it may indeed be a vastly easier time to buy than when bidding wars were the rule of the day, but waiting will almost certainly cost you more.

In today's increasing rate environment, waiting costs you on two fronts: the home you want to buy is slowly but steadily appreciating and interest rates are creeping up. Both mean buying 6 months or a year from now will almost certainly cost you more than it would now.

Bottom line? Take advantage of the "plunge" in volume to make a reasonable offer on a home you will be happy with for 3-5 years or more on terms you can afford. Do it as soon as you can. Then you can shift from being an outsider watching as prices just keep going up to an owner benefitting from the steady march of appreciation in the months and years ahead.

Comments? Drop me a line at dkarow@divcap.net.

4% Savings Account Sign-Up Page (now 4.5%)

2006-01-28T19:11:00.000-08:00

Several of you have asked me where the best deal is for "rainy day" or "emergency fund" money. You want something completely liquid and government insured but with a yield above the 1, 2 or 3 percent you are getting at your bank or credit union.

I have just put up a page on my davekarow.com site (http://davekarow.com/savings) that explains my recommendation for an account that yields 4%, is fully insured, and requires nothing more than your existing checking account and a web browser to manage.

Have a look, or give me a call if you'd like to know more.

Update 2/22/06 -> The rate has been raised to 4.25%. I'm working on getting a new banner on the /savings page referenced above, but rest assured that if you "click through" the banner, you'll see the new rate.

Update 4/20/06 -> The rate is up to 4.5%, and I've got that documented on the banner on the above referenced page. If you aren't getting 4.5% fully insured for your savings, take the time to get on board!

Fed Raises Rates and Mortgage Rates go DOWN?

2006-01-14T14:25:00.000-08:00

Believe it or not, things aren't quite as simple as the mass media press would lead you to believe. Have a look at this article if you want to better understand what makes mortgage rates go up and down. The answer might surprise you at first, but it won't be that hard to remember...

PS: This article is from a series I usually share with my Real Estate agent referral partners. This one is so fundamental (and doesn't use industry jargon), so I decided to share it here as well.

May 2006 be a GREAT year for you and those you care for,

/dtk

Buyers Market + Interest fixed for 7 years = opportunity

2005-12-18T14:35:00.000-08:00

Ask your realtor or anyone else involved in real estate, and they'll tell you that we have shifted into a buyer's market. The days of every listing going quickly for well over the asking price are behind us (for now).

Combine that with mortgage rates that have eased a bit (not just in the face of the Fed's increase of the prime rate, but because of those increases), and you have what's shaping up to be an excellent opportunity to get in or move up.

You may wonder why mortgage rates would be easing if the fed is raising rates. The simple answer is that mortgage rates reflect expectations of inflation. If the fed steps out to ensure that inflation does not occur in the future, then mortgage rates ease.

Before the Fed took on a proactive stance, an increase by the Fed was in response to inflation. In that environment, you would expect to see mortgage rates already climbing, and then climbing again once more on the fed's confirmation of trouble.

In the last 19 months, we've seen the opposite: a long string of increases by the Fed and level or dropping long term mortgage interest rates. Here's a chart to prove it.

As long as the Fed maintains a posture that contains inflation, we'll continue to see historically low mortgage rates. Lenders are offering some of their best rates on loans with interest rate fixed for the first 7 years. Yes, cheaper than loans that are only fixed for 1, 3 or 5 years! Its a great time to lock in a rate for 7 years while that situation persists.

Drop me a line if you want to know more,

/dtk

Do well by doing good

2005-11-06T22:22:00.000-08:00

As part of expanding my practice, I have been searching for and interviewing Enrolled Agents (enrolled to represent people before the IRS).

One of the good folks I met last week had a warm office environment and a sign by the door that read "Do well by doing good."

That's exactly what I'm out do to as I build my practice. The challenge for us all as providers with good intentions and a commitment to the right skills and knowledge, is: how do we become connected to people who need our services? I believe its in earning trust one customer at a time and then "passing it along" in the form of warm referrals to like minded professionals in related professions.

Its a variation on "pay it forward" and its all about finding truly caring and capable referral partners.
/dtk

Got Commute? Why not Invest the time...

2005-10-24T16:05:00.000-07:00

If you have a commute of 30 minutes or more, you might find this quick tip about a "commuters education" interesting (and useful!). Invest more than your $'s and you may be surprised by the return.

Bubble? Bubble?

2005-10-14T22:04:00.000-07:00

One favorite topic of discussion lately, particularly amongst folks who are considering either a first time home purchase or a "move up" purchase, is the concept of a "housing bubble."

I confess that even a year and a half ago when my wife and I "moved up" to our present home, we were concerned that we might get in only to find the value of our house go down.

Did we take a calculated risk?

Did we just hold our breath and pray?

Nope.

We just made sure we could answer "yes" to two questions:
Could we afford our financing now and for the forseable future?
Would we be happy staying in the home for more than just a few years?

Here's why the answers to those two questions are really all you need to know: The biggest cure for paying too much for a house, or buying at the top of a cycle, or just about any other ill that could leave you "under water" is TIME.

If you can afford to keep your current financing arrangements, any dip in market value is irrelevant. It simply has NO effect on you. If you are happy to continue living there, then again, the market value of your house doesn't matter. The market value only matters when you go to refinance or sell. If that time is sufficiently far off the horizon, then history says you will do just fine.

In the world's trading markets, there is a name for the speculators who are after a quick buck but cannot afford to hold their position when the market goes against them: "weak hands." Those who have the resources to maintain their position are called "strong hands." You don't have to be Warren Buffet to take a strong position with a home. Just be sure you aren't taking on financing that will explode on you down the road, and don't choose to live somewhere you will outgrow or tire of in a short period of time.

Here's a link that is good reading if you wonder whether a "bubble" in housing would be anything like the Nasdaq or Nikkei crashes of recent history.

Pre Qualification & Pre Approval

2005-09-27T10:48:00.000-07:00

Here's a one-pager about pre-qualification and pre-approval that also explains how I view my role as consultant for you: view one-pager.

Simple to conceive, hard to find!

2005-09-02T15:45:00.000-07:00

Have you personally, or do you know anyone who has ever had a bad experience with a mortgage lender? It doesn't have to be this way!

I have been a student of the mortgage finance process since purchasing my first home a number of years ago. I asked a lot of questions and earnestly sought to become an amateur authority on the topic, but I didn't get much useful information, let alone much of value, from my first two lenders! After my early (and not so pleasant!) experiences, I was determined to learn, and do, much better for myself and my young family.

One thing led to another, and I found that there was so much room for improvement in the realm of loan officers, mortgage brokers, and any other source for mortgage financing, that I decided to join the business and be part of the solution.

Every day, I bring the following commitment to everything I do for customers who are referred to me:

the right education: deep knowledge of finance and the marketplace
the right intention: a genuine commitment to long term customer satisfaction
the ability to deliver: resourcefulness, tenacity, and a knack for details

In turn, I am honored to service the enthusiastic referrals who come to me from people who have experienced my way of doing business. Simple, but amazingly rare: this virtuous loop is the solution.

Dave

What is a pre-pay penalty? How do I find out if I have one?

2005-09-01T15:30:00.000-07:00

Recently, one of my clients asked this question. I'll share the answer here in case you're curious too...

A pre-payment penalty aims to keep you locked into a loan long enough to ensure that the lender makes a profit. They do this not by refusing to let you prepay, but by requiring you to pay a penalty (such as 6 months' worth of interest) if you refinance the loan or sell the house before the specified period. The period is usually one, two or three years.

A "soft" prepay is waived if you are selling the house or (in some cases) if you are refinancing with the same lender. A "hard" prepay applies no matter what.

You can find out if your existing loan carries a prepay penalty by reading the "note." I am happy to review your note for you. Hopefully, you have a big thick legal sized pile of papers from when you did the loan in question. Buried in there is a short document known as your "note" that specifies the rate and terms. I can dig it out and decipher it pretty quickly in person, and I'd feel most comfortable for your protection if I did so.

No one wants surprises on the home stretch if/when we go to get you your next loan!