Talking about real estate and having clients who want to sell, and having clients who want to buy…..seems rather tame and trivial compared to all who have lost their lives, lost their homes (rentals or owned), lost everything in the most recent fires all over CA. I hope many of you have or will be donating to the fire victims through such agencies as the Red Cross.
Thanksgiving is upon us, and not only do I need to express my gratitude for everything I have physically, verbally, and mentally, I hope you have a good Thanksgiving, no matter if you have peanut butter sandwiches, a full turkey dinner, or take out from McDonald’s.
Even just a few moments of silence can give me a more well-rounded outlook and attitude. I wish that for those of you who read this blog.
It’s been said that if you can find a home that has most of what you want, you should go ahead and purchase it. Many first-time buyers are using everything they have for a down payment and closing costs and would have to “live” with the less than perfect home until they can save the money to make the changes.
The FHA 203(k) mortgage allows a borrower to purchase a home and provides additional funds for improvements to be made. These types of renovations can include kitchen and bathroom remodels, flooring, plumbing, heating and air conditioning systems, additions and other things.
The benefit to the buyer is that they have the opportunity to consider a home that needs repairs and might have been unacceptable without a program like this. Being a FHA loan, a minimal down payment is required, fair interest rates and generous qualifying requirements.
The 203(k) Streamline can be used for cosmetic improvements, appliances and minor remodeling up to $35,000 in cost.
As you can imagine, this is a specialized program and not all lenders choose to make 203(k) loans. They usually take longer to process and getting firm bids on the work to be done will be required. It is important to find out how much experience a lender has with this particular type of loan.
It will also be required that you work with a 203(k) consultant in addition to the mortgage officer.
For more information, go to Hud.gov. FNMA has a similar conventional loan program called HomeStyle Mortgage. Your real estate professional will be able to help with recommendations. Call me at (510) 908-9021.
IMHO I think Alameda pushes all of my buttons considering the above. Access to transportation, to me, means not using a car as solo driver (and yes, I do drive solo). And I’ve ridden my bike to the Alameda ferry (to SF). But I love most of the transformations that our town has made since 1973 when Carl and I showed up here, renting our first house (a studio apartment) at 2105 Central Ave. It seemed like we were in heaven! But not much has changed on the exterior, other than it got a new foundation years ago..and it was sitting on bricks when he rented it!
Have a fun weekend…but maybe play games inside, or stream some movies, or go to our magnificent theatre and watch a movie. And then head over to Tuckers for some ice cream treats!
But the smoke is awful. As I was driving to our BayEast Association of Realtors’ chapter (near Mariner Square) I saw folks that were walking and wearing masks, and some people driving cars were wearing masks! Not good.
And give please pause to think good thoughts for and about those who lost everything in Paradise, CA.
Finding the right home is still the biggest challenge buyers are faced with in today’s market as is shown in the latest Confidence Index Survey. Assuming the buyers find the “right” home with determination, perseverance and the help of a real estate professional, 88% of all transactions last year required financing to get the buyer’s address on the home. 93% of first-time buyers needed financing.
Pre-approval is an essential step that needs to be handled before buyers begin searching for a home. The benefits to the buyer fall into the category of confidence.
PRE-APPROVAL GIVES YOU CONFIDENCE
Knowing the amount you can borrow the mortgage amount decreases as interest rates rise
Looking at the right priced homes price, size, amenities, location
Comparing and identifying the best loan rate, term, type
Uncover issues early that could affect the most favorable loan terms time to cure possible problems
Bargaining power to negotiate with the seller and possibly, competing buyers price, terms, & timing
Settlement can occur sooner after contact is accepted verifications have already been made
Items Needed for Pre-Approval
Two months current pay stubs
Last two year’s W2s
Complete copies of checking and savings statements for last three months
Copies of statements for IRAs, 401k, savings, CDs, money market funds, etc.
Employment history for last two years with addresses and contacts
Proof of commissioned or bonus income
Residency history for last two years with addresses and contacts
Assets for down payment, closing costs, and reserves; must provide paper trail
If self-employed, last two years tax returns, current profit and loss statement and balance sheet; copy of partnership/corporate tax returns for last two years if owning more than 25% of company
FHA requires driver’s license and social security card
VA requires original certificate of eligibility and DD214
Other things may be required such as previous bankruptcy, divorce decree
Contact us at (510) 908-9021 or marilynschu if you’d like a recommendation of a trusted mortgage professional.
If you live in the Bay Area, you should have some inkling that the Seller‘s Market is not as good as it has been the past 3-4 years. However, there can be loads of reasons for selling:
-Making the big bucks’ as long as you don’t buy something that costs ‘big bucks.’
-You can’t wait until the neighbors make the big bucks…you need to stay ahead of them. Be a leader, not a follower, but make wise decisions.
-Outgrown the house? Sure… but it may be worthwhile to think ahead a few years…will you grow back into it? Would putting an addition help to add space? How about an ADU (accessory dwelling unit) that you can rent out?
-Feeling financially stressed? Maybe talk to your accountant or financial advisor BEFORE you sign on the dotted line to list that property. There are numerous things to consider…and speak to a Realtor that knows what’s going on in the ‘hood, and hopefully you can trust.
-Outta there due to deferred maintenance? Maybe take it one step at a time…get a pest and property inspection done…and prioritize those findings.
As storybooks go, the character is introduced, they meet their love interest, a villain thwarts their intentions, true love overcomes, they marry and live happily ever-after. It’s a very familiar formula.
Similarly, there is a formula that couples follow in real life. They go to college, get a good job, rent a home, fall in love, get married and buy a starter home. They start a family, move into a larger home, save for their children’s education, start planning for their retirement and if they live within their means, they invest their surplus funds.
An alternative to this might be to start investing in rental homes early in their adult life before their standard of living becomes so expensive that they don’t feel like they have the money to purchase rentals. There are infinite possibilities but let’s say a single person, after getting a good job, buys a small three or four-bedroom home with an owner-occupied, minimum down payment. They move into the home and possibly, rent out the bedrooms to other singles who need a place to live.
At some point, they decide to buy another home to live in with a minimum down payment and either rent out their bedroom in the first home or rent the whole home to a tenant. And they repeat the process again with the second home.
This could continue until they acquired several homes. Let’s say, that in the meantime, they have met their love interest, decide to get married and together, they buy a starter home for them to live in.
This concept advances the investment in rental homes from the latter part of their lives to the early part of their life. The early investment gives them more time for appreciation and wealth accumulation. A simple principle of investing is that sooner is better than later. By delaying gratification to own your “dream home” early, a person may be able to accumulate more net worth in the same period of time.
Buying a property initially as owner-occupied permits a lower down payment of 3.5% compared to a typical down payment for non-owner-occupied properties is 20%. By using more borrowed funds, leverage can increase the yield on the investment.
It may be too late for some people reading this article to adopt this strategy but if they have kids in college, it may be something for them to consider.
I attended a class in Maine many years ago. Rushworth Kidder taught the class. His book is ‘How Good People Make Tough Choices’is an excellent read. I wanted to hear him and I wanted to learn.
This past Wednesday and Thursday, I was part of a group of Realtors at a leadership meeting in Santa Cruz. I shared the above quote when I was called upon (out of the clear blue) by the CEO to share what I thought this group was about.
To my knowledge, nobody had heard of him or the quote. People were writing it down. It’s the best definition of ‘ethics’ that I’ve ever come across. And that’s the standard that I work towards, in my business and my life. That particular week-long class has made me aware of what’s what, and what’s not – especially in these challenging times.
When the standard deduction for married couples filing jointly was increased from $12,700 to $24,000 for 2018, there was some speculation that the bloom was off the rose of homeownership. The thought was that if the tax benefits from being able to deduct the property taxes and interest was less than the standard deduction, that maybe, the buyer would be better off continuing to rent.
With mortgage rates as low as they have been for the past eight years, payments have been lower and so has the amount of interest that was paid. This and the fact that sales and local taxes, which include property taxes, are limited to $10,000 a year on the Itemized Deduction form have made it harder to reach the increased standard deduction.
The reality of the situation is tax benefits are only one of the components that make a home an excellent investment and it probably contributes the least of the top three benefits. Principal reduction and appreciation build an owner’s equity in an automatic way that is like a forced savings account.
In today’s market, it is common for the total house payment to be lower than the rent a first-time home buyer is currently paying. As a homeowner, the buyer would have additional expenses like maintenance and possibly, a HOA.
To illustrate the net effect, let’s look at a purchase price of $275,000 with 3.5% down payment on a 4.75% 30-year FHA loan. We’ll assume the home appreciates at 3% annually and the buyer is currently paying $2,000 a month rent.
The total payment is $2,115.44 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,205.72. It costs $794.28 more a month to rent than to own. In a year’s time, it would cost $9,531.36 more to rent than to own which is more than the down payment required to buy the home.
In seven-years, the $9,625 down payment would grow to over $101,000 in equity. The equity build-up far exceeds the tax benefits which some people would have as an additional incentive. Use this Rent vs. Own to see what the net cost of housing would be using a home in your price range or call me at (510) 908-9021 and I’ll do it for you.
During a listing presentation, I’m often asked. “Why so many questions?” My questions can certainly seem to be intrusive to new potential clients…because this is probably the first time I’ve ever sat down at a table with them. My goal is to find out if we are on the same page, or not. Often it’s a book of pages.
This afternoon I attended one of our Bay East Association of Realtors meetings regarding Alameda (city) transportation issues. It was fascinating, with speakers from the city, the County, a rep from one of the local biz associations, and a rep from WETA (San Francisco Water Emergency Transporation Authority). Per usual, it takes a vote to move anything up the hill (or through the water because by most everybody’s standards we don’t have hills in A-town but we are surrounded by H2O).
But we did get to ask questions!
Then I flashed back to earlier this month..when I was taking a quick vaca in Newport Beach. At this time of year, the natives have claimed their land back…no crowds, minimal tourists, and pretty good (read excellent) weather and some body-whomping surf.
I’ll usually park my car on Balboa Island, unload my bike, and take the ferry over to the peninsula and I start riding, up to Huntington Beach and/or down to the Wedge.
I think that our employees who represent A-town, do a fantastic job, either sitting at a table or standing up presenting something to the public. Thus the title of this blog post….”I don’t know what you need to know.” Most of us in attendance didn’t know too much…but they gave us lots to think about.
As potential Sellers and Buyers, IMHO you need to use a local agent, who focuses on Alameda (94501, 94502), otherwise it’s up to you…to get info, and that leads me back to the question, “I don’t know what you need to know, but if you have the time we can find out together.”
In September, the Federal Reserve raised interest rates for the third time in 2018 and they’re expected to go up one more time this year and three times next year. If you have a Home Equity Line of Credit, HELOC, you’re paying more to use that money and it is going to become more expensive.
It may make sense to refinance your home and consolidate the balance of your HELOC to lock in a lower mortgage rate. Most lenders require that the combination of these loans should not exceed 80% of the home’s fair market value and that you have good credit and adequate income to support the payment.
A HELOC is a first or second mortgage that allows the borrower to withdraw money as needed, up to the line of credit provided by the lender. A draw period is established where the borrower is only required to pay interest.
Since all HELOC loans are variable rate mortgages, during periods of rising rates, the cost of the funds increase. However, unlike adjustable rate mortgages that have specified adjustment periods and caps, a HELOC adjusts when the prime interest changes.
The formula for determining available funds on a refinance are to take 80% of the fair market value, which will probably have to be verified by appraisal, less the existing first mortgage and the costs to refinance. The balance would need to cover the cost of replacing the HELOC. Any remaining balance may be available for cash to be taken out.
Now is a great time for a mortgage review.In many cases, the equity you have in your home may allow you to eliminate mortgage insurance and substantially lower your monthly payment.As with all tax matters, always consult with a tax professional before making any decisions.Call us at (510) 908-9021 for a recommendation of a trusted mortgage professional.