Ten Commandments of Real Estate Finance for the 21st Century

The world of real estate finance has undergone drastic changes over the last couple of months.  Just over a year ago, underwriting standards to qualify for a mortgage were easier than they have been since I got into the real estate business back in 1983 (Yes – I’ve been around that long!).  I just read this web page¹ from The Stamford Review that lists ten things to keep in mind if you are applying for a mortgage in today’s, financing environment.  While the intent of the ten edicts is to be a little humorous, there is a grain of truth to each one.  Enjoy.

I.  Write upon thy heart the law that ‘reward’ and ‘risk’ shalt always appear in the same sentence.

Translation: Mortgages are not FREE money.  There is risk with any financing vehicle.  Know what that risk is before signing on the dotted line.

II.  Make neither markets nor regulators into idols, and follow not false prophets of simplistic bias.

Translation: The age-old adage applies here – - if it looks to good to be true, it probably is.  Use common sense.

III.  Be sober and watchful, lest the enemy of massive loss approach like a thief in the night.

Translation: Watch your investments (including real estate) like a hawk.

IV.  Honor thy father and thy mother’s ancient counsel; keep it simple, stupid!

Translation: If you don’t understand something, ask questions.  Who cares if you think it’s a dumb question.  It’s your money.

V.  If thou wilt not do thy own credit analysis, then vow to invest not at all.

Translation: Know what your credit score is.  If there are problems, work on solving them.

VI.  Thou shalt not adulterate thy portfolio with excessive leverage.

Translation: Borrow what you can afford – - not what someone else says you can.

VII.  Thou shalt not bear the false witness of hidden assumptions in thy investment underwriting.

Translation: It’s a No-No to lie or fudge on your mortgage application.  If you know there are issues in your past, be up front and address them now.

VIII.  Thou shalt not covet for the short term, yea, but shalt lay up thy treasures for length of days.

Translation: Stop watching television shows that tell you how to flip homes in six months to make a huge profit.  Real estate is a long-term investment.

IX.  In all things, yield not to the tempter’s snare of panic.

Translation: The media would have you believe that the $150,000 home that you bought ten years ago is now worth $30,000.  Remember – all real estate is local.  Lancaster County has held it’s own during this challenging period.

X.  Remember that, after thy exile in the wilderness, if thou heedest these commandments, thou shalt once again return to the land of milk and honey.

Translation: If you’re a hard-working individual, use good common sense and pay your bills on time, 99.9% of the time you’ll come out ahead.

Have a question regarding how to put your best foot forward when applying for a mortgage in today’s real estate market?  Drop me an e-mail or give me a call.

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¹ Counselors of Real Estate Ethics Panel. “Ten Commandments for 21st Century Real Estate Finance.” The Stamford Review. Oct. 2009. Web. 18 Oct. 2009. <http://www.stamfordreview.com/current01a.php>.