Kirk Charles

I was speaking with a client yesterday who was thoroughly confused by the good faith estimates he received from three different mortgage companies for his refinance.  He and his better half are dream candidates for a loan officer.  They each have great jobs, better than average credit and are highly educated.  If I was still originating mortgages I’d be salivating over them.  Anyway, I looked over the good faith estimates and admittedly I was also confused although I thoroughly understand the process.  Each estimate had different loan amounts, different closing costs and different interest rates.  One estimate seemed absurdly low, while the other two were about average.  So, with the great variation among the estimates, the question became which good faith estimate should he put his faith in?

In today’s tough economic times it’s hard for lenders to get deals done.  Consequently many loan officers have morphed into jackals jousting over scraps of meat—and you know who the dinner is!  Since I’m positive you don’t want to be gobbled up any time soon, I’ll just cover one thing which could save you some money.  When my client looked at one of his good faith estimates, it said closing costs would be approximately $7,458.  Immediately my antennae shot up because it seemed absurdly low. I knew he would have to take more than that out of his pocket to consummate the deal, based purely on my experience.  He then confirmed that he got the verbal from the loan officer that it would cost him $7,458.  I then get a fax of the good faith estimate and it was indeed true that the closing costs reflected that amount.

So, what’s the problem? The loan officer didn’t include tax escrows and pre-paid interest in the closing costs, which technically is the correct thing to do.  But, clients aren’t technical people.  They want the bottom line.  Including tax escrows, pre-paid interest and closing costs, the client would have to take $12,264 out of his pocket, which would be the total settlement charges.  Do the math—that’s nearly $5,000 more than the estimate given by the loan officer. So, when the client asked the loan officer the magic question, how much would it cost him, did he mean closing costs or how much out of his pocket?  To make his deal look better obviously the loan officer gave him the lower of the two figures, which to me is a travesty.

There’s much more about this scenario that I could rail about, but I’ll save my agitation for my next post.  Needless to say that loan officer won’t get the deal and he’ll have to go searching for another piece of meat, but don’t let that meat be you.  Be on top of your game and understand where your dollars are going.

Kirk Charles, a.k.a. The Mortgage Confidant, is a mortgage consultant and author of The Real Deal: How to Get a Mortgage During & After the Subprime Crisis

Kirk Charles

Yesterday afternoon I was in an attorney’s office and a gentleman came in for a real estate consultation. Unfortunately he fell way behind on his mortgage and he had to face the fact that a short sale was his only option. He then asked me, “How will the short sale affect me when I try to buy another home?” Well, it ain’t pretty, so let’s see what we can do.

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that selling the property at a moderate loss is better than pressing the current debtor. Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrower.

When bankers look at your credit report, the biggest concern is how timely are your payments, especially your mortgage payment. The issue with the short sale is, although you were not officially foreclosed upon, your credit report still says “foreclosure” in the mind of the banker. How could that possibly be when you haven’t been booted out of your home? It’s very simple. With most, if not all short sales, the homeowner is at least four months behind on his mortgage. Actually, if the homeowner wasn’t at least that far behind, the short sale would probably not be approved by the homeowner’s bank anyway—keeping in mind the bank must give its approval to consummate the short deal. So, in the banker’s mind, being four months behind on your mortgage is tantamount to being in foreclosure. I know, selling short is technically not the same as foreclosure, but it can be considered the same thing when a bank is deciding to lend you a couple of hundred thousand dollars.

So, back to the original question of how will a short sale affect any subsequent purchases? If on your credit report it shows something like “11/09-120″ regarding payments on your mortgage, the translation is “in November of 2009 you were 120 days late with your payments”. Red flags go up and your possibility of getting a home in the near future will probably go up in smoke. When I say the near future, let’s say approximately the next four years. Many lenders won’t touch you with a ten foot pole for at least that period of time after the foreclosure, if you’re looking to make another purchase (refinancing is a different issue). However, that period of time isn’t written in stone. The policy is lender specific, so it may be longer or shorter.

So, if you’re forced to sell short, speak to as many lenders as possible about their short sale policies regarding purchasing a home. It all depends on your situation. Let’s say you fell behind and you’re selling short because of the physical incapacitation of one of the breadwinners in your household, who could no longer work. However, when you go to purchase your next home, you could afford the purchase solely on the income of the one healthy breadwinner who is still working. Maybe an explanation like that would appease a lender when considering your mortgage application. In today’s economic climate it’s hard to predict from one day to the next what the new rules will be, so hang in there until the storm subsides.

The real deal is to not be in a position where you need a short sale. Obviously that’s easier said than done, but here are a few obvious tips to save some money so you can make those mortgage payments:

Cut back on some seemingly necessary expenses. My better half and I have cut way, way back on some things we thought were absolutely necessary a few years ago. As an example, we just found out we won’t bore each other if we don’t have cable TV.

Stop eating out. If you haven’t done so already, make your home your favorite restaurant. I love to wine and dine my wife, but I think she’s actually starting to appreciate culinary artistry, especially when we can eat like royalty for less than $10, and have left overs.

Turn the heat down or off when nobody is home. I live in the northeast and it’s about to get freezing cold really soon, which means my heating bill is about to get sky high. However, my better half and I are not home at least ten hours of the day during the week because of work. It makes no sense to keep the furniture warm.

Kirk Charles, a.k.a. The Mortgage Confidant, is a mortgage consultant and author of The Real Deal: How to Get a Mortgage During & After the Subprime Crisis

Kirk Charles

Just got a phone call from a couple thinking of filing Chapter 13 bankruptcy.  However, their adjustable rate mortgage is about to adjust—most likely upward—within the next five to six months.  They want to know how the Chapter 13 filing will affect their opportunity to refinance?

In short, it’s going to be ugly.  It’s always best to avoid filing bankruptcy, especially if you need to refinance any time soon. (Check out What You Should Know Before Filing For Bankruptcy.)

If you didn’t know, with Chapter 13 bankruptcy you’re basically restructuring your debt.  When you’re approved for it, you’ll most likely be in a program where you pay off your debt within the next three to five years.  It’s a great program, but it should be looked at as a tool of last resort.  With it you can forestall foreclosure, keep all of your property, freeze your debts and your creditors who are out for blood can’t garnish your wages—as long as you make your bankruptcy payments on time.  But, if you have an adjustable rate mortgage and your interest rate is about to fly to the moon, Chapter 13 bankruptcy won’t help you a bit.

Back during the subprime heyday, many subprime lenders would allow you to refinance a day after being discharged from bankruptcy.  Most conventional lenders would allow you to refinance, but only after being discharged from bankruptcy at least 24 months, with more conservative lenders making you wait 36 to 48 months.  However, the FHA would allow you to refinance while you’re in bankruptcy.  To be clear, you’d probably have to be in Chapter 13 for at least a year and be able to prove that you’ve made all your payments on time.  Plus your bankruptcy trustee would have to allow you to refinance.

So, what do you do?  Gut it out and avoid filing for Chapter 13 bankruptcy if you’re able to.  And, if you feel you must file, do everything humanly possible to refinance beforehand and save yourself from plenty of agitation and aggravation.  I know, it seems quite tempting to file for bankruptcy, lower your payments and get back on track, but take everything into consideration before doing so.  In the best case scenario, if you file for Chapter 13 bankruptcy you’ll have to wait at least a year before you’re able to refinance with FHA.  Maybe President Obama will save you with some more great economic stimuli aimed at bankruptcy processes, but don’t bet on it just yet.  The water is still a little too murky in the financial sectors to take chances with your wealth and your home.

Kirk Charles, a.k.a. The Mortgage Confidant, is a mortgage consultant and author of The Real Deal: How to Get a Mortgage During & After the Subprime Crisis

Helmstetter asserts that the “No!” we’ve been told more than 100,000 times during our first 18 years of life alone has helped to create an invisible wall between our selves and our unlimited potential. In Chapter 3, “What Works and What Doesn’t,” you’ll learn why the mantras of motivational gurus — “believe in yourself” and “think positively,” for example — don’t sink in with the average individual. In Chapter 9, you’ll study the five levels of self-talk — from “negative acceptance” to “the better you” — before arriving at Chapter 17, “Changing Attitudes,” perhaps the most powerful section of the book. Here, you’ll learn how to override the self-destructive feelings many of us succumb to on a regular basis. Further, it deals with the importance of taking responsibility for yourself and building a healthy self-esteem.

All in all, this is a book that shows you what to say and how to say it. With a little discipline and patience, you will be better equipped with the words that will help you climb out of the pit of negative self-talk.

What to Say When You Talk to Your self by Shad Helmstetter, Ph.D. (Fine Communications, $6.98)

Throughout the book, Maxwell cites the words of prominent figures, among them Dr. Martin Luther King, to help describe the 21 crucial traits, including courage and responsibility, that define the best leaders. Charisma (see “You’re Such a Charmer!” Motivation, April 2000), which he defines as “the ability to draw others to you,” is another key characteristic. He cautions leaders-to-be to keep pride, insecurity, moodiness, perfectionism and cynicism in check, since all can stand in the way of your improving/expanding your personal magnetism.

If you want a lot of information but don’t want to carry around a tome, you’re in luck. The book is small and easy to carry. The chapters-each devoted to its own trait-are brief. While there aren’t any exercises to help you learn how to use what you’ve learned, it is still a good book that will give you the insight you need to help you lead.

The 21 Indispensable Qualities of a Leader: Becoming the Person Others Will Want to Follow by John C. Maxwell (Thomas Nelson, $14.99).

For some assistance, pick up a copy of Difficult Conversations: How to Discuss What Matters Most by Douglas Stone, Bruce Patton and Sheila Heen. It will teach you how to eliminate the anxiety that surrounds most tension-filled verbal encounters. The authors draw from 15 years of research at the Harvard Negotiation Project-which asserts that human interaction should be the focal point of communication-to help the reader maneuver through various types of ego-driven confrontations.

The authors use everyday examples to explain what makes conversations difficult and why we avoid them. The authors instruct the reader how to avoid common communication blunders-making assumptions about the other speaker’s intentions, for example-and move toward more enlightened conversation by getting past what seem to be accusations to understanding the feelings behind the other person’s words.

Difficult Conversations: How to Discuss What Matters Most by Douglas Stone, Bruce Patton and Sheila Heen (Viking Press, $24.95)

For those scaling the corporate ladder — or just looking to improve personal relationships — Elffers and Greene, co-authors of The 48 Laws of Power, have set out to explain the seductiveness of power. Drawing on 3,000 years of history, they use examples set by everyone from Machiavelli to Haile Selassie to Ivan the Terrible to illustrate mankind’s innate ambition to attain and wield power.

Readers will learn how to avoid being taken advantage of by not blindly trusting everyone (Law 4), mastering the art of reinventing themselves (Law 25) and acting with boldness (Law 28). To support their arguments, the authors put various fables and folktales in the book’s margins as examples of each law. Keys to understanding each law’s essence and, when applicable, each law’s exception are also offered.

It must be stressed that some of the points are not kind. In fact, some may seem downright dirty. But when it comes to the issue of power, just about anything goes. So, for those who desire to attain power and enhance their ability to use it — and especially those who want to protect themselves from cold-hearted domination — The 48 Laws of Power is a must-read.

The 48 Laws of Power, by Joost Elffers and Robert Greene (Viking, $24.95). To order, call 800-BOOKS-NOW or visit www.BooksNow.com/Black Enterprise.

Maybe you don’t have a mentor to help walk you through your entrepreneurial plans. But if you look back, you’ll find a number of backers in your corner: all the African American businesspeople who helped pave the way for those who would come after them. Knowledge of these black pioneers-all-round businessman Arthur G. Gaston Sr., sausage manufacturer Henry G. Parks Jr. and, of course, haircare’s first lady, Madam C. J. Walker, just to name a few-can give you assurance when you experience a little turbulence.

When you feel unsure of what lies ahead, consider their trials: these pathfinders had to fight off a viciously racist and sexist system that relentlessly attacked from every angle. They faced tremendous odds with very few resources-and still beat them to a pulp.

As I waited, I remembered an inspirational quote by business trailblazer, Ebony magazine Publisher John H. Johnson: “Living through your fear is the summit of life, and people who refuse to take that dare condemn themselves to a living death.” After reflecting on his words, I walked into that meeting with a renewed sense of confidence and won the bid. If you draw on our business past for help to go forward, failure will never be an option.

Kirk Charles, is president of AccuWord, a legal transcription company based in Linden, New Jersey

Find your own inspiration by reading up on some of our enterprising forebears:

African-American Business Leaders: A Biographical Dictionary by John N. Ingham and Lynne B. Feldman (Greenwood Publishing Group, $105)

African American Entrepreneurs: Inspiring Success Stories of Innovation and Determination Across the Centuries by Jim Haskins (John Wiley & Sons, $19.95)

Black Entrepreneurs in America: Stories of Struggle and Success by Michael D. Woodward (Rutgers University Press, $18)

How to Succeed in Business Without Being White by Earl G. Graves (HarperBusiness, $25)

Succeeding Against the Odds by John H. Johnson and Lerone Bennett (Amistad Press, $12.95)

Titans of the B.E. 100s by Derek T. Dingle (forthcoming) (John Wiley & Sons, $29.95)

Why Should White Guys Have All the Fun? How Reginald Lewis Created a Billion Dollar Business Empire by Reginald Lewis and Blair Walker, (John Wiley & Sons, $22.95)

To order, call Books Now! At 800-BOOKS-NOW or visit Www.BooksNow.com/BlackEnterprise.

“Our business is alive and well because we are financially conservative,” says Gwen Mizell, co-proprietor of AAmerican Marketing Systems Inc. in Memphis, Tennessee. She and her co-owner husband, Steven, started the security firm in 1983 after eight years in corporate America as a bank associate branch manager and electrical engineer, respectively. “We even kept our jobs on a part-time basis to save as much money as we could,” she says.

Newly minted entrepreneurs must resist the urge to spend excessively. In fact, they may actually need to live below their means until the business stabilizes and brings in a sizable profit. Sacrifice is the key,” says Mark Perry, a partner of Alston & Perry, a CPA firm in Piscataway, New Jersey. “You have to go without personal luxuries if your cash flow can’t support them.”

In the meantime, the Mizells made a commitment to cut back on miscellaneous spending. They gave up trips to the movies and sporting events, and cut back on vacations. By the time they quit their jobs five years later, they had saved about $20,000 to reinvest in their company. “You have to take care of the important things first,” says Steven Mizell. “When it comes to everything else, you only buy what you can afford without taking away from the business.”

Setting financial goals for your business is easy. “Planning for an unforeseen turn of events, however, tends to be a big problem for new entrepreneurs,” says Perry. But a frugal approach to finances will get you through the rough patches and keep your business going strong. Here are some ways you can develop an economical outlook:

• Cut back. Avoid spending money on items not essential to the maintenance of your business and home life. This means eating out less and taking fewer vacations and shopping trips.
• Use less plastic. You don’t want to use the money you should he reinvesting in your business to pay off high-interest debt. “Try to limit your credit card use to emergencies,” says Perry.
• Be patient, Many entrepreneurs want too much too soon. Rome wasn’t built in a day, and your business won’t be a success overnight. Be assured that your diligence and sacrifices will pay off in the end.
• Use financial services. If you’re not disciplined enough to handle your finances, seek an advisor. A good one will help you keep accurate records of your business and personal finances, and might even save you a few extra dollars.

To obtain back issues containing other parts of this series, please call our circulation department at 212-886-9568.

Focus on the company agenda, not your own. “It’s critical to nurture the corporate vision in your employees,” says social psychologist Ansley W. LaMar, Ph.D., a dean at New Jersey City University in New Jersey. “If they can’t see the big picture, they’ll lack direction and feel that their actions are futile,” he says. A singular sense of purpose builds a bond, producing a more harmonious work climate.

Offer praise as well as reprooff People accomplish more and are receptive to constructive criticism when they’re recognized for good performance. “First acknowledging things done right makes any criticism easier to swallow,” says LaMar.

Henry F. Brooks, president of Brooks Precision Inc. in Rockford, Illinois, believes praise and criticism should be handled in different forums. “Public praise is highly effective,” says Brooks, who oversees a staff of 58 at his machining and assembly firm. “Criticism, on the other hand, should only be doled out in private as soon as the infraction is made.”

Practice an “open-door” policy. “An effective manager makes time to be available,” notes Brooks. “This helps employees feel as though they are valued.” He also recommends monthly Q&A meetings where employees can express their concerns and you can keep abreast of their feelings. Besides your door, also keep an open mind.