mortgage advice

Outsourcing Can Pay Dividends for Small Business Owners!” (Guest Blog)

I was lucky enough to meet Sandy Pucciarelli with Premier Accounting Solutions LLC., last year and she’s subsequently become my go-to resource for small business owners looking to make the most of their hard work and income. Take a look at Sandy’s tips on how small business owners can make the most of their success and obtain a mortgage with the best possible terms.

-Scott Shenton

Outsourcing can pay dividends to self-employed small business owners…

You are ready to purchase the home of your dreams and need to begin the process of obtaining a loan. However, are your documents ready for a mortgage lender? Many small business owners are surprised to find out that despite their success in business, their bookkeeping efforts won’t suffice when it comes to taking out a mortgage.

Given today’s stringent lending requirements, mortgage professionals will require at least two years of Financial Statements and filed Tax Returns, as well as a clear paper trail on all income and assets. In the case of self-employed borrowers, including those who own a small business, being able to tell your whole income story can be a challenge. The key is good bookkeeping strategies.

You may be at the top of your game when it comes to running your business from a sales and implementation standpoint, but your back office may be lacking when it comes to maintaining your financial records. So how do you complete all you need to run your business and keep up with the back-office activity; especially when you are not 100% sure what needs to be done?

First, it’s important to understand what is needed from your back office. Make sure that you always remain compliant with Federal, State and local agencies. Compliant bookkeeping will help grease the wheels with anything you or your business may need.

Be sure to process your customer invoicing in a timely manner and keep up with collections to ensure your cash flow will continue.
- When applying for a loan, this will also assure you’ll be able to demonstrate that it will continue to the bank’s satisfaction.
Pay your bills in a timely format so you maintain important relationships with your vendors.
- Any outstanding items will reflect on your mortgage application and will leave a mark on your credit for a number of years.
Reconcile your bank account.
- This helps clarify your assets and will help eliminate additional questions.
Make necessary tax deposits for Federal and State obligation. Know what needs to be filed from licenses through tax returns.
- Tax liabilities will limit the business income and possibly your personal income that is allowed to be applied to a mortgage.

All of this can seem overwhelming and far too difficult to keep up with while running full steam ahead on the front end of your business. However, you have a few options. You could hire an employee to handle this part of the business or you could outsource to a firm who specializes in this arena. Outsourcing is hiring a company or individual who specializes in an area of your business that you don’t have the staff or the time to take care of yourself. There are many firms that provide outsourcing making it easy for the small business owner to obtain the attention it needs to navigate through all or parts of its back-office activity. When the right employee is put in place, or an outsourced company is engaged to assist with your back-office activity, it provides the stability a business owner needs to allow them to focus on running and growing their business in a way that allows them to access mortgages, home improvement loans and other opportunities for personal financial growth.

sandy_pucciarelli

Sandy is the owner of Premier Accounting Solutions LLC which she started in 2015 after spending over 25 years in private industry as controller or assistant controller. The firm specializes in all areas of accounting, from bookkeeping to controller roles. Sandy focuses on enhancing internal operations so they are working accurately and efficiently. She works in conjunction with outside CPA firms to provide timely and accurate year-end information for financial statements and tax return preparation. Premier Accounting Solutions will ensure that you have the financial information you need to make important decisions for your company’s future. Sandy can be reached at 240-848-3427 or sandy@pasaccountant.com http://www.pasaccountant.com

Bond Market Update for the week of January 17th 2017

Market Update

Tuesday, January 17, 2017

What’s going on and why does it matter?
Mortgage bond prices are trading higher this morning, as “Brexit” is back in the news. The Prime Minister of the UK announced today that Great Britain will exit the European Union’s single market when they exit the European Union. This puts an end to market speculation about a “soft Brexit” that would have involved a more tempered approach. Initially, this is causing a “flight to quality” in the global bond markets, as investors shift their bias away from stocks and into bonds. The rally in mortgage bonds may be short-lived however, because there are also rumblings that the Fed may stop buying mortgage bonds sooner rather than later. There are several Fed speakers scheduled this week, including Fed Chair Yellen. The market will be watching their comments very closely for clues as to their plans moving forward. In the meantime, the Fed is scheduled to purchase up to $2.2 billlion in GNMA and 15-year conventional mortgages today, which may help bond prices to improve.

What should you do about it?
Watch for mortgage bond prices to improve, but be prepared to lock your rate quickly if bond prices break below their 30-day moving average.

Economic Calendar

Economic reports that may impact mortgage rates this week:

Date	Report	Period	Prior	Estimate	Actual
Tue 17 Jan	NY Fed Mfg. Index	Jan	9.0	8.5	6.5
Wed 18 Jan	Core CPI	Dec	+0.2%	+0.2%
Wed 18 Jan	Real Weekly Earnings	Dec	-0.3%	–
Wed 18 Jan	Industrial Production	Dec	-0.4%	+0.6%
Wed 18 Jan	Capacity Utilization	Dec	75.0%	75.4%
Wed 18 Jan	Manuf. Output	Dec	-0.1%	+0.4%
Thu 19 Jan	Building Permits	Dec	1.20M	1.23M
Thu 19 Jan	Housing Starts	Dec	1.09M	1.20M
Thu 19 Jan	Initial Jobless Claims	Week of Jan 8	247,000	254,000

Scott Shenton
NMLS Number: 1039731
Apex Home Loans
Corporate NMLS Number: 2884
sshenton@apexhomeloans.com
https://www.apexhomeloans.com/scottshenton
(240) 268-3156
3204 Tower Oaks Blvd, Suite 400
Rockville, Maryland 20852

NMLS #2884 (www.nmlsconsumeraccess.org): Licensed as a Mortgage Lender and Broker by the Virginia State Corporation Commission, License #MC1278; Licensed in the District of Columbia as a Mortgage Lender and Broker by the DC DISB License # MLB2884; Licensed in Maryland as a Mortgage Lender and Broker by the DLLR, License #06-4989; Licensed in Delaware as a Mortgage Lender and Broker by the Office of the State Bank Commissioner, License # 011603.

Winter 2015 Guide to Mortgage Rates

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 interest rates down 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 $1.74 TRILLION in mortgage bonds!

The Fed has been the biggest buyer of mortgage bonds in recent years. This had the impact of holding interest rates down to artificially low levels. In fact, mortgage rates were in the 6.5% – 7% range back in 2006 – 2007 before the Fed started buying mortgage bonds. That’s over 2% higher than where mortgage rates are today. Interest rates could be impacted if the Fed issues statements about slowing down or stopping their purchase of mortgage bonds.

Here are Three Things that May Impact Mortgage Rates in the Coming Months

Jobs Report: 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.
Inflation Report: bond investors and the Fed watch the inflation reports (CPI and PCE) to determine whether they should buy, sell or hold mortgage bonds.
Gross Domestic Product (GDP) Report: bond investors and the Fed follow the GDP numbers to determine if the economy is growing and whether they should buy, sell or hold mortgage bonds. (GDP measures the size of the economy and whether it’s growing, shrinking or stagnating.)

Conclusion: we anticipate continued volatility in mortgage rates over the next several months as bond investors and the Fed decipher the economic reports that we’ve outlined above. Please contact me for more info on which economic reports may impact mortgage rates this week.

Scott Shenton
NMLS Number: 1039731
Apex Home Loans
Corporate NMLS Number: 2884
sshenton@apexhomeloans.com

https://www.apexhomeloans.com/scottshenton

(240) 268-3156
3204 Tower Oaks Blvd, Suite 400
Rockville, Maryland 20852

Three Reasons to Buy a Home this Fall

The fall can be a fantastic time to buy a home because:

1. Sellers tend to lower their list price in the fall. Most sellers who weren’t able to sell their home in the summer become more willing to accept an offer below list price during the fall. After all, the alternative for the seller is to wait until next spring or summer to sell the house. In the meantime, he/she would have to pay the mortgage, property taxes and utilities.

2. You are competing with fewer buyers. One main reason why most buyers wait until the spring or summer to buy a house is because they don’t want to move their children to a new school district in the middle of the school year. However, this shouldn’t be a limiting factor for you if you don’t have children, or if your children are too young (or old) to go to school.

3. You are positioning yourself to benefit from price increases next spring and summer. The spring and summer homebuying season is when most people buy houses. Therefore, if you get a good deal on the purchase of your home this fall, you’ll likely benefit when prices go up next year. This sure beats getting stuck on the losing end of a bidding war or price increase!

Contact me so that we can further explore how you may benefit by buying a home this fall.

Guest Blog: The difference between replacement cost and market value

This week, I want to feature a guest blog, written by a trusted local insurance agent, David Munson with the David Munson Statefarm Agency in Bethesda MD. Here David explains the important, but sometimes confusing difference between a home’s replacement cost and it’s market value, as it pertains to choosing home owner’s insurance.

Scott Shenton

Inevitably, with land valuations as high as they are, we often find that one of our clients most frequent questions is how to correctly set the dwelling coverage and the difference between the Replacement Cost of a home and its respective Market Value.

When you purchase a homeowners insurance policy, you’ll make a number of decisions about your coverage. One of the most important is whether to insure your home for its replacement cost or its market value. Understanding each option will help you make an informed choice that safeguards your home and your family’s financial future.

What Is Replacement Cost?

Replacement cost is the cost necessary to repair or replace your entire home. When you insure your home for its replacement value, your insurer will reimburse you for the cost of rebuilding or repairing your home, based on the size and structure of the home that was lost or damaged. The most accurate way to determine the replacement cost of your home is to hire a building contractor or other building professional to produce a detailed estimate. Only the cost of the property’s structure and its associated systems, fixtures, and finishes will be included in the estimate; land value is included in a home’s market value but should not be included in the amount of insurance you buy.

Benefits

In the event of a loss, replacement cost coverage will help your family return to their home and usual quality of life with minimal financial interruption. For the best protection, experts recommend that you insure your home for at least 100 percent of its replacement cost.

Risks

Replacement value can change over time, so you should review your policy annually to make sure its coverage meets your needs. Inform your insurer if you have upgraded or improved your home, because these alterations may increase your home’s estimated replacement cost. Also, you’ll want to stay informed about changing market conditions in your area. Rising labor, materials, and transportation costs can directly affect your home’s replacement value. For maximum protection, consider a policy that includes an inflation clause that automatically adjusts coverage and premiums to account for changes in construction costs.

What Is Market Value?

Market value is the amount that a buyer would pay to purchase your home and its land in its current condition. Unlike your home’s replacement value, its market value is influenced by factors beyond the material and labor costs of repairs or reconstruction, such as proximity to good schools, local crime statistics, and the availability of similar homes. Also, the land itself will be included in the home’s market value, although it will not be covered by the homeowners policy.

Benefits

In some cases, market value coverage may be the most practical option. Take the example of an ornate older home. In today’s market, the cost of rebuilding or restoring artisanal woodwork, masonry, and plastering to their original condition may be much higher than the home’s purchase price. Therefore, the replacement policy premiums for the home would be high. (Special policies are available for some historic homes, but these also come at a higher price.) For a cash-strapped homeowner, buying a policy based on market value offers the best chance to recoup at least partial expenses after a loss.

Risks

When you insure a typical home for its market value, you are at risk of having incomplete coverage. For example, imagine that a family buys a home for $175,000 and takes out a homeowner’s policy for the same amount. The replacement cost for the home, though, is $225,000. If a fire or other insured event destroys the house, the insurance settlement would be $50,000 less than the actual replacement cost of the home. The family would either have to make up the difference themselves or build a new, less expensive home.

See more at:

http://learningcenter.statefarm.com/insurance/home/replacement-cost-vs-market-value/

David Munson State Farm Agency

7910 Woodmont Avenue Suite 903

Bethesda, MD 20814

Bus 301.654.7373 : Fax 301.657.0219

david@dcmetroinsurance.com

http://www.dcmetroinsurance.com

Licensed: Maryland, D.C. & Virginia

Find us on Facebook

How to Solve Your Negative Equity Problem….

One out of every ten homeowners in America owe more on their mortgages than the value of their homes. You may want to consider the “cash-in mortgage” strategy if you’re in that situation. You can use this strategy to reduce your mortgage in order to refinance your loan into a lower payment. You can also use the strategy to sell the property without having to do a short sale.

Cash-in Mortgage Refinance

Using cash to pay down your mortgage may allow you to refinance into a lower interest rate and lower your monthly payments. For example, consider a homeowner who owns a $200,000 home that has declined in value to $150,000. The picture illustrates what would happen if the homeowner uses $60,000 in cash to reduce the balance of their $180,000 mortgage to $120,000. As you can see, this would result in extra cash flow of $623 per month. There are two steps to determine the financial impact of this strategy:

Step 1: $623 monthly savings x 12 = $7,476 annual savings
Step 2: $7,476 annual savings / $60,000 investment = 12.46% Cash on Cash ROI

How would you like to earn 12.46% tax-free (and risk-free) rate of return on your $60,000 investment?

This strategy makes sense as long as you are currently earning less than 12.46% after-tax on your $60,000. There are two ways to get the $60,000 in cash to make this strategy work:

You can use cash from your bank accounts that may be currently earning you 0% or 1% interest; and/or,
You could sell some of your other investment assets that are earning you less than 12.46% after-tax.

Either way, the strategy makes sense as long as you can earn a higher after-tax return on your money by paying down your mortgage than you would by leaving your cash wherever it is right now.

Cash-in Mortgage to Sell Your House

The cash-in mortgage strategy can be used to eliminate negative equity and sell your home without pursuing the short sale option. For example, consider a homeowner who owns a $200,000 home that has declined in value to $150,000. If the homeowner rents out the property, they would end up with negative cash flow of $400/month. Here’s what would happen if the homeowner sold the house for $150,000 by using $42,000 in cash to reduce the balance of their $180,000 mortgage to $138,000:

Again, there are two steps to determine the financial impact of this strategy:

Step 1: $400 monthly savings x 12 = $4,800 annual savings
Step 2: $4,800 annual savings / $42,000 investment = 11.42% Cash on Cash ROI

This strategy makes sense as long as you are currently earning less than 11.24% after-tax on your $42,000. There are two ways to get the $42,000 in cash to make this strategy work:

You can use cash from your bank accounts that may be currently earning you 0% or 1% interest; and/or,
You could sell some of your other investment assets that are earning you less than 11.42% after-tax.

Either way, the strategy makes sense as long as you can earn a higher after-tax return on your money by paying down your mortgage and selling your home than you would by leaving your cash wherever it is right now. There are two additional benefits with this strategy:

You eliminate the headache and need to manage tenants if you rent out the property; and,
You protect your credit rating from any adverse impact that may occur from pursuing the short sale or foreclosure option.

Conclusion

It’s always advisable to consult with a Certified Mortgage Planning Specialist (CMPS®) when navigating today’s turbulent mortgage and real estate marketplace. I’d be happy to review your situation and help you compare your options. Contact me for more information!