Burn The Ships!!!

I was recently at a business training to learn more about real estate. Instead of the training being focused on logical and practical operations it was more of a sermon.  The guest speaker spoke about how we give ourselves the option to fail by the way we emotionally express ourselves on a daily bases.  He said “We just give up too easily sometimes.”  I agree with him on that point.  Then he went on about explaining the words we declare sometimes. He stated, “We worry ourselves and even curse ourselves, then wonder why we receive the results that we get.”  I couldn’t argue that for one second. As he went on about his lesson he used metaphoric “ships that we have in our lives.”  These ships represent; doubt, the familiar, the place of comfort, and simply things that we go back to when times get rough.

 I remember reading the story of Peter when he was on the boat. At the time, Peter and a few of his disciples were off shore, there were waves and wind thrusting against his boat. They then saw a man walking on water and were terrified because they thought it was a ghost, little did they know it was Jesus.  Jesus spoke to them saying they should have courage and not to be afraid for it was Him walking on water not a ghost. Peter then told Jesus “Lord, if it’s you, tell me to come to you on the water.” Jesus said “come.” Peter then walked on to the water to go towards Jesus. But when saw the wind he was afraid and began to sink in the water. He cried out “LORD, SAVE ME!” Jesus immediately reached out to his hand and caught him. He said, “You of little faith, why did you doubt?”  

Now picture yourself in Peter’s shoes, taking your first step on the surface of the water because you’re trying to go towards Jesus. Imagine your self walking on water but feeling the strong winds push against you and seeing waves come to you. Would you be scared? Would you look back at the boat to see how far you were from it? Would you have any doubt?  I personally would be frightened; I would probably look around in panic to see where the boat was. This is what we do spiritually when we hear our calling but lose our concentration on the Lord.  We look for something to save us, when we have the best life preserver with us all along.

The Instructor then went on about relating the story of Peter to the story of Hernan Cortes the Spanish Conquistador. Cortes had planned to attack the Mexican Azteca’s with a strategic plan because the Spaniards wanted to conquer Mexico and raid the land for their famous precious treasure that they possessed. The Spaniards were not only seriously outnumbered but they had to be willing to die for their Queen and acknowledge that many would die due to the odds. Nevertheless, Cortes motivated the troops by exposing that they would forever be remembered and spoke about in history. Upon the battle, Mr. Cortes gave one of the best battle cries ever recorded. He shouted "BURN THE SHIPS"!  This was the point of no return. The army was stunned and excited to push forward by these words when in fact, they had no other option. They simply had to give it their all and die for what they believed in. 

That is the point in our faith and in our industry.  It is not Ludacris to be a Broker, Loan Officer, or Realtor in this industry, nor in our faith.  Being faithful in our lives and industry isn’t absurd, it’s courageous.  Let us be brave for “yet in all things we are more than conquerors through Him who loved us. For I am persuaded that neither death nor life, nor angels nor principalities nor powers, nor things present, nor things to come, nor height nor depth, nor any other created things, shall be able to separate us from the love of God which is in Christ Jesus our Lord” (Romans 8:37-39).  I was so pumped up and refreshed after the training; it was personally much need it. Sit back, analyze, and ask yourself “Am I ready to become a conqueror?” YES YOU ARE!!!

I really hope that this story helps it did it for me.

Mortgage Related Terms: "Shop Talk"

Understanding the “Shop Talk” between the various industry professionals is quite important. If you do not know the terms it may be a bit difficult to make a home buying decision, therefore we wanted to highlight the top terms that most borrowers will hear several times throughout the approval and home buying process.

We have assembled a list of key term and hope that this gives you greater confidence when discussing important topics that may impact your transaction.

Mortgage Related Terms:

• Amortization Schedule: A schedule of payments showing the amount applied to the principal and interest through the payoff.
• Annual Percentage Rate (APR): The effective rate of interest that includes loan related fees.  The APR helps determine the total cost of borrowing a loan and is used to compare loans that are advertised with different note rates.
• Adjustable Rate Mortgage (ARM): As opposed to a fixed-rate mortgage where the payment is set for the full term of the loan agreement, an ARM is tied to a specific financial index and may adjust after a set amount of time.
• Buydown:Where a borrower pays an up-front fee to lower the mortgage rate and monthly payment.  Rate Buydown’s can be used to help a borrower qualify for a loan, or as a means of negotiation where the seller would contribute to a lower rate in order to entice a buyer to purchase their property.
• Combined Loan-to-Value (CLTV): The total amount of mortgage obligations on a particular property compared to the fair market value.
• Debt-to-Income Ratio (DTI): A borrower’s minimum monthly liability payments divided by their gross monthly income.
• Default: Failure to fulfill an obligation to pay a mortgage.
• Delinquency: Late payments on a monthly liability.  Creditors generally report payments to credit bureaus once the delinquency goes past 30 days.
• Disclosure: A big stack of documents that the lender, buyer and sellers sign during a real estate purchase or mortgage transaction.  These disclosures may also notify all parties involved of their rights and obligations.
• Discount Point: The amount paid to decrease an interest rate. 
• Fico Score: The three credit reporting agencies in the United States, Equifax, Experian, and TransUnion, collect data about consumers used to compile credit reports. The credit agencies use FICO software to generate FICO scores, which are sold to lenders.

Each individual actually has three credit scores at any given time for any given scoring model because the three credit agencies have their own databases, gather reports from different creditors, and receive information from creditors at different times.

• Fixed Rate Mortgage: A mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float”.
• Good Faith Estimate (GFE): A good faith estimate must be provided by a mortgage lender or broker in the United States to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). The estimate must include an itemized list of fees and costs associated with your loan and must be provided within three business days of applying for a loan.

These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges.

A good faith estimate is a standard form which is intended to be used to compare different offers (or quotes) from different lenders or brokers.

• Gross Income: Total taxable income which is generally verified by a lender through tax returns and W2′s.
• Home Equity Line of Credit (HELOC): A line of credit secured by real estate.
• HUD-1 Statement: A comprehensive and itemized list of closing costs prepared by a closing agent that detail all of the financial figures in a mortgage refinance or purchase transaction.
• Joint Liability: When more than one person applies for and secures a mortgage.
• Jumbo Mortgage: A mortgage with a loan amount above conventional conforming loan limits. This standard is set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender.

Fannie Mae (FNMA) and Freddie Mac (FHLMC) are large agencies that purchase the bulk of U.S. residential mortgages from banks and other lenders, allowing them to free up liquidity to lend more mortgages.

When FNMA and FHLMC limits don’t cover the full loan amount, the loan is referred to as a “jumbo mortgage”. The average interest rates on jumbo mortgages are typically higher than that of conforming mortgages.

• Loan-to-Value (LTV): The loan-to-value (LTV) ratio expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. For instance, if a borrower wants $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000/$150,000 or 87% (LTV).

Loan to value is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. The risk of default is always at the forefront of lending decisions, and the likelihood of a lender absorbing a loss in the foreclosure process increases as the amount of equity decreases. Therefore, as the LTV ratio of a loan increases, the qualification guidelines for certain mortgage programs become much stricter. Lenders can require borrowers of high LTV loans to buy mortgage insurance to protect the lender from the buyer default, which increases the costs of the mortgage.

The valuation of a property is typically determined by an appraiser, but there is no greater measure of the actual real value of one property than an arms-length transaction between a willing buyer and a willing seller. Typically, banks will utilize the lesser of the appraised value and purchase price if the purchase is “recent.” What constitutes recent varies by institution but is generally between 1–2 years.

• Loan Rate Lock:Where the loan officer locks a specific rate with a lender for a set amount of time.
• Liquid Assets:Money in a bank or investment account that can be obtained quickly.
• Loan Origination Fee: A fee paid by a borrower to a lender for obtaining a mortgage loan.
• Loan Servicer: A mortgage servicer is the company that borrowers pay their mortgage loan payments to. Mortgage servicers either purchase or retain mortgage servicing rights that allow them to collect payments from borrowers in return for a servicing fee. The duty of a mortgage servicer varies, but typically includes the acceptance and recording of mortgage payments; calculating variable interest rates on adjustable rate loans; payment of taxes and insurance from borrower escrow accounts; negotiations of workouts and modifications of mortgage upon default; and conducting or supervising the foreclosure process when necessary.

Many borrowers confuse mortgage servicers with their lender. A mortgage servicer may be a borrower’s lender, but often the beneficial rights to the payment of principal and interest on mortgages are sold to investors such as Fannie Mae, Freddie Mac, Ginnie Mae, FHA, and private investors in mortgage securitization transactions.

• Mortgage Insurance: Mortgage insurance (also known as mortgage guaranty) is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer.

Mortgage Backed Security: A mortgage-backed security (MBS) is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans, most commonly on residential property.

First, mortgage loans are purchased from banks, mortgage companies, and other originators. Then, these loans are assembled into pools. This is done by government agencies, government-sponsored enterprises, and private entities, which may offer features to mitigate the risk of default associated with these mortgages.

Mortgage-backed securities represent claims on the principal and payments on the loans in the pool, through a process known as Securitization. These securities are usually sold as bonds, but financial innovation has created a variety of securities that derive their ultimate value from mortgage pools.

• Private Mortgage Insurance (PMI): Private mortgage insurance (PMI) is insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan. It is insurance to offset losses in the case where a borrower is not able to repay the loan and the lender is not able to recover its costs after foreclosure and sale of the mortgaged property.
• Acceptance:Generally used when a seller accepts the terms presented in a purchase contract offer.
• Contingency:A “Subject To” provision in a purchase contract or mortgage approval that requires more work or documents to be submitted prior to a final decision to be completed.
• Due-Diligence: The period of time described in a purchase contract for the buyer and seller to perform certain duties such as appraisal, loan approval and inspections.
• Deed of Trust: In real estate, a trust deed or deed of trust, is a document wherein specific financial interest in the title to real property is transferred to a trustee, which holds it as security for a loan (debt) between two other parties.

One is referred to as the trustor the other referred to as the beneficiary. In its simplest terms the trustor would be the receiver of money and the beneficiary would be the lender of money. The trust deed document most likely would be recorded (constructive notice) with the County Recorder where the property is located as evidence of and security for the debt.

When the loan is fully paid, the monetary claim on the title is transferred to the borrower by reconveyance to release the debt obligation. If the borrower defaults on the loan, the trustee has the right to foreclose on and transfer title to the lender or sell the property to pay the lender from the proceeds.

• Earnest Money: The deposit money deposited in escrow by a buyer in good faith to secure a purchase transaction.
• Escrow: A third party that holds money or property in trust until a transaction has been complete.  There are several uses for the word “Escrow” in the real estate or mortgage process.

Closing Escrow describes when a purchase transaction is complete. An Escrow or Impound account involves having your annual property and hazard insurance payments handled by a third party and taken out of monthly installments in a mortgage payment.

• Equity: The difference between a loan balance and a property’s fair market value.

 For more information about this subject and about loan questions please contact Frank Marta Texas Home Loan Specialist. Info@nuhomegroup.com or give us a call (713) 373-0345.

NuHome Group 713-373-0345

1445 North Loop West Suite 105 Houston, TX 77008

Frank Marta NMLS# 245813/835196