The Right Professionals Makes the Difference!
Property type: Two-bedroom, two bath in Burlingame
Appraised value: $480,000
Loan amount: $369,000
Loan type: 30yr fixed
Rate: 4.5%
Back story:
This one, while ending with happy clients, was a lesson in working with the right professionals to get the job done. This client and their realtor had troubles with their appraiser and actually had to have a few different discussions with them to get them to reconsider comps in the area in the overall home value. Being sure that your Realtor, Mortgage Lender, Appraiser, Insurance Agent, and every other person involved in the process is on top of their job and able to troubleshoot situations is so important!
And, as always, it closed in less than 30 days!
Refinance and change your financial outlook.
Property type: Four-bedroom, two bath in Stinson Beach
Appraised value: $795,000
Loan amount: $270,000
Loan type: 30yr fixed
Rate: 4.5%
Back story:
This client was working on a fixed income and had many loans and investments. They needed to refinance to get cash out to put in a new septic system on their home and consolidate some of their consumer debt. We were able to do both and increase their cash flow by $450/mo.!
And, as always, it closed in less than 30 days!
You’ve been in the mortgage business for over 20 years. You obviously like your job, how does it make you feel to help your clients?
Honestly, I could not see myself doing anything else. I love using my expertise and knowledge to help provide financing solutions to my clients, because financing a home is so important to them and the process can be very confusing! Every client has a special story on why the home they are buying is important to them and no two stories are alike.
I try to understand each client’s personal situation and I make sure to explain every aspect of the process they are embarking on, and not just my side of the it, but also what everyone else is doing too! Understanding this can make the entire process less daunting and makes sure that my clients are fully satisfied.
I think most clients appreciate the extra effort that my team takes to ensure that they have a smooth process and know they can always call to ask any questions at any time.
I truly do love my job and look forward to working with my clients daily!
When should I think about discussing my finances with a financial planner ?
You should consider talking to a financial advisor when you are making a life change such as getting married, having children, changing jobs or have some financial questions outside of your personal expertise. Don’t assume that you can find financial answers on the internet. You are about as likely to become an expert in financial planning over the internet as you are to become a brain surgeon.
Financial planning takes into account many different aspects of the current marketplace and a strategic financial plan helps those aspects to work together for the greatest reward. This is not something that a novice to the financial world can understand fully and create for themselves after doing a little internet research. So, don’t do it yourself! It is rather important to plan for your financial future properly the first time because you don?t always get a second chance. Rather than searching the web for good investments, most people should start by searching for a good financial planner.
Here are a few tips to find a good financial planner:
- You should find a financial planner who listens to your concerns and desires. This is your financial plan and he or she should focus on what you want to accomplish.
- You should expect a series of appointments, often 2 to 4, before doing any investing. (Anyone giving investment recommendations at the first meeting is not a true financial planner.)
- You should expect a written financial plan that covers the areas of:
Investments
Retirement Planning
Education
Funding Risk Management/Insurance Estate Planning/Trusts Tax Strategies
Note: It is as important to find a good financial advisor who listens to your concerns and desires as it is to decide on a financial plan and stick to it. Most people start with a strategy and the minute it starts to work imperfectly, they give up on it and change to another strategy or another advisor. Even though a few changes may be needed – don’t throw the baby out with the bath water!
Troy V. Collins, RFC.
President, McKinley Financial Group
Phone: (650) 551-8900
CA Insurance Lic. No. 0B96613
www.mkfinancial.com
Troy is a financial advisor offering securities through First Allied Securities, Inc. A Registered Broker/Dealer member of FINRA/SIPC For any questions or information on Financial Planning you can contact troy at tcollins@mkfinancial.com or by phone at 650-551-8900.
The First Offer, the Counter Offer – What Works, What Doesn’t
In today’s real estate market, counter offers are pretty much the norm. Usually, the first offer is not the offer the seller is looking for and so they will issue a counter offer detailing the terms and conditions they want in the contract.
The first key is to understand whether you are in a negotiating environment, where you can set the terms and conditions, or a competing environment, where the highest and best offer wins. The type of environment makes a big difference in how you structure the first offer and subsequent counter offers.
The best approach is for your real estate agent to work with you in advance to determine what the environment is like (one or multiple offers), what your first price offer will be, and then what type of back up offers you are willing to make. That way you are prepared. Once you put in a first offer, be patient and wait until the seller counters.
Sometimes, it becomes a cat and mouse game and if the seller does not respond right away, it is okay to take a breather. In fact, sometimes it is best to let the listing sit on the market for a while and then put in another offer later. If you do this, make sure that you know that there are no other offers and that the risk to this approach is that another buyer could enter the picture who is willing to pay the seller’s price.
If you are trying to avoid a counter offer situation, be strong on the first offer – get a pre-approval letter, include your FICO score, and put in less terms and conditions with your offer. Include a letter to the seller thanking them for the opportunity to present the bid and tell them about yourself, your family, and what you like about their property. Show your financial strength with proof of funds for the down payment and your ability to close.
If there are multiple offers, remember that the seller can only accept one offer in primary position. Multiple offers are occurring today – even in the still correcting, low-inventory, high-demand markets like Palo Alto, Cupertino, some parts of San Francisco, parts of San Jose, Burlingame, Novato, Fremont, Richmond, Hayward, Gilroy, Sacramento, San Luis Obispo, Carmel, etc.
You will be able to pin point these areas via your real estate agent who will look at inventory levels, days on the market, recent sales, price to listing ratios, and finding out how many offers were placed on recently sold properties.
If it will be a multiple offer situation, you need to make your first offer your best offer and in an effort to protect yourself against having to bid too high, you might want to include an appraisal contingency in your purchase offer.
Generally, an appraisal contingency allows you to withdraw from your purchase contract if the property does not appraise for the purchase price. At the same time, remember that banks are very conservative today on appraised valuations, so if the property does not appraise for the purchase price, you may need to increase your cash contribution or down payment if you still want to purchase the property.
Expect that there will be two or three go arounds in a regular transaction and if it is a short sale or foreclosure property, it could take 2-3 months or more and many counter offer rounds to get to a common agreement over price and terms. In today’s market, values are still moving – some higher and some lower, so paying the right price is more complex and requires more time.
That is not bad or good. It is just a reflection of current market conditions. And, on the positive side, interest rates are the lowest in the last 58 years and valuations are on average 26% lower than in the peak in 2006.
Protecting your Family’s Financial Future
While Life Insurance clearly does not replace your goal of building your financial security through investments, it is an important part of protecting your family’s financial future and should be viewed as such. You first have to protect what you have, and build from there.
Your family’s financial future could be seriously impeded, if not destroyed, if one of the adult members of the household were to die unexpectedly.
Once you realize the importance of having this protection, you then have to decide how much is appropriate, and just as important, affordable. In today’s world the ideal is having a policy large enough to conservatively replace the major breadwinner’s financial contribution to the family. And, let’s not forget about a non working spouse’s financial contribution to the household which has been conservatively estimated at @$35,000 per year. The amount of mortgage debt, and the cost of the children(s) college education are other items considered vital to the amount of coverage.
Among the two types of Life Insurance available (temporary or permanent) the least expensive is Term (temporary) coverage. When your children are minors (up to age 18) and/or the mortgage debt is large (for new homeowners), Term is an economical tool to provide the larger protection you need during these years. However, 98% of Term is not in force when it’s needed, as most live through the term, allow it to lapse, or cancel it when times are tight. Term is also not as available in your later years as the cheaper premiums do not offset the mortality risk to the insurance companies. Then you will need to consider a permanent policy (Whole Life, Universal or Variable Universal). If possible you want to buy this as young, and inexpensive as possible.
When weighing the amount needed against the amount affordable, I always start with the premise that something is better than nothing! You should consider what the family can afford, on a monthly basis, and work from there. If there is Group Life coverage available at work it is an excellent option to augment that which you can afford personally. But, if you leave that job, in most cases you can’t take it with you, and it is usually not more than 1 or 2 X salary. So it alone is not enough, particularly in California, to provide for your family’s security.
I have come across some who do not “believe” they need Life Insurance because they have plenty of assets to protect the family should a parent die. This may well be, but if one has the assets to protect their family, and can easily afford to provide the means for the funeral for one of such status, wouldn’t it be a better use of those assets to provide a Life Insurance benefit to cover the funeral expenses (at pennies on the dollar), than require the family to use them for their farewell services. If your finances are sufficient, consider buying, as soon as possible, a small permanent policy to bury you, and make up the balance of what you need with term coverage while your need is greater.
Call Corrin to discuss this and other insurance needs. Protect your family! 1.650.FARMERS or ctrowbridge@farmeragent.com.
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How do my investments relate to my children’s college tuition funding/costs?
When it comes to getting your children ready for college, you need to understand your full financial picture. This is what schools look at when calculating the financial aid available for your children.
As it stands with investments, your liquid investments (i.e. non-retirement) are assessed at 5.65%. You are allocated a protection allowance on your assets based on the oldest parent. If you’re 50, it’s in the neighborhood of $50,000. Above and beyond that threshold the 5.65% kicks in. Also, important to note is that money in retirement accounts are not assessed.
What this means is don’t be caught off-guard with money that’s slated for retirement, but rather sitting in money-market account. Those dollars will be assessed as part of your contribution. If it’s for retirement, move it into a retirement vehicle (e.g. IRA). Additionally, there are other investments that are not assessed (e.g. annuities) within the formula. In sum, while you have some protection on your assets, don’t have your money sitting around if it’s for retirement. Be fair to yourself.
It’s important to remember that a student’s asset is assessed at 35% with no protection, whether that’s in cash, savings, CDs or UGMA/UTMA custodial account. Again, a 529 is assessed as a parent asset.
In sum, if you’re looking to invest ahead of time for your child’s education, choose a 529. If you have a UTMA/UGMA, try to convert. Some plans allow you do that. But bottom line, having cash, savings, UGMA/UTMAs under child’s name should be avoided.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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Why is pre-approval important? Do I have to go back to the same lender that originally approved me?
Pre-approval is the first step in looking for looking for a home. Yes, even before hiring a real estate agent! The pre-approval letter that you get from your lender shows that the lender has verified your income, pulled your credit, verified your assets to close and for reserves and deemed them all okay for a loan of a particular size.
Part of this process should be your lender sitting down with you and talking about your finances and the mortgage payments you would be comfortable with, based on your income and down payment. This conversation will help you determine a purchase price that will fit into your finances and future plans. We want to make sure any offer you put on a home is something that is comfortable for you to make and will not put you in a financially irresponsible place.
You do not have to work with the same lender that pre-approved you; however, it can speed up the process. Since the lender already has your documentation, credit report and other information and it has already been reviewed by an underwriter (which at some big banks could take weeks), you’re much closer to completing the loan application and receiving funding.
That being said, your relationship with your lender should be a personal one, since they are the ones with the knowledge and experience to make sure you are put in the best position. Resubmitting paperwork and an extra week of time is nothing if it gives you peace of mind and you are treated in a way that lets you know your lender has your best interest in mind.
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When should I think about discussing my finances with a financial planner?
You should consider talking to a Financial Advisor when you are making a life change such as getting married, having children, changing jobs or have some financial questions outside of your personal expertise. Don’t assume that you can find financial answers on the internet. You are about as likely to become an expert in financial planning over the internet as you are to become a brain surgeon.
Financial planning takes into account many different aspects of the current marketplace and a strategic financial plan helps those aspects to work together for the greatest reward. This isn’t something that a novice to the financial world can understand fully and create for themselves after doing a little internet research. So, don’t do it yourself! Your financial future is rather important to plan for properly the first time and you don’t always get a second chance. Rather than searching the web for good investments, most should start by searching for a good financial planner.
A few tips to finding a good Financial Planner:
- You should find a financial planner who you feel listens to your concerns and desires. This is your financial plan and needs to focus on what you want to accomplish.
- You should expect a series of appointments, often 2-4 before doing any investing. (Anyone giving investment recommendations at the first meeting is not a true financial planner.)
- You should expect a written financial plan that covers the areas of:
Investments
Retirement Planning
Education Funding
Risk Management/Insurance
Estate Planning/Trusts
Tax Strategies
Note:
As important as finding a financial advisor is deciding on a financial plan and sticking to it. Most people start with a strategy and the minute it starts to not work perfectly they will give up on it and change to another strategy or another advisor. Though a few changes may be needed, “Don’t throw the baby out with the bath water.”
*Troy is a financial advisor offering securities through First Allied Securities, Inc. A Registered Broker/Dealer member of FINRA/SIPC
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A Note on the New FHA Rules
The Federal Housing Administration has announced major changes to its program. The agency will increase the amount of upfront cash paid by new borrowers and require higher down payments from those with the poorest credit.
Upfront insurance premiums paid at the closing table will increase to 2.25% of the loan value, but buyers will be able to finance the premiums. Borrowers with credit scores below 580 will be required to put at least 10% down. Home buyers with higher scores will still be allowed to put down as little as 3.5%. FHA also plans to reduce seller concessions from 6 to 3% of the home’s value.
These policy changes come on the heels of FHA’s announcement in Oct. 2009 that its capital reserve fund had fallen below the congressionally mandated level of 2%. Lawmakers believe these changes will help ensure the agency’s financial soundness and fulfill its mission of serving borrowers not adequately served by the private sector.
Since August 2008 equity lines used as second mortgages and traditional second mortgages have become almost non-existent. Buyers without at least 20% down have turned to FHA financing as their only choice. The upfront costs at closing are high and private mortgage insurance is required. But, a large percentage of buyers are thrilled with this option providing financing to purchase at an optimum time.
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