Every October we reach a critical date, the day when all of those people who requested an extension to file their taxes are now obligated to file. Yes, it has been almost six months since taxes were due, and for most people it is just a memory. However, to a significant group of people, those mostly self-employed, it is at the very front of their minds as they get the final paperwork to their accountant to meet the deadline.
So why is this important to mortgage professionals? Well, from my point of view, it is a very significant opportunity to do more business and build strong relationships with important referral partners. Since many of those now filing their returns are amongst those who have complicated returns to complete, with many schedules and a multitude of deductions, now is the time to have a frank conversation about income.
We all know that “stated income” and “no ratio” loan products have all but vanished from the markets. The old term of “common sense underwriting” is also in very limited use. So now those self-employed borrowers that used to use those products to finance their home purchases are left either putting significantly more money down, or they are not buying the homes they otherwise would be buying because they can’t qualify for a larger loan. My point is the word “qualify”. We all realize that the single largest determining factor of income for qualifying purposes is a borrower’s tax returns. We all need to examine, review, and calculate income based on what a client’s tax returns say. So important are these returns that we not only have to provide them, but we need to verify them with the IRS to be sure that what we have actually reflects what was submitted.
So why is October so important? Well, since so many have yet to file, they have an opportunity to declare income; taxable, qualifying income for 2011. By declaring more net income, these people are able begin the process of establishing the two years of income required to qualify for a mortgage loan. The fact that they can file their 2012 returns early in 2013, gives them an opportunity to have two years of documented income for loan qualification purposes in just a few short months!
Clearly I am not suggesting that anyone misstate their income or pay taxes on income they didn’t generate. What I am suggesting that sometimes looking at a situation where a person’s income has change substantially in the short term, that there might be a benefit by working with your accountant and financial professionals as to how and when certain incomes are declared and other deductions taken. This simple bit of planning could make a huge difference in the amount of money a potential home buyer would qualify for, and the price they would have to pay to borrow it.
Situational awareness is often a sign of a true professional. Having this conversation with your accountants, financial planners, and self-employed borrowers gives them an opportunity to look at the big picture and see how these circumstances could result in a net lower cost of ownership. As a mortgage professional it is your job to share information with your clients and referral partners so they can make an informed choice about what they do and what their options may be. October provides a choice for a few people to think about their home financing strategy, either to purchase or even refinance. Your ability to share this information may directly increase the opportunities you have to work with certain professionals and their clients.
Information, education, and options are our business. We are more of a solutions provider than a salesperson given the current environment. October tax filings represent an opportunity to engage in a conversation with people who have the ability to refer you and use your services. Don’t miss the opportunity!
If you have questions or comments, please feel free to share! You can always visit our website: www.improvemytomorrowcoaching.com and see how we can help you “Do something today that improves your tomorrow!”
QE 3 – What does it mean to me?
Federal Reserve Announces QE 3
1) $40 BILLION a MONTH in MBS purchases
3) No hike in rates until 2015
4) Future bond purchases to continue
My instant reaction was that was much more than anyone could have imagined. The pure shock at the size and scope of such a program has instantly caused oil prices to go higher, as well as gold and silver prices. The Stock Market up over 200 points in a few hours was part of the boost the FED is looking for to create a “wealth effect” so people will start spending money and spur the economy. After some quick movements, we saw over a 100bps move in the mortgage bond market, how that trend carries over into the weeks to come are unclear.
My short term thoughts were quickly:
1) What is the media take on all of this?
2) What are the general perceptions of people?
3) How quickly will mortgage rates respond?
4) Will we see a 2% 30 year fixed rate?
As professionals we have to be prepared to answer questions. Will entire pipelines of processed refinances all need to be renegotiated? Will customers simply walk away from transactions to shop for a better deal? You need to be prepared and ready to offer solutions.
My long term view is to look at some basic issues that caught my attention:
1) This is $480,000,000,000 a year in purchases.
2) This is about $4,247,787 per licensed L/O.
3) Can it solve the problem; it hasn’t so far so why now?
4) Were there better options to spur housing recovery?
5) Fixed rates will benefit; what about adjustable rates?
1) You must have answers to the likely common questions.
2) You have to be confident and honest, not defensive.
3) You must be proactive with information for your clients and your referral partners.
4) Remember that information and knowledge are useless without implementation to a plan.
5) You must have a clear policy about loan locks.
You must inform the client about lock extensions and renegotiations. A little time spent up front about your policy will save a lot of discussions, and possibly a few relationships! Always explain that rate locks are like insurance policies, they protect against bad things happening. If rates don’t go up, they don’t get their money back. Besides, this current policy is likely to pressure rates down of the long term. People can close their current loans and refinance down the road if rates are seriously lower.
In my opinion, if it isn’t in writing it doesn’t exist. You must put your plan in writing so your responses will remain consistent. With the election seven weeks away, ANYTHING IS POSSIBLE! This may just be the first of more surprises. A REAL budget resolution would do more to spur the economy and support the housing market than if the FED bought ALL the MBS available. Besides all of the talk, rates can only go so low. Sooner or later mortgage rates will run into the floor. If a 30 year treasury is around 2%, a 30 year mortgage security can’t get there. Since all rates include a certain amount for servicing, not to mention the risk of non-performance.
It is time to step up to the plate and SWING! True professionals see opportunity and seize it. When the markets are moving, so are the real professionals. Know what is going on and be sure to share the SUBSTANCE of the reality, not the SIZZLE or the hype! Do the work! You must keep yourself informed. 100% of the truth 100% of the time is something that has never been more important than now. Documentation beats conversation EVERY TIME! Get the facts and share them.
Questions or comments:
Be sure to visit our website at http://www.improvemytomorrowcoaching.com
The time has come for a brief conversation about taxes. No way around it, if you don’t show income and pay taxes on it, it is almost impossible to qualify for a great mortgage loan. While there are a few portfolio lenders out there making loans, most of the loans being made are being sold to entities that will require seeing full sets of tax returns. With that in mind, I want to draw your attention to the fact that many people have not yet filed their 2011 tax returns as of yet.
For everyone who needs to file a tax return the deadline to file is April 15th provided the 15th isn’t a Sunday or holiday. This year that was the case so the tax deadline was extended a couple of days. Unfortunately, this wasn’t enough time for some people, largely the self-employed, who need more time to file more complex tax returns. Those people may file for and automatically receive a six month extension to get their returns into Uncle Sam and our friends at the IRS.
So here we are in the middle of September and you are likely wondering why I have chosen to talk about taxes? Well, just follow me a little longer and you will begin to see a very powerful strategy you might want to use for your accountants, financial planners, and any clients who fall into the category of those having filed for such an extension.
Suppose there was a way to generate two years-worth of documentable income in just four months? What if it were perfectly legal? Would you think such a thing would be of interest to some potential clients as well as many of your referral partners? You bet it would! So here we go.
Many people who are still yet to file are busy looking for every deduction, every loop hole, and every possible legal way to lower their taxable income, and therefore, pay less in taxes. What if they didn’t? What if their taxable income was higher? What if they made the choice to declare more income and pay more in taxes? Well, for one thing, they would be on the way to have the first of two years tax returns needed to prove income for which they would need to qualify for a mortgage loan!
What if these same people completed and filed their 2012 tax returns as soon as they were able, say by February of 2013? What if they again chose to declare a higher income and pay their fair share of taxes on this income? Well, for one thing, they would then have a second year of filed taxes by which they could qualify for a mortgage loan! Think about it for just a moment. Declaring more income and paying taxes on that income may actually allow them to buy and finance a more expensive home while prices and interest rates are low, and before both start to go up! How much greater the benefit would it be to have spent money on taxes so you could finance more of the home you desire, while capturing today’s low interest rates for the next thirty years?
Clearly each case is different. Certainly it will take some serious calculations to determine if money is better spent on taxes than it is on larger down payments and/or higher interest rates. But what if you could finance more of that “forever house” at lower rates? Isn’t this the type of conversation we need to be having NOW with our clients and referral partners? This strategy isn’t for everybody. But for those it does work for, the savings can be thousands of dollars over the life of the loan!
We need to engage in more than just asking for business. We need to be a solutions provider. While many will go ahead and file as they would; maybe we can find a few people that can take advantage of this strategy and help make a big impact on their lives for years to come? That is what being a professional loan originator is about. Offering strategies and solutions that provide people with options to make an informed choice when it comes to financing real property!
If you have questions or comments please just email us at:
Also, for a free copy of my e-book, The Opportunity Advantage, please go to my website, www.improvemytomorrowcoaching.com and complete the survey found by clicking on the button on the top of the homepage. This book provides an insight into 58 different areas of mortgage loan opportunities!
One of the reasons I write this blog post each week is to help keep my clients informed and to share information about what is “working” for my originators and managers, and to quickly share that information with others.
In a recent coaching session I shared with the group about being sure to “follow your money” by leaving a note on the back of your business card when someone does a great job for you. I have done this myself, and many of my clients use this technique to build relationships that generate referrals. Well, it seems as though one of my clients on the call was a former waitress who loved the idea and went to work handing out her card as she spent her money. She was met with a number of warm reactions and a few people who then engaged in conversation about loans.
As she was doing her homework for this session, she remembered what I said about leaving a card for a waiter or waitress along with your tip. She remembered her days as a waitress and how nice it would have been for someone do have thanked her the same way, with a brief written “thank you” on the back of a business card. She also remembered that one of the more frustrating parts of being a waitress was the fact that sometimes people would take the pen with them when signing the guest check. Trying to locate another pen in the middle of a busy shift wasn’t so easy. That is when she thought about having pens made up with her name and contact information on them to leave along with the card and the tip for the serving staff!
What a great idea! I thought back when I used to have pens made up with company information on them. I remember when one company I worked for had ordered these pens that were triangle shaped and just seemed to fit your hand great and they wrote very smoothly. I loved these pens, and so did my clients. Now I know it sounds silly, but people remembered those pens! I also believe that it kept my name in front of my clients and referral partners, not to mention introducing me to people I had not yet met.
So will buying branded pens set you apart from your competition? Will giving away a pen to people or leaving it with a service professional get you more loans? Maybe not; but it could! After all, we do all kinds of marketing. We do many things to make an impression and rekindle a memory. So why not share an odd shaped pen with your information on it as part of your daily marketing program? Sometimes it is the little things that tip the balance for you. A simple gesture of giving away a pen can make all the difference. When that service person reaches for that pen, and it is passed from customer to customer, what are the odds of someone reading it and calling you? Who cares? It is POSSIBLE for that to be the reason for the call or visit your website. You never know!
For more about this or any questions or comments you may have, please let us know!
***For a copy of my e-book “The Opportunity Advantage” just visit my website www.improvemytomorrowcoaching.com and complete the survey. Once received, we will email you the book, FREE! ***