Sunday, March 29, 2009
The Ultimate Bargain Shopping
Sunday, March 22, 2009
Lessons learned from Investing during a Recession
- Buy Low
- Although this may seem like an obvious point, it is surprising how hard it is to actually buy a stock at a low point.
- From my personal experience, one usually buys a stock on the way down, however, it is after the initial dip from a previous high which may not be the lowest point of the stock.
- Reviewing the stock's 52-week low and even daily low is helpful when determining a "low" price to purchase a stock.
- Sell High
- Once again, another obvious point that many cannot seem to get right
- One would like to sell a stock for a profit over the price that was originally paid, however most hold on to a stock trying to break even from the original stock price plus the commission for the buy.
- Very rarely does a stock give you a massive return in a short time, however over time, the potential for that stock to give you those types of returns are possible.
- Stock prices are based on emotions, not always on facts
- Unfortunately, the average stock investor is typically "along for the ride".
- There are many big time investors (investment bankers, hedge funds, mutual funds, etc) that sway the price of a stock. The average consumer does not really affect the price of the stock by buying and selling.
- Just because a stock has good news, does not necessarily mean that it will go up. The same goes for the converse of that, bad news does not necessarily mean that the stock price will go down.
- It is impossible to time the lowest price of a stock
- Timing a stock is almost near impossible. It is a better idea to purchase a stock at a price that you are comfortable with. Honestly, when a stock is being purchased, it is literally buying a piece of paper that you are assigning a value to.
- Do not watch your stock everyday
- Watching a stock everyday will cause you to be stressed out.
- It is best to set a limit or a stop limit order to purchase a or sell a stock.
Sunday, March 15, 2009
Understanding the Good Faith Estimate
800 ITEMS PAYABLE IN CONNECTION WITH LOAN:
- 801 - Loan Origination Fee
This fee is a charge for originating or creating the loan
- 802 - Loan Discount
This is an upfront charge paid to the lender to get a lower mortgage rate – the same as “buying the rate down”
- 803 - Appraisal Fee
This is the cost of the independent appraisal. It is usually paid by the buyer.
- 804 - Credit Report
This is the cost of the credit report
- 805 - Lender's Inspection Fee
This is the lender’s cost of inspecting a property – some may double check the appraisal provided by an independent appraiser
- 808 - Mortgage Broker Fee
This is the upfront charge that a mortgage broker charges. Brokers can also earn a “rebate” from the lender which is not listed here
- 809 - Tax Related Service Fee
Lender fee, usually small, for handling tax related matters
- 810 - Processing Fee
This is the charge for processing the loan – collecting your application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc.
- 811 - Underwriting Fee
This is the cost of the loan underwriter (approver)
- 812 - Wire Transfer Fee
This is the cost of wiring the money around, which is usually done by escrow.
900 ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE
- 901 - Interest for days X $ per day
This is your prepaid interest for your mortgage loan.
- 902 - Mortgage Insurance Premium
This is the prepaid mortgage insurance premium, if you have one. This is the insurance premium some lenders charge for loans with little equity.
- 903 - Hazard Insurance Premium
This is your home’s hazard insurance being prepaid.
- 905 - VA Funding Fee
This is the Veterans Administration funding fee, which is something you will not incur unless you go through a VA program.
1000 RESERVES DEPOSITED WITH LENDER
- 1001 - Hazard Insurance Premiums # months @ $ per month
This is any prepayment of your future hazard insurance expense
- 1002 - Mortgage Ins. Premium Reserves months @ $ per month
This is any prepayment of your future mortgage insurance expense
- 1003 - School Tax months @ $ per month
This is any prepayment of your future school tax expense
- 1004 - Taxes and Assessment Reserves months @ $ per month
This is any prepayment of your future tax expenses, such as property taxes
- 1005 - Flood Insurance Reserves months @ $ per month months
This is any prepayment of your future flood insurance expense
1100 TITLE CHARGES
- 1101 - Closing or Escrow Fee
This is the cost of escrow. This is the service of a neutral party that actually handles the money between all the different parties in a real estate transaction, including: the lender, the buyer, the seller, the agents, notary, etc. This is often done by the “Title Company” – a related entity in the same office that provides title insurance
- 1105 - Document Preparation Fee
This is the charge for preparing the loan documents. Lenders often email the loan documents to the escrow company, which in turn prints them out and reviews them before signing
- 1106 - Notary Fees
This is the cost of the notary. This is to have all of the legal documents surrounding this transaction notarized
- 1107 - Attorney Fees
Any legal charges
- 1108 - Title Insurance
This is the cost of insuring the title of the property. If there is a question about title (who really owned the property), after the transaction is done then this insurance protects the lender from future problems
1200 GOVERNMENT RECORDING & TRANSFER CHARGES
- 1201 - Recording Fees
This is the cost of updating relevant government records
- 1202 - City/County Tax/Stamps
Unavoidable government charge
- 1203 - State Tax/Stamps
Unavoidable government charge
1300 ADDITIONAL SETTLEMENT CHARGES
- 1302 - Pest Inspection
This is the cost of the pest inspector. Their purpose is to document the state of the property that the lender is making the loan on.
Information above taken directly from the following wikipedia article.
All information above was republished under the terms of the GNU Free Documentation License.
The list above contains general items that most Good Faith Estimates contain, however, some items are particular to the lender who is providing the loan. Below are a things to watch that can vary from loan to loan:
- Loan Discount
- Some mortgage brokers may try to offer you a very interest low rate for the purchase of your home, however, they will offer you this rate by placing the cost to reduce the interest rate directly into your closing costs.
- This is beneficial to you if you have your closing posts being paid by the seller, else this cost will come directly out of your pockets as you will be paying for this up front rather than over the life of the loan.
- Seller contribution for closing costs
- A mortgage broker may recommend for the buyer to roll up the closing costs into the price of the loan and have the seller pay for the closing costs. The caveats to this is to know that the seller is only allowed to pay up to 3% closing costs for a conventional primary residence FHA home loan. The maximum a seller can contribute for an FHA investor loan is 2%.
- Loan Application Fee
- The loan application fee is typically required up front by the mortgage broker in order to process the loan. This item is usually listed on the Good Faith Estimate however the buyer should receive a credit for this charge during closing since it is paid up front.
Sunday, March 8, 2009
Steps to Prepare for Home Ownership
- Ask yourself the following questions and be honest
- What is your price point for your house that you can afford?
- As a personal rule of thumb, I have always believed that the primary mortgage should not be anymore than 33% of your take home (after taxes) pay.
- What location do you want your house to be in?
- What type of house do you want? (Townhome, Single Family, Condo)?
- How big do you want your house to be?
- What special features you want in your home?
- Write down a description of your home
- This step is important so you do not compromise on getting the house that you want. Throughout this process of searching for a home, I got discouraged when others beat me to the punch when placing a contract on homes that had 60 - 70% of what I wanted. However, I eventually found the house that had 90%+ of what I wanted and I currently have it under contract.
- Research your Credit Score
- There are a multitude of ways to research your credit score on the Internet. Below are the free alternatives that I use:
- Realistically, many of the loan officers I spoke with stated that they are looking for 700+ credit scores. However, do not get discouraged if your credit score is not that high, I recommend to at least try, the worst thing they can say is "no".
- Find a Real Estate agent
- A real estate agent can determine how your home buying process will be. They generally handle all of the paper work and discussions with the seller (or the seller's real estate agent).
- In addition to that, they will be the ones to make the necessary arrangements to view the property.
- Usually they also have easy access to people you may need during the home buying process (inspectors, general contractors, loan mortgage officers, etc).
- Research homes
- There are many things to take in consideration when purchasing a home. Below is a short list with somethings worth considering:
- Utilities
- Taxes
- Repair on the home
- Maintenance
- Location
- For more things to consider, look at the article at the following link.
- Find a Mortgage Broker
- Talk to the mortgage broker to find out what packages they have and make an educated decision on which offered package is best for you.
- Get financial records in order for loan qualification process, what you will need:
- Last two paycheck stubs
- 60 days worth of bank and investment account statements.
- W-2s from the last two years
- A few important notes:
- The loan company should be able to provide you with a loan pre-qualification letter and Good Faith Estimate without any type of commitment to obtain the loan with the company. You should use these documents to compare offers and get the best deal possible.
- One concern that many people have when it comes to obtaining loans is the credit-check process. From this article, credit scorers look at all credit inquiries made within a 14-day interval as being the same as one inquiry. This will allow you to shop around for mortgages for a two week period without substantial negative impact on your credit score.
Sunday, March 1, 2009
Conquering the fear of failure
So it has been. So it must be with this generation of Americans.
That we are in the midst of crisis is now well understood. Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age. Homes have been lost; jobs shed; businesses shuttered. Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.
"I've missed more than 9,000 shots in my career, I've lost almost 300 games. Twenty six times I've been trusted to take the game winning shot and missed. I've failed over and over and over in my life. And that's why I succeed!" - Michael Jordan