Financial Principles 101: File under Duh-uh.

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Image courtesy of Stuart Miles/ FreeDigitalPhotos.net

Have you seen this clip from Saturday Night Live with Steve Martin: Don’t Buy Stuff You Cannot Afford?  If you haven’t, it’s a quick two minutes and I find it absolutely hilarious.

To me, the funniest part about his entire sketch is pretty simple, people really do look at their finances in the way this couple, played by Steve Martin and Amy Poehler.  Obviously, not in such simple and direct terms.

If you look at the nature of credit cards as an example. Many households and individuals take this approach with money.  They sense a need (most likely a want), buy the item then put it on their credit card and plan on paying it later, when they have the cash. As this becomes ingrained as a habit, the minimum payments end up being made.  This is the one of the most effective ways to throw away your hard earned money.

Let’s use an example of a $2,000 vacation put entirely on your credit card.  The card has a rate of 7.99% and you start making the minimum payment of $15.  If you continue down this path, when all is said and done, you will have paid the credit card company $4,943.00!

Here’s a quick tip that helps me: When I’m in a mood where I want to purchase something before having the money.  I remind myself that if I put it on a credit card without a clear plan to pay off the balance, the item I’m looking to buy is costing me double the price.  That vacation package was a steal at $2,000 but it’s a ripoff at $4,000.  I could have gone to Europe instead of Arizona!!

The two other mental triggers that help me:

1. Will I survive without it (medical surgery? no.  A new blender? yes.)  NEED versus WANT.

2.  What mood am I in?  Studies have shown time and again that mood alters our buying habits.  If I don’t absolutely need it, then I sit back and wait for two days to reduce impulse buying.  I try not to buy things when I’m in a tired or bad mood.  Rest will make me much happier over the long term than a new CD.

Hope that video gave you a chuckle!

 

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The Golden Rule

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Image courtesy of Stuart Miles / FreeDigitalPhotos.net

As a parent of two young children, my wife and I often find ourselves searching for the best way to handle a situation.  We are quickly discovering two very important lessons:

1. Always evaluate your method, good or bad and see what can be improved.

2. Positive Attitudes are infectious.

I will also tell you that we didn’t come by these two rules by getting them right the first time, the fourth time or even the twentieth time.  Moreso it’s what we strive towards.

The second one is what I want to focus on today.  We have recently discovered in the midst of yet another three year old’s battle that if we take a kind and positive approach to a tantrum, they become fewer and farther in between.  We have also found that if we develop routines and habits that get our point across in a kind way, that the response and actions tend to be reciprocated over time.  That doesn’t make it easy to do in the heat of a moment, but it does give us drive to continue this path of parenting.

I’ve heard this called the “Law of Reciprocity”, the inherent desire to want to help someone whom has helped you. I like to see it in a less ‘me’ focused ideal of the Golden Rule: Do onto others as you would have them do to you.

I see this as the key to life in many ways, and our professions tenfold.  Think about this for a second, we all strive to feel fulfilled in our jobs.  It’s natural to want to be in a job that you enjoy.  Have you ever felt bad about yourself or your job when you have gone out of your way to help someone?  Odds are that you felt pretty good about yourself, and that person you helped will never forget you.  Translate this into your job, do you think a client will recommend someone that has gone above the expected call of duty to help them out?  

Try it out, take one client or conversation today where an opportunity to help out presents itself and act.  Focus on how it makes you feel.  Felt good, didn’t it.  Now rinse and repeat with your spouse, your children or simply an acquaintance. 

There’s a reason I love my job, I get to help people everyday.  At the same time, when it comes down to it, I could love any job for the same reason.

Short sale? When can I buy another house?

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Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Over the last several years, especially in the wake of what I like to term as the foreclosure crisis, many homeowners found themselves in a situation where selling their house for less than they owed on the mortgage was the only option.

This is commonly referred to as a short sale and this will show on your credit report. When Julie (name changed) was referred to me from her Realtor, she had been told so many different waiting periods before she could buy that she didn’t know what to believe anymore.  I’ll agree with her, it can be confusing.

The time frame varies between programs, anywhere from no waiting period to 7 years!  Julie was told that she would need to wait 3 years. In her case this was wrong and she moved into her new home less than one year after her short sale.

Here’s why:  FHA, Conventional and VA programs all have different requirements.  Julie was able to take advantage of the FHA program that allows immediate purchase of a new home as long as the mortgage on the prior home that was sold has a payment history that was on time for the prior 12 months.

Here are the programs and their timelines as of today:

Conventional:

  1. 7 years with a down payment <10%
  2. 4 years with 10% down.
  3. 2 years with 20% down.

FHA:

  1. 3 years if the prior mortgage had any late payments.
  2. No wait if the prior mortgage was paid on time and the borrower can show specific hardship reasons for the short sale.

VA:

  1. 2 years in most cases.
  2. No wait if the prior mortgage was paid on time and the borrower can show specific hardship reasons for the short sale.

As always, talk to a professional to ensure that you meet all the guidelines in addition to this general synopsis. That’s what we are here for, to help you understand and walk through each part of this process!

-Matt

VA Mortgages and a Certificate of Eligibility

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Image courtesy of FreeDigitalPhotos.net

 

So, you are Military Veteran.  First off, Thank you so much for your service to our country.

Typically by the time a Veteran calls me, they already have received their Certificate of Eligibility, allowing them to pursue the pre-approval for their new home purchase.  There are a million places online that go over the benefits of a VA Mortgage yet very few walk through how to obtain the Certificate if you don’t have it.

To be clear, the Certificate of Eligibility is not your service record, it is a very specific form that someone receives from the VA (Department of Veteran’s Affairs). When I spoke with Debra (name changed), she thought she had her Certificate of Eligibility when we first spoke.  She was mistaken and that led us on a search to the quickest and fastest way for obtaining one. Here’s how  we got her Certificate:

There are 3 main options:

1. Call a local Lender.  In most cases, a good Lender can obtain this online.  If not…

2. Have your Lender send in the request – With this option, you will have to fill out a couple request forms, send these forms along with the proper service records to your Lender and wait while the request is processed. In many cases this can take up to a week or longer.

3. Call your regional VA Center.  From my conversations with the St. Paul MN location,  most Veteran’s can go directly to the center and walk out with their Certificate of Eligibility the same day.  My advice would be  to skip option 1 altogether.  It cuts out a middle man and a delay.  The sooner you have this form in your hands, the easier the mortgage process will be.   Here is a link to the VA offices: http://www.benefits.va.gov/benefits/offices.asp

Once you have this in hand, then it’s time to call your local mortgage professional and take advantage of one of the most affordable and best mortgage options on the market today. A well deserved benefit for the Men and Women that serve our country!

Have a great week!

Matt

 

 

What I look for in a professional

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Image courtesy of Ambro / FreeDigitalPhotos.net

It occurred to me the other day that how I choose to run my business is a direct result of what I value with other professionals I work with. I would have a very difficult time paying anyone for their services if their business ethos differs from mine in a major way.

I’ve narrowed it down to a few key traits.

1. Communication –

When I have a question for my financial planner. my accountant or the painter we’ve used for our home on numerous occasions. I send over an email, a text or simply give them a call depending on the immediacy of the question.  We are all busy people and I would never expect an instantaneous response but I do expect that if they don’t have an answer the same day that they will let me know when I can expect to hear back.

2. Expertise –

I don’t believe anyone will have every answer off the top of their head.  Simply put, no one is capable of knowing every single thing in a complicated profession. However, I do expect that they know how to go about getting accurate answers. The truest professional in my opinion has the confidence to say “I don’t know but I will find out for you.” or “I believe the answer is this, but let me confirm that so we are 100% sure first”.

3. Concern –

I could have labeled this one with several titles but it all boils down to this. I want to work with someone who is interested in getting to know me as a person. Not simply because they want to make new friends but because that deeper understanding of me as a client will help them assist and advise me more accurately than they could have otherwise.  I suppose one could also title it, caring about your client.

4. Trust –

The final item on my list is not a trait that a professional has per se.  This is s a culmination of the first three and the most important. I always try to listen to my instincts and if the first 3 traits are all met with integrity and honesty by the professional, then the trust I place in them is simply a byproduct of their approach.

I am willing to bet that if you look for those 3 traits within anyone you choose to do business with, you will be rewarded greatly with the relationships you foster and cut out hours of needless stress and worry.

That’s my two cents.  Have a wonderful week!

Mortgage terms are confusing!

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Image courtesy of Stuart Miles / FreeDigitalPhotos.net

One of the first things I tell every one of my clients is that there are no stupid or silly questions!

Too many times, it is assumed that asking what a fixed rate is or how to get equity in a home is something that everyone should know.

The average homeowner will buy a home 2 or 3 times in their life.  I work with Mortgage’s every single day.  My point is this: You should not be expected to remember the terminology being used, the thousands of constantly changing requirements or details or what a specific program is called.

This is why you pay a professional to handle one of the biggest investments of your life.  You want someone that understands the language, the details and the requirements to ensure that everything goes smoothly.

That being said, there is one expectation you should have of anyone you work with and that is Translation.  This is the most important part of my job, being a Translator for my client.

Even though you may not know what DTI stands for or how to calculate it, I take the time to help you understand the concept of the term and explain it to you in every day English. I focus on educating my clients because I want them to understand each piece of the mortgage puzzle. Even if they may not be able to define amortization or remember the term rescission, they still deserve to know how to pay their loan down faster or why they need to wait three days after signing the papers to get a check.

I am here to answer your questions, to walk with you through the mortgage process step by step and answer every question you have and ensure you understand the answers.  I am a personal concierge to cater to every need you have in the mortgage process.  Let me translate for you.  No one expects me to speak Italian if I walk into a an Italian restaurant.  I don’t expect you to speak mortgage when you step into my office.