How Much Student Debt is Too much ?

By alex.barrientos@nafinc.com December 8, 2017
Student loans have surpassed credit card debt and are now the second largest source of household debt in the United States… second only to mortgage debt. Is this leading to a decline in household wealth? Several recent studies have examined the topic and it seems that the amount of debt is not as important as the college degree that came with it. For example, young adults who graduate with degrees in business, law and medicine tend to have very high debt burdens. However, their degrees tend to lead to jobs with very high incomes. On the other hand, young adults who have either dropped out of college or who have graduated with degrees in lower paying fields end up with lower paying jobs. This would cause even a small amount of student loans to be burdensome. A recent study conducted by Georgetown University found that top paying college majors earn a staggering $3.4 million more than the lowest paying majors over the course of a recipient’s career. Moral of the story? Examine the earnings potential of the degree you want before you get into debt to acquire it

Save More by Paying Less in Fees

By Ryan.Whitmore@nafinc.com December 8, 2017

Saving for a down payment can be less about how much you can afford to put away than about what you spend your money on. Many fees, for instance, are expenses that are easily reduced without compromising your current lifestyle. The fewer you pay, the more cash you’ll have available to add to the down payment cause.

Where to Begin

Here are some ideas for where to find fees that can be negotiated, minimized, or eliminated altogether.

Bank Fees

Ask your personal banker about ways to reduce any fees you are paying on your checking account, particularly if you have been with your bank for a while. Be sure to mention you are saving for a down payment. The more services you use and the more money you have with a bank, the better your negotiating power is regarding fee reduction. Even if you receive a concession on your fees, stay focused on managing your balances. Avoiding fees for overdrafts and bounced checks is quite savings-friendly.

Credit Card Fees

Call your issuer and request a reduction of your annual fee in view of your history of consistent and timely payments. The alternative, which your issuer knows, is to transfer your balances and relationship to a different card issuer offering lower or no-fee accounts. Similarly, if a payment does arrive late, request a reversal. Generally, issuers are accommodative; they want to avoid losing business to a competitor over an occasional late fee.

Claim Rewards

Loyalty adds up. Whether it is at a local store, restaurant group, or major airline, signing up to receive points is a way to get a little more out of each expense. When you are asked to pay a fee to join a program, however, look long and hard at your break-even point, which is where the benefits you would gain exceed the fees you will pay. Programs like Amazon Prime, which offers free shipping that often pays for itself at holiday time, are good examples of this.

Attendance Fees

Many museums and galleries offer regular free admission days. They tend to be more crowded on those days, but this can save your family enough to pay for lunch after a visit. You will also avoid the handling fee often charged for mailing tickets. Becoming a member of a museum you frequent can also save you and your family money since attendance is free and, often, a portion of the membership fee is tax deductible. 

Cutting Other Expenses

Whether it’s your cell phone, Internet, cable, alarm-monitoring company, or satellite radio subscription, monitor your bills and periodically call to ask if they can be lowered. Often, especially if you’ve been a loyal customer—and make timely payments—the company will be able to find an incentive that can be applied to your account.

With every fee or bill that you cut—or incentive you earn—make it a point to match that amount with a deposit to your down payment savings account. The amounts may be small, but you’ll be surprised by how quickly each of these financial victories can add up. 

Down Payment Download: How Much Do You Really Need?

By Dylan.Tortarolo@nafinc.com December 8, 2017

There is a well-rooted perception that to buy a home, especially your first one, you should keep saving and renting until you can make a 20 percent down payment. Reality is far different and knowing your options may get you through the door to homeownership that much sooner.

Doing More with Less

Black Knight Financial Services reports that 1.5 million borrowers became homeowners in the 12 months ended June 2017 with down payments of less than 10 percent. Most of these loans were conventional, fixed-rate offerings made through the Fannie Mae, Freddie Mac, and FHA loan programs. Because these agencies are now able to accommodate this type of loan, close to 40 percent of all new mortgages are being made with low down payments.

Mortgage ProgramsMinimum Down Payment
Conventional Loans 3–5 percent
Conventional Jumbo 10 percent
FHA Loans 3.5 percent
VA Loans 0 percent
USDA Loans 0 percent

Down payment requirements may differ for condo purchases or new construction.

Weighing the Trade-Off

While it’s possible to get into a home sooner with less money up front, mortgages made with low down payments do come with the added expense of mortgage insurance premiums until that 20 percent equity level is achieved. They also typically result in the borrower paying more interest over the life of the loan, which could make the ultimate cost of the home higher.

However, proceeding with a low down payment might still save you money over the long run. You will no longer be paying rent and may realize tax savings after deductions for your higher interest expense and property taxes. Potential gains in the home’s value can also make the earlier purchase and expenses worthwhile over time. So, it is important to consider how these varying factors may affect your near-term budget as well as the potential for a long-term gain in your net worth. In many cases, your Loan Officer or financial advisor can help you weigh the alternatives.

Next Steps

Going through the preapproval process with a Loan Officer is an effective way to gauge how much home you can buy—and afford—given different down payment scenarios. It will also help you engage the attention of a Real Estate Agent. Having a preapproval letter will ensure they view you as a serious buyer instead of an aspirational browser still building your savings.

When it comes to down payments, in today’s market it isn’t as much about the amount you put down as it is how much you can comfortably afford to owe. Once you know that, homeownership is in reach.

Save More by Paying Less in Fees

By Jonny.Moore@nafinc.com December 8, 2017

Saving for a down payment can be less about how much you can afford to put away than about what you spend your money on. Many fees, for instance, are expenses that are easily reduced without compromising your current lifestyle. The fewer you pay, the more cash you’ll have available to add to the down payment cause.

Where to Begin

Here are some ideas for where to find fees that can be negotiated, minimized, or eliminated altogether.

Bank Fees

Ask your personal banker about ways to reduce any fees you are paying on your checking account, particularly if you have been with your bank for a while. Be sure to mention you are saving for a down payment. The more services you use and the more money you have with a bank, the better your negotiating power is regarding fee reduction. Even if you receive a concession on your fees, stay focused on managing your balances. Avoiding fees for overdrafts and bounced checks is quite savings-friendly.

Credit Card Fees

Call your issuer and request a reduction of your annual fee in view of your history of consistent and timely payments. The alternative, which your issuer knows, is to transfer your balances and relationship to a different card issuer offering lower or no-fee accounts. Similarly, if a payment does arrive late, request a reversal. Generally, issuers are accommodative; they want to avoid losing business to a competitor over an occasional late fee.

Claim Rewards

Loyalty adds up. Whether it is at a local store, restaurant group, or major airline, signing up to receive points is a way to get a little more out of each expense. When you are asked to pay a fee to join a program, however, look long and hard at your break-even point, which is where the benefits you would gain exceed the fees you will pay. Programs like Amazon Prime, which offers free shipping that often pays for itself at holiday time, are good examples of this.

Attendance Fees

Many museums and galleries offer regular free admission days. They tend to be more crowded on those days, but this can save your family enough to pay for lunch after a visit. You will also avoid the handling fee often charged for mailing tickets. Becoming a member of a museum you frequent can also save you and your family money since attendance is free and, often, a portion of the membership fee is tax deductible. 

Cutting Other Expenses

Whether it’s your cell phone, Internet, cable, alarm-monitoring company, or satellite radio subscription, monitor your bills and periodically call to ask if they can be lowered. Often, especially if you’ve been a loyal customer—and make timely payments—the company will be able to find an incentive that can be applied to your account.

With every fee or bill that you cut—or incentive you earn—make it a point to match that amount with a deposit to your down payment savings account. The amounts may be small, but you’ll be surprised by how quickly each of these financial victories can add up. 

Upsizing Your Home Is A Thing

By jeff.moore@nafinc.com December 8, 2017

When it comes to buying a new home in retirement, conventional wisdom says most people will downsize from what they currently have and spend less. However, surveys find that 48 percent of respondents plan to spend the same amount or more on a new home. Additionally, 30 percent are looking to purchase a house with more square footage. The reasons why vary and can affect how you work with these clients.

Family Matters

Some of the most popular reasons for upsizing involve family. Many people want to move closer to kids—and grandkids. Additionally, 16 percent of those surveyed have adult children who have returned home. This often means they want more room in anticipation of time spent with extended family.

Aging Parents…and Selves

Others who choose to upsize cite the need to accommodate elderly parents and, possibly, their caregivers. These potential clients generally require larger homes with a certain layout: fewer levels and wider areas for mobility. Homeowners are also considering this type of space as they think about what their own futures might look like.

Entertaining

Retirement often means more free time to get together with friends and family. Thirty-three percent of those surveyed say that having enough room for family and friends to stay during visits and host holidays is a top consideration.

Living the Dream

Still other retirees have waited—and worked—their whole lives to buy their dream home. They see retirement as the perfect opportunity to acquire the lifestyle they have worked so hard to achieve. This may mean being closer to activities, like golf or skiing, and possibly taking advantage of the amenities a planned community offers.

Cost Effective

Clients who decide to upsize generally do so after careful consideration of how it will affect their savings and cash flow. Since many will be living on a fixed income—with minimal earned income—they may need extra help anticipating all the potential maintenance costs associated with the properties and neighborhoods you show them. This may also mean their search could take a little longer, and some added patience, as they get their numbers to work out.  

For those clients who are thinking about upsizing, understanding what they want in their next home—and assuring them of your ability and willingness to work with them until they get it—can make for a rewarding experience for you both.

The Future Belongs to You

By paul.pritchard@nafinc.com December 8, 2017

Change is required to stay competitive in a market dominated by millennials

Technology is changing the world we live in. The mortgage process has rapidly evolved, becoming more modernized with the times, and with every change comes a new way of doing business for both mortgage originators and real estate agents.

As we step into the future, many want to know: Will this evolution in technology make the role of the originator and agent a concept of the past? Although technology won’t likely replace them, it will require changes to remain relevant and competitive in dealing with the modern-day borrower.

Reach millennial buyers

There is a new wave of homebuyers already starting to emerge. They are the millennial generation. This massive age group is not only the largest generation today, making up about one-fourth of the nation’s population, they are fast becoming the most significant consumer demographic in the U.S. They are the future of the housing industry.

As this younger generation enters their homebuying years, first-time purchases will become the norm. Because millennials are just beginning their financial journey, most won’t want to go through the homebuying process without expert input. They will need a trusted adviser.

Buying a home is one of the biggest financial commitments people make, and most buyers still want a professional alongside. Millennials are no different. In fact, 83 percent of millennials seek financial guidance when it comes to major life events.

Even though they may be tech-savvy, millennials aren’t necessarily ready for a completely digital homebuying experience. And, in general, technology does not provide the same confidence a buyer gains from establishing trust with a professional and having that adviser’s perspective to guide them through major milestones.

One key to gaining this new type of buyer’s business, however, is understanding how to serve them. Most millennials want a different consumer experience than other generations. They look for a fast, efficient and customer-centric purchase process. Therefore, originators and agents who want to succeed with millennials must embrace a different approach to business.

Diversify your team

Like any other generation, millennials want to engage with professionals they can relate to and who connect with them. Therefore, part of future success depends on mentoring the incoming generation. The mortgage workforce is aging while borrowers are getting younger.

One of the best ways to attract millennial consumers is by employing other millennials. You need mirrors in any market — people who reflect the demographic you’re seeking to serve — because customers like working with service providers who are like them.

Millennials on your team become a resource to your business. Not only do they have a mindset similar to prospective millennial borrowers, which can help your team better understand how to reach millennials, but they can help build trust with that market segment. Many millennials won’t respond to traditional marketing tactics, but they will do business with a professional they trust who can provide valuable information relevant to their needs throughout the homebuying process.

Go mobile

Although most millennials aren’t looking for a totally automated homebuying experience, many are looking for the convenience provided by modern technology. Millennials grew up in the digital age and are used to on-demand information; therefore, anyone looking to serve them should be armed with instant access to information.

More than any other generation, millennials use the internet and mobile devices when connecting with businesses. That means having a user-friendly, mobile website and easy-to-use apps is a necessity for mortgage professionals doing business in the 21st century.

“ Approach social media strategy as a teacher, rather than as a sales person. ”

Originators who can provide fast updates, create transparency throughout the lending process and efficiently close loans will have a competitive advantage when serving millennials. Today’s mortgage originators should be able to check a loan’s status, send a prequalification letter and pull credit — all from their mobile devices.

Mobile technology provides the ability to get everyday tasks done anytime, anywhere, making originators just as effective in the field as they are in the office. If you don’t have this capability, you won’t be able to competitively market your services to on-the-go buyers.

Build an online reputation

This incoming era of homebuyers also tends to do their research first, then do business next. According to Adweek, 93 percent of millennials turn to consumer reviews before making a purchase decision and more than 97 percent of them trust anonymous reviews on e-commerce sites.

It’s clear that millennials care about online reviews, and so should you. To be the originator of choice in this coming age, you will need a solid online reputation. Not having online reviews is like closing the door on business from a vast section of the buying population.

Reviews are the marketing direction of the future, so you need the right technology in place now to help you build your online reputation. It’s difficult to reach out to each borrower personally after every transaction. Instead, you should have a system that does this for you, so you’re free to focus on serving your clients.

The technology you use should not only facilitate feedback once the homebuying experience is done, however. It should allow for contact with borrowers while the process is still underway. This is key because if there is a customer concern that needs to be addressed, you can correct it before it potentially turns into a negative review.

Generating positive reviews and building a good online reputation begins with how you close your borrowers’ transactions. When you provide excellent service, clients are more inclined to write a favorable review when you ask for feedback. As satisfied borrowers complete reviews, your system should automatically post them to constantly build your online reputation.

Reviews should be posted in all the prime places where consumers look — your company website, your personal website and social media channels. The key is to build a reputable brand over a period of time to help convert potential millennial borrowers into loyal clients.

Activate social media

As we move into the future, social media will be essential to success. It is important today, but will be even more so tomorrow. Nearly 90 percent of millennials use social media. It’s practically a universally used platform; and nearly 40 percent say businesses that use social media are more accessible and trustworthy.

The key is knowing how to use it effectively. Millennials don’t go on Facebook 50 minutes a day to review the latest sales ads. It is more beneficial to approach social media strategy as a teacher, rather than as a sales person. Most millennials like to be well-informed so you have to position yourself as a credible industry expert.

There is an enormous amount of information already inundating social media channels, so you have to find a way to separate yourself from the fray. Whether your skill is working with first-time homebuyers or you’re a knowledgeable veteran with years of experience in the industry, determine what makes you stand out from the competition so you can showcase it effectively.

Not only must you know your brand, you also have to know the type of content potential borrowers want. Videos have become the dominant content across the major platforms. Millennials also tend to look for easy-to-digest information that adds value, like tips on building credit or saving for downpayments. Any professional looking to find success with millennials would do well to tailor their approach to accommodate this demand.

•  •  • 

Despite changes brought about by technology, the future still belongs to loan originators and real estate agents. It’s a matter of knowing how to use technology to your advantage and being adaptable as times continue to evolve. Build your future now.

Down Payment Download: How Much Do You Really Need?

By Tammie.VanDeusen@nafinc.com December 6, 2017
There is a well-rooted perception that to buy a home, especially your first one, you should keep saving and renting until you can make a 20 percent down payment. Reality is far different and knowing your options may get you through the door to homeownership that much sooner.

Doing More with Less

Black Knight Financial Services reports that 1.5 million borrowers became homeowners in the 12 months ended June 2017 with down payments of less than 10 percent. Most of these loans were conventional, fixed-rate offerings made through the Fannie Mae, Freddie Mac, and FHA loan programs. Because these agencies are now able to accommodate this type of loan, close to 40 percent of all new mortgages are being made with low down payments.
Mortgage Programs- Minimum Down Payment
Conventional Loans 3–5 percent
Conventional Jumbo 10 percent
FHA Loans 3.5 percent
VA Loans 0 percent
USDA Loans 0 percent

Weighing the Trade-Off

While it’s possible to get into a home sooner with less money up front, mortgages made with low down payments do come with the added expense of mortgage insurance premiums until that 20 percent equity level is achieved. They also typically result in the borrower paying more interest over the life of the loan, which could make the ultimate cost of the home higher.
However, proceeding with a low down payment might still save you money over the long run. You will no longer be paying rent and may realize tax savings after deductions for your higher interest expense and property taxes. Potential gains in the home’s value can also make the earlier purchase and expenses worthwhile over time. So, it is important to consider how these varying factors may affect your near-term budget as well as the potential for a long-term gain in your net worth. In many cases, your Loan Officer or financial advisor can help you weigh the alternatives.

Next Steps

Going through the preapproval process with a Loan Officer is an effective way to gauge how much home you can buy—and afford—given different down payment scenarios. It will also help you engage the attention of a Real Estate Agent. Having a preapproval letter will ensure they view you as a serious buyer instead of an aspirational browser still building your savings.
When it comes to down payments, in today’s market it isn’t as much about the amount you put down as it is how much you can comfortably afford to owe. Once you know that, homeownership is in reach.

Scotsman Guide Ranks New American Funding a Top Mortgage Lender in America

By JoAnne.Lamorey@nafinc.com December 5, 2017

scotsman top lender award

For the fifth year in a row, national mortgage lender New American Funding makes Scotsman Guide Top Mortgage Lenders list. The California-based company was ranked among entries from hundreds of mortgage companies across the country in the following categories:

-Top Overall Volume: #14

- Retail Volume: #11

To view Scotsman Guide’s residential ranking, please visit: http://www.ScotsmanGuide.com/TopLenders2016

Scotsman Guide, the leading resource for mortgage originators, created its 5th annual listing based on loan data from 2016. They ranked each company according to mortgage volume on residential properties that are up to four units and are located within the U.S.

“We’re thrilled Scotsman Guide has again identified New American Funding as one of America’s leading mortgage companies,” said CEO Rick Arvielo. “We work hard to remain progressive and to be a forerunner in the industry; therefore, we count it an honor to be recognized for five years in a row. This accomplishment challenges us to continue stretching to new heights.”

2016 Highlights

Arvielo guided New American Funding through 2016, a year that resulted in record-breaking profitability, which included generating more than $11.7 billion in loan volume and funding more than 40,600 loans. He also expanded the company’s reach to 130+ nationwide locations and 2300+ team members by adding 36 retail branches and more than 1200 employees.

Recent Awards

The company has received several notable accolades for its tremendous growth, which include:

-Inc. 5000 Fastest Growing Companies

-Top Mortgage Companies in America – Mortgage Executive Magazine

-Gold Best in Biz Award – Fastest-Growing Company of the Year

Due to his progressive business approach, Ernst &Young named Arvielo an EY Entrepreneur of the Year™ and inducted him into its EY Hall of Fame; while the American Business Awards? named him a gold Stevie® winner for Executive of the Year. 


Read more at https://www.newamericanfunding.com/about/newsroom/scotsman-guide-ranks-new-american-funding-a-top-mortgage-lender-in-america/#qJey8YACCkK81Dxa.99

Buying a Home While Managing Student Debt

By Tammie.VanDeusen@nafinc.com November 29, 2017
If you’re a Millennial and attended college, there is an excellent chance student debt is part of your financial life. Total U.S. student loan debt surpassed $1.3 trillion and now affects some 40 million Americans. The percentage of individuals between the ages of 25 and 34 who have $50,000 or more in student loan debt doubled between 2005 and 2015. Meanwhile, the amount of mortgage debt held by this age group fell by half.
As pervasive as student loan debt is, it doesn’t need to define your future or keep you from reaching your homeownership goals.

How to Move On With Student Debt

Buying a home and repaying student debt are not mutually exclusive. The key to achieving both goals is balance. Here are seven tips for finding that middle ground within your own household’s finances.
  1. Know your options. You have options regarding your repayment programs if your debt is federal and your loans aren’t with a private lender. You also have the ability to switch repayment programs as your income, financial circumstances, and goals change. Visit the Department of Education’s website for a rundown of the repayment programs.
  2. Look beyond interest rates. Student debt management isn’t so much about the lowest interest rate as it is finding the most affordable repayment option. That affordability is what allows you to meet financial goals in addition to repaying your student loan debt.
  3. Keep up. Student loan debt can interfere with home buying if you have a history of late or missed payments. Payment history accounts for roughly 35 percent of your credit score. Timely payments and demonstrating your ability to handle the repayment of debt are actually positive attributes on a credit profile.
  4. It's all about DTI. From a Loan Officer’s perspective, it’s not about how much you already owe as it is about the ratio of that debt to your income (DTI). There are two ways to improve this ratio. The first is the one that many focus on: reducing your debt level. However, increasing income through a better job, freelancing, or having a nonworking spouse go back to work part time can also help you qualify for a mortgage.
  5. Take advantage of your first time buyer status. There are a number of first time homebuyer programs that can help you qualify for a mortgage. These programs may offer low to no down payment requirements, which makes owning a home and repaying student loans doable. Also, various loan programs will treat student loan debt differently when approving applications. Get advice from a Loan Officer to see which program may be appropriate for you.
  6. Work it. Many municipalities and, increasingly, corporations are offering student loan repayment programs as an employee benefit or as an enticement to locate to underserved areas. When looking at your employment options, consider how having access to such benefits might impact your ability to achieve your financial goals sooner.
  7. Think after tax. Take a holistic look at your current spending on an after-tax basis. Focusing on being free of student debt may sound good, but pouring your money into loan repayments while paying rent may actually be costing you more money depending on where you live. Under the current federal tax laws, mortgage interest is tax deductible for most filers. The tax savings, especially if it comes in the form of a tax refund, could help you retire your student debt even as you build your home equity. It’s a good idea to consult a tax professional to help you decide.
Don't let student loan debt stand in the way of your homeownership goals!

Guide to Mortgage Rates

By alex.barrientos@nafinc.com November 28, 2017
Mortgage rates are determined by the supply and demand for mortgage bonds in the bond market. Why Mortgage Bonds? When you get a mortgage in the US, your mortgage company is getting the money from Fannie Mae, Freddie Mac or other "securitizers". These "securitizers" get their money by issuing bonds to bond market investors. These bonds are called "mortgage bonds" or "mortgage backed securities". Therefore, the mortgage rate you pay is really determined by the supply and demand for mortgage bonds in the bond market. The Role of the Federal Reserve As you can see from the chart, the Fed owned zero ($0) mortgage bonds prior to 2008. Once the financial crisis happened, the Fed decided to start buying mortgage bonds in order to drive down interest rates and stimulate the economy. This is called "quantitative easing" or "QE", and we've had several rounds of QE so far. Currently, the Fed owns a whopping $1.77 TRILLION in mortgage bonds! In fact, the Fed has been the biggest buyer of mortgage bonds in recent years, and is currently absorbing over half the supply of new mortgage bonds being issued in the market. If the Fed stops buying mortgage bonds, mortgage rates could increase. The Fed has indicated that they will reduce their purchases of mortgage bonds by 25% every three months starting sometime this fall. The market will be watching very closely to see how this process unfolds, and whether private investors will absorb the extra supply of bonds in the market. Mortgage rates are also impacted by the bond market's reaction to various news items. Here are three economic trends to watch in the coming months: Inflation: bond investors and the Fed watch the inflation reports (CPI and PCE) to determine whether they should buy, sell or hold mortgage bonds. Jobs: bond investors and the Fed watch the jobs report and unemployment numbers very closely to determine if the economy is improving and whether they should buy, sell or hold mortgage bonds. Changing Supply and Demand Dynamics in the Bond Market: this is influenced by economic reports, political events, and other news. Conclusion: we anticipate continued volatility in mortgage rates over the next several months as bond investors and the Fed decipher the economic trends that we've outlined above. Please contact me for more info on which economic reports may impact mortgage rates this week.