Mortgage lenders swing from one extreme to another. A short time ago they were giving mortgage money away. You didn’t need a down payment or a good credit score. Today, there are less lenders available and those in the market are going the other way to an extreme.

The best strategy for getting a mortgage today is to maximize your exposure. If your current bank can’t provide a mortgage, ask for references. Call the lenders that hold mortgages on any other properties you own. Ask your insurance agent for references. Find an experienced, well-connected mortgage broker to represent you. Be prepared for extensive document requests. Make a duplicate of everything you give to the lender. Be sure that any commitment you do get is from a well-funded, large institution. Finally, the difficulty of getting a mortgage should not compromise you into a bad mortgage.

First a note on the media delivering the economic news: The media believes it’s their mission to convey only bad news, which is what they assume the public wants. Whether to buy or rent is a personal decision. Each approach has its own list of bad news and good news. Following is a brief summary of each.

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Heisenberg the German physicist said “An expert is someone who knows some of the worst mistakes that can be made in his subject and manages to avoid them.”

Recently, NetGain received an attractive four-color brochure editorializing the investment merits of a property. Among the pictures and maps was a description of the immediate area plus a brief financial summary. It was a partisan presentation for what was proposed to be an attractive income property investment opportunity.

Since the listing agent had already described why this was a wonderful investment, NetGain’s instincts were directed to what was wrong with the picture. The focus of attention always begins with the math. Two numbers stood out: The capitalization rate (cap rate) was 5.6% and the income was predicated on market rents. These numbers call for further investigation and the question Heisenberg might ask from this brochure is “Who’s the expert?” Is it (1) the broker, (2) the seller, (3 ) the buyer’s money manager, or (4) the buyer?

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The current unemployment rate is 5.5%. Historically, that’s not a high number. Why all the concern?

The present unemployment rate is historically low. During the past 25 years the unemployment rate has ranged from a high of 9.7% to a low of 4%. It would appear that 5.5% is on the low end. That said, before assuming 5.5% is good news, there are four factors which need to be taken into consideration.

1. Unemployment is a lagging indicator. People are let go from their jobs when business has declined, not before it declines. If business continues to decline, then we will see higher unemployment rates.
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