Coming from an automotive finanacing background, I am a big leasing advocate - especially in our chosen professions.  I realize this may be too much information for some and perhaps a bit boring, but I do get asked this question fairly often.

So, how do they come up with the lease payment?  It is composed of three factors:

1. Depreciation
2. Lease Charge (could be considered interest)
3. Sales Tax

For an example, I will use a car that is currently running a lease special.  For a lease, an interest rate is not actually used - the term is referred to as a Money Factor.  There is a way to convert a money factor to a rate - I will get to that in a bit.

All new vehicles come with an MSRP.  In this case it is 26630.  A lease will be set up with a Net Cap Cost, which means your sale price after any applicable rebates and dealer discounts.  In this example, our Cap Cost is 23227.26, meaning discounts and rebates totaling 3402.74 (26630 - 23227.26). 

The next part of the equation is the Residual Percentage.  This is just like it sounds - a percentage of the MSRP.  This multiplied by the MSRP will result in a Residual Value, also know as the price you can purchase the vehicle at the end of the lease.  In a lease you are not obligated to buy at the end, which is the beauty of it.  If the residual percentage is 59%, the residual value is 15711.70 (26630 x 0.59).

This is where the first part of the payment comes in.  The depreciation, or 'use of the car' is the difference between the Net Cap Cost and Residual Value.  This amount is 7515.56 (23227.26 - 15711.70).  This amount is not paid back all at once, but is instead divided over the term of the lease.  If our term is 36 months, we will divide the depreciation by 36, resulting in a monthly amount of 208.77 (7515.56 / 36).  That is the first part of the payment.  Here is the second:

Add together the Residual and the Net Cap Cost - it will come out to 38938.96 (23227.26 + 15711.70).  This number is then multiplied by the Money Factor, which is .00129 in this scenario.  The Money Factor is set by the factory and will be provided by the dealer.  If you find a lease quote online, it will likely not show it, but every other number is there to work it backwards.  Our Money Factor multiplied by 38938.96 is 50.23.  Add this to our depreciation amount and our lease payment totals $259 per month.  Not bad for a $27000 car.

The last part is sales tax - it is added monthly to the payment.  If your tax is 8.0%, multiply that by your payment and add them together.  259 x .08 = 20.72, resulting in a monthly payment of $279.72.

Thank you for reading and replying to this post.

I am located in th 'Apple Capital of the World', Wenatchee, WA which is more or less in the middle of the state between Seattle and Spokane.  We have a good size growing community and seem to be lucky enough to be in an appreciating market.

I have been reading up on community sponsorship today and noticed ours was not taken, so I jumped on it.

Is there anyone with ideas on how they are going to use their sponsorship when they get it or has anyone been using it?  I have searched to find the 'static content' on some community pages and have not found it yet.

My ideas were to of course, submit a description of our community, and use the three links available.  Two of the links are to be non-commercial and the other will be my business.

Chamber of commerce seems to come to mind for one, but what about the other?  Should it be used to focus on a niche, such as relocation to our area and/or community resources such as schools and hospitals?

I will look forward to seeing what everyone has to offer!

Simply put, your income does not affect your credit score.  Whether you make 30k per year or 200K - you may share the same scores.

So that opens up the question - "What are the factors that affect my score?"

Here they are:

• 35% is based on your payment history for both old and new accounts.
• 30% is based on the amount you owe.  High balances are a negative in the eyes of a credit bureau.  As a rule of thumb, add up all of your 'limits' for your credit cards and compare the total to the total of your balances.  50% should be the maximum.  30% is ideal.  This is why it is better to ask a creditor to report the correct limit or request a raise as opposed to asking them to lower it.
• 15% is based on how long you have used the credit - payment history is very important.  Don't continue to jump on the newest credit card offer as tempting as it can be.
• 10% is based on recent inquiries, or new applications.  Inquiries will affect your score for six months and drop off in two years.  Now more than ever, lenders are asking for explanations for every inquiry on your report - make sure you have explanations when applying for a mortgage.  If you have new credit that does not show yet, do your loan originator a favor and let him know.  It will make things easier for your closing.
• 10% is your credit mix.  You should try to have a good mix of credit, such as installment loans and revolving debt.

Even a single late payment can have an adverse effect on your credit.  There are ways to repair credit report 'mistakes' and we are a company that can help with that on your mortgage application.

Please contact me with any questions and make every day your best!

Sincerely,

Kevin Nelson

I am the Online / Technical Chairperson for the Relay for Life of Chelan and Douglas County, WA., set to take place in May of 2008.  This is an American Cancer Society sponsored event.

Our event is set to kickoff October 18th form 6:00 to 9:00 PM at the Red Lion Hotel in Wenatchee.  The kickoff is a great place to get together if you would like to learn about the Relay for Life and have any questions about participation.  We will also have a guest speaker and plenty of entertainment.

We are currently seeking corporate sponsorships and recruiting teams as well.  Sponsorships include your branding on all of our marketing material.

Last year, we had our most successful event to date and raised over $150,000 in donations and nearly 700 participants!

I have posted most of the information and an event calendar on a site I built for the cause, www.wenatcheerelay.com.

Please email or call with any inquiries!

"It's About Being a Community that Takes Up the Fight."

You've all hear the news by now.  There has definitely been a change to mortgage lending, but is it really that bad?

Nearly every day, I receive a call from clients or business partners asking "How does this affect me?"  My answer?  It doesn't.  My business partners tell me, "this banker or loan officer was in the other day to tell us what kinds of loans we can not do anymore and it has the entire office worried."

In my experience as a loan originator, or a salesperson if you will, what is accomplished by this approach?  I don't understand it.  My response is just the opposite.  The positive approach is the only way.  Anyone knows, whether it's is sales or just an outlook on life, a positive attitude is always the best.  Is it really a coincidence that your doctor tells you better outlooks and better health endure?  It's not.

I am committed to my career, clients and associates.  When they have concerns, it's my turn to come out ahead, and better yet on top.  Need some encouragement?  Call me.  Tough loan or problems with another lender?  Call me.  Take a step in the right direction.

P.S.  I have some great referral partners with similar goals and attitudes if you need them.

This seems to be a question that I hear very often.  Here are a few tips:

• For most homeowners, the monthly housing costs should run no higher than 28% of your gross annual income - this is commonly referred to as the 'front end' debt ratio.  This payment would include the principal and interest amount of your mortgage, the monthly real estate taxes, hazard insurance and mortgage insurance, if applicable.  All of these payments can be bunched into one payment.
• The second guideline is the 'back end' ratio, or the mortgage plus all other debt like credit cards, vehicle loans, student loans, etc.  This ratio is 36%.

When looking for a new home, it is always best to save some money for a down payment and closing costs as well.  Typically, a lender or bank would like to see a minimum of 5% down although there are many first time home buyer programs available that offer 100% financing.

Also remember when looking at a home there may be other factors to consider besides debt ratios:

• How much will closing costs be?
• How many payments will I have in savings when the loan closes?
• Are there any repairs that would need to be done to the home after the sale?
• Are there any major purchases that would need to happen after closing, such as appliances?

I hope this answers a few questions and please feel free to contact me if you have any specific requests.  For your convenience, I do have mortgage calculators located on my website.  Click here to try them out:

http://kevinnelson.biz/calculators.php

Anyone who has been watching the media withing this last week saw some big changes in the mortgage industry, including the all of a large national mortgage lender - but then again, we all like placing our loans twice, don't we?  If we are lucky, we won't have to do it a third time.

You can read about the lender here:

http://www.msnbc.msn.com/id/20144277/

The articles refer to 'liquidity' of the loans, which I thought I would offer a little insight to.

In many cases, lender will transfer a mortgage by selling to another lender.  With a non-conforming, or ALT-A loan, these mortgages don't always fit the mold of conventional financing.  Myabe the loan amount is too large, it might be an interest only adjustable mortgage or non traditional documentation, llike stated income or no income and asset disclosure.

When these loans are sold to an invester, a 200k mortgage may be bought for 202k.  With the increase in foreclosure rates, a liquidity problem has arisen, which means that 200k loan is being bought by the investor for less than the principal amount, like 198k, resulting in a loss for the initial lender.

As a result, rates spike, programs are restructured, and credit and down payment requirements are greater.

For example, I received an email that says they will no longer finance first time home buyers without a minimum of 10% down.  In my opinion, this is one extreme and will level out in the future.

Keep watching my blog for updates and please email or post with any questions or comments.

Is this the start of a trend?

My inbox is full today - mostly with subprime lending news.  Do to market conditions, lenders are starting to drop their 2 year adjustable programs and extending them to at least three years.

I have heard many different reasons.  Lack of profit, lack of time to build equity, etc.  Really it's simple.  Why would a lender want a loan that can't be sold on the secondary market?

Here is the article:

http://blownmortgage.com/2007/07/16/option-one-eliminates-the-228-subprime-arm-loan/

This just shows one lender.  I have a short list I could add to it as well.

Take a quick look and leave some comments.  I really don't see how this could be a bad thing.  After all, it is the interest of our clients that we focus on.  Sure it's nice getting a new loan every two years from another refinance, but what value does this offer to a homeowner?  I don't see any.

Finally back to business and the blog with a little advice for those of you thinking about uprading to Vista.

MAKE SURE YOUR LOS SUPPORTS IT.  Most don't, and I found that one out the hard way.  Our company is moving from Genesis to Encompass.  Genesis is absolutely supported with Vista and Encompass is on the way.  The newest release, version 3.0, will take care of the issues.

I first received the CD to install the software, which does not work for compatibility.  It needs to be downloaded from the Ellie Mae website through a link and patched with another couple of downloads.

Even after all of this, I could still not access EPass and Desktop Underwriter.  It took three weeks from there until a fix was available.  The fix is an ocx file download to replace another within Vista and then registering the file.  No problems since.

I know others will have the same problem I did, and if you are into the tech stuff like I am, hop on board and email me if you have any questions.  Good luck to all!