Bay Area Real Estate and Community News

Dec. 8, 2020

Down Payment 101: Getting Creative With Savings

down payment ideas

One of the most daunting things to think about when considering buying a home is how you will afford the down payment.  Once you own a home, this usually becomes a non-issue as you use the equity from your existing home to help you. But when you’re going for your first home, this nut can be overwhelming.  This is especially true on the Peninsula, where “starter homes” can cost upwards of $1,000,000 - that means a 20% down deposit is $200,000. That’s a lot!

Don’t despair! In addition to mortgage programs that require less than 20% down, there are also many ways that you can bring in money to get you to your down payment amount much quicker than you ever imagined.  Let’s look at some of the more creative options:

Down Payment Gift Funds

While gifting is traditionally thought of as a method for paying for education, it’s a great way to accrue funds for your down payment.  Consider asking relatives (who you have very close relationships with,) to contribute to your gift fund. In some situations, employers will have assistance programs that will gift or subsidize down payments, so be sure to check with your HR department.  

If you want to kick up your gift fund fundraising even more, consider setting up a page on HomeFundMe.  Like GoFundMe, friends, family (and even strangers,) can contribute to your down payment savings efforts.  If you qualify, you may even be able to get matching funds from the site’s parent company, up to $2,500.

Do the Hustle

Getting a side hustle is a no-brainer in terms of raising additional funds.  There are so many side gig opportunities in the Bay Area, finding the right fit for you shouldn’t be hard.  Whether it’s driving for Uber or Lyft, or delivering for Instacart or DoorDash, there are lots of options.

If you don’t want to be out running around, consider taking your skills and putting them to work on a freelance basis.  Through sites like Elance or Upwork, you can find freelance work in finance, creative, virtual assistant roles and so much more.  Work from the comfort of your home at the times that work for you.

If you truly don’t have time for any of that, consider totally passive ways to earn money.  Have a strong web/social presence?  Explore ways you can monetize that by taking advertising and sponsorships.  Drive a lot? Look into turning your car into a billboard. You could earn up to $400 a month just by letting someone advertise on your car.  You literally don’t have to do anything different, just keep driving to work, errands, etc.

Cut It Out

We all spend so much more money every month than we’re even aware of, so do a tough accounting of how you’re spending your money and figure out where you can cut back.  Some ideas include:

Cancel Cable

Shocking, I know, but with so many streaming services, how much do you really use that pricey cable box?  There are great, less expensive options for video and internet, so maybe you can save $100 or more each month!

Don’t Deliver 

I’m a horrible example of this.  Just this week I had two deliveries from Instacart and three from DoorDash.  I can give you great rationale for why I needed these services this week (and sometimes we really do,) but the truth is that I could have definitely saved a lot of money by doing these things myself, and not incurring the delivery expense.  Keep in mind, when you get delivery, there’s the delivery fee and tip, and sometimes even a slight increase on the item feel.

DIY 

This comes out of the point above.  If I had just made those dinners myself, I would have saved probably close to $100.  I do make a habit out of making and bringing my lunch every day versus going out to a restaurant or grocery store.  But think beyond the meals. Are there items you use in the home that you can make yourself and save some money? Most common in this area are cleaning supplies.  Search online for easy ways to DIY and save yourself some money. It may seem like small savings, but these do add up.

Cash Only

I have friends who run almost entirely on cash every month.  They have a detailed budget and at the start of the month, they withdraw the cash they need for the month.  This doesn’t cover items like mortgage payments, insurance, etc, but does cover things like entertainment, groceries, clothing, home improvements and anything their kids might need for school.  They have an envelope and know what they have to spend for the month. They never go over that amount, and sometimes need to make hard choices, but they save a LOT of money by not making frivolous purchases at Costco or Target.  Cash in hand means more than digital currency in terms of really understanding what you’re spending.

Don’t Forget

Not all savings ideas are creative, but some are easily overlooked.  Two very practical ones that you should be sure to explore are using your 401k and looking for assistance programs.

When using your 401k, you can use this as a loan or make a withdrawal.  There are limitations and consequences both ways, so be sure to talk with your CPA and plan administrator to make sure you are very well informed before choosing to use your 401k as part of your down payment.

There are numerous down payment assistance programs available to residents of California.  The best thing to do is take a look at this FHA site and see if there’s a program that works for you - https://www.fha.com/fha-grants?state=CA

With all of these ideas and options, you should be able to have your down payment saved in no time.  Break the savings down into small goals so it doesn’t feel so overwhelming. Celebrate your savings victories and start planning for your new home.  This is a great time to check out my tips for first time homebuyers too. You’ve got this!!

 

IMPORTANT NOTE:I have not and will not verify or investigate the information supplied by third parties.

Posted in Financial
Nov. 11, 2020

Closings 101: 5 Tips to Avoid Wire Fraud

real estate wire fraud

It’s sad to say, but there’s always someone out there looking to make a quick and easy buck.  There’s the “prince” from Nigeria, your “friends” who have gotten stranded in a foreign country and lost their wallet, even “grandchildren” calling their grandparents in despair needing cash.  All scams called wire fraud.

Thieves have even figured out how to have a big payday by scamming people during escrow closings, making off with thousands, or even hundreds of thousands, in down payment funds.  How often does this happen, you ask? In 2017, the FBI reported over $5.3B in wire fraud losses, with over 10% of that being in real estate alone.

What Does Wire Fraud Look Like?

The most common way wire fraud happens is that hackers will tap into the email systems of a title, escrow or real estate company, and start collecting data.  They then will create email accounts that look legitimate, but get rerouted directly to them. Closing instructions are sent from this email account, directing buyers where and how to wire their funds.  The unsuspecting buyer follows the instructions and, voila, money gone.

That all sounds so simple, and terrifying.  How can any one person possibly protect themselves from such a scam?  The solution is actually just as simple - be a savvy buyer. While the title, escrow and real estate firms continue to enhance and improve their internal security systems to prevent an attack like this, much of the power is actually in the hands of the buyer.  

Here are 5 tips to help you avoid being a victim of wire fraud:

Know All the Players

The first step you can take in preventing wire fraud related to your real estate closing is to be sure you know who everyone is who is involved.  Make yourself familiar with your realtor’s email address and phone number, and confirm with them the information for your escrow officer. You should only have one escrow contact email and phone number.  If that changes mid-process, be sure to double check this with your realtor.

Be Careful with Links

Cyber crimes are most often initiated by the simple clicking of a link.  Make sure you know what you are clicking on, and that you’re expecting to have received this link.  Your escrow officer may phone you, or your realtor may instruct that you will be receiving a link to a secure site.  But if you receive an unexpected link, see Tip #3...

Verify Instructions Over the Phone

The absolute best way to ensure you’re protected from wire fraud is to confirm instructions on the phone. This does not mean to call a phone number on the email.  Your realtor should have provided you with the direct number for your escrow officer so call that number only. If someone has hacked an email system, it’s very easy for them to put a false phone number, so only use the number that was given to you along with your transaction paperwork.

Look Out For Last Minute Changes

Last minute changes are a huge red flag.  If anything changes at the last minute, especially the instructions for wiring, you likely have a problem.  If you do see any last minute changes, go back to Tip #3 and call your escrow officer directly to inquire.

If It Doesn’t Feel Right, Ask

There’s no shame in doing a gut check, it just may save you hundreds of thousands of dollars.  If anything feels even slightly off to you, talk to your escrow officer. Even if things do feel ok, doing a final verbal confirmation isn’t a bad idea.  

Wire fraud isn’t an inevitability, so don’t let it happen to you.  With a little common sense, some gut checking, and a great team made up of your realtor and escrow officer, you should find yourself kicking up your heels in your new home in no time.

 

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

 

Posted in Closings, Financial
Oct. 29, 2020

Get Your Drainage On - Here Comes The Rain Again!

peninsula drainage for foundation protection

Theoretically, we’re approaching the rainy season here in the Bay Area (which we’ll hopefully have plenty of this year!) But while it’s still sunny and dry, it’s a great time to think about the drainage around your home and how to keep your foundation, in particular, protected from water.

Three key areas that you should focus on at this time are your gutters, your downspouts and underground drainage systems (typically French Drains).

Gutter Maintenance

There are a lot of reasons to keep your gutters clean, beyond just protecting your home’s foundation. Last year my gutter out front got clogged with maple leaves and water ended up backing into the siding, causing some bubbling below the paint. Fortunately, I found this quickly and was able to remedy the issue, but if I hadn’t, it could have caused some serious damage.

Additionally, backed up gutters can cause extensive damage to landscaping. Overflowing gutters can wash away landscaping or just plain drown it. And if you spend a lot of time or money on making your garden look gorgeous, you want to avoid that.

Cleaning your gutters isn’t hard, but can be a bit messy and includes a risk factor. If you have a 2-story home, you should probably hire someone to do that. But for those of us with single story homes, gutters should be cleaned out at least once per year (more if there are trees that hang over them).

When preparing to clean your gutters, make sure you have good gloves on, and someone to hold the ladder for you as well as to hand up tools as needed.  You can use a scoop to clean them out, a trowel, or just your hands. Try not to dump the debris on the ground, but get it into a plastic bag or onto a tarp. This makes it easier to clean up at the end and doesn’t damage your landscaping. After scooping out all the debris, take a hose and flush the gutters out, making sure there aren’t any additional drainage obstructions around or in the downspouts.

Downspout Drainage

Speaking of downspouts, they need a lot of attention on their own. I know it may seem like they’re just a part of the gutter, but they’re really much more than that. The first downspout was utilized in 1240 at the Tower of London to keep the newly whitewashed walls looking fresh. These days, downspouts are not only for protecting siding but especially for protecting foundations.

The purpose of the downspout is to take the water from the gutters and move it away from the house. The key word there being “away”. While it’s nice that downspouts help to make falling rain water sound quieter coming out of gutters, it’s really all about saving your foundation.

Downspouts should not be a pipe running straight down and ending at the ground, or even with an angle that moves the water a few inches away.  We’re talking about protecting the foundation here, so you want to get that water as far away as possible. So downspouts should ultimately end a foot or more from the home, in an area that is sloping away from the house, not towards it.

When you’ve finished cleaning your gutters and are flushing them out, that’s the time to inspect for downspout problems. Are there any blockages? Any leaks? Any spouts where the water is running back towards the foundation? All of these are issues to be quickly dealt with, and are pretty easy to fix.

French Drains

French drain drainageTwo things about French drains. One, they aren’t necessarily from France. The man who popularized them in the States was Henry Flagg French. And two, they aren’t specific for rain water, but they are still important if there’s a really rainy season.

Per our friends at Wikipedia:

A French drain is a trench filled with gravel or rock or containing a perforated pipe that redirects surface water and groundwater away from an area. A French drain can have perforated hollow pipes along the bottom to quickly vent water that seeps down through the upper gravel or rock.

French drains are primarily used to prevent ground and surface water from penetrating or damaging building foundations and as an alternative to open ditches or storm sewers for streets and highways...French drains are also used behind retaining walls to relieve ground water pressure.

The key takeaways here are that French drains run underground and are beneficial for drainage of both surface (rain, sprinklers, etc.) as well as groundwater. While it may seem like we don’t have a lot of groundwater issues here, there are actually areas of the Peninsula that have significant groundwater conditions.

If there’s any area near your house that is consistently damp, you should probably talk to a professional about the benefits of a French drain. A French drain puts you in a position of control as to where and how water flows around your property.

So don’t let any flooding occur at your home this year. Be prepared, get your drainage in tip top shape, and keep things dry!

 

 

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in Home Maintenance
Sept. 28, 2020

Property Taxes 101: Props 13 / 60 / 90

Property Taxes Prop 13 60 90

If you’ve ever lived in California or owned property here, you know there are some significant propositions that have been voted in over the years which greatly impact property taxes and ownership.  I remember as a kid when Prop 13 was on the ballot. While I wasn’t entirely sure what it meant, I did know that we were TOTALLY behind it and worked hard to get others to support it. All these years later, I understand why my parents wanted this proposition to pass, but I also see the impact that it’s had over 40 years on the state, the economy and the housing market.

The three most significant propositions we have in the state that impact home ownership, especially those who have owned their properties for a long time and seen a huge increase in value, are Props 13, 60 and 90. Let’s explore what they are, and how they impact our housing market and the economy.

Prop 13

What is it?

With Prop 13, property tax values were rolled back and frozen at the 1976 assessed value level. Property tax increases on any given property were limited to no more than 2% per year as long as the property was not sold. Once sold, the property was reassessed at 1% of the sale price, and the 2% yearly cap became applicable to future years.

When did it become law?

Prop 13 was voted in June 6, 1978 by nearly ⅔ of voters.

Why was it voted in?

Prior to Proposition 13, the property tax rate throughout California averaged a little less than 3% of market value. Additionally, there were no limits on increases for the tax rate or on individual ad valorem charges. (“Ad valorem” refers to taxes based on the assessed value of property. ) Some properties were reassessed 50% to 100% in just one year and their owners’ property tax bills increased accordingly.  

As California’s real estate market value was exploding, so were the property taxes. This was creating an untenable situation for property owners.

What is the impact it has had?

Prop 13 has had an impact on every element of the state’s economy and real estate market.

  • Property Lock-in - Owners who have been in their home an extended time are reticent to sell and give up their tax rate, creating less inventory on the market.
  • Tax Disparity - Two properties valued at $4M could have extraordinarily different tax rates if one is newly purchased (and paying taxes based on the $4M value,) and the other has been owned for 40 years (and paying taxes based on annual increases of 1-2% from the 1976 assessed value).
  • Education Failures - as a result of decreased tax bases and related reductions in spending on education, California schools have gone from some of the top in the country to 48th in the nation.
  • State Infrastructure - there’s much debate as to whether or not Prop 13 is to blame for California’s antiquated and failing infrastructure. One can only assume that the reduction in property taxes over the years has had some related impact on infrastructure funding as well.

Prop 60

What is it?

Prop 60 gives homeowners over the age of 55 the option to transfer the assessed value of their current home to a replacement home if the replacement home is located in the same county, is of equal or lesser value than the original property, and purchased or newly constructed within two years of the sale of the present property.

Prop 60 can only be used once in a claimant’s lifetime.

When did it become law?

Prop 60 was voted into law on November 4, 1986

Why was it voted in?

Prop 60 helps to address the “lock-in” impact of Prop 13 by allowing 55+ owners to sell their homes, but keep their tax rate.

What is the impact it has had?

Prop 60 opened up some long-time owned property within counties. As these properties were sold, tax rates were increased to reflect the purchase price for the new owners.  However, the lower tax rates of the original owners still resulted in reduced revenue for the state and counties.

Prop 90

What is it?

Prop 90 allows homeowners over the age of 55 to transfer the assessed value of their present home to a replacement home if the replacement home is located in another county, is of equal or lesser value than the original property, if the county of the replacement dwelling adopts an ordinance participating in the program.

Participating counties are: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne and Ventura.

A claimant can only use Prop 90 OR Prop 60 once in their lifetime. It is not possible to use both.

When did it become law?

Prop 90 was voted into law on November 8, 1988

Why was it voted in?

Realizing the limitations of Prop 60 mandating that the new property must be in the same county, Prop 90 sought to provide for more flexibility and opportunity.

What is the impact it has had?

Like Prop 60, Prop 90 has further opened up some long-time owned properties within counties. As these properties were sold, tax rates were increased to reflect the purchase price for the new owners.  However, the lower tax rates of the original owners still resulted in reduced revenue for the both the state and counties.

For more insight into Propositions 60/90, including an extensive FAQ, visit the California BOE page on these props.

If you’re a current property owner in California, no matter when you purchased your home, you fall under these proposition guidelines. If you bought in 1995, Prop 13 locked in your tax rate at 1995 values. If you’re looking to sell in 2018 and you’re over 55, Props 60 and 90 give you the flexibility to take your tax rate with you, on a conditional basis.

Over the years, there have been many debates about reforming or repealing Prop 13. As of now, neither action has occurred, but it is reasonable to expect that this conversation will continue. Time will tell.

 

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in Financial
Aug. 11, 2020

Need More Space? Fast Facts on ADU’s

ADU accessory dwelling unit

Here on the Peninsula, people are needing to get creative about housing. With limited space, rising populations and multi-generational families, finding housing that fits your needs can be tricky.  San Mateo County is making a considered effort to promote and encourage residents to explore developing second units, or ADU’s. So what are ADU’s all about?

What is an ADU?

The term ADU stands for “Accessory Dwelling Unit”. This could be anything from a garage conversion to a free-standing structure on the property.  Regardless of type, they are all self-contained and smaller than the primary structure on the property. Often known as in-law units, cottages or garage apartments.

Why consider adding an ADU?

ADU’s can be used in a variety of ways.  More and more, they are being developed as rental units. Similar to a studio or one bedroom apartment, but with the feel of a single family home. These units can generate great income for owners.

Another common use for ADU’s is for multi-generational housing.  For families wanting to have an aging member live with them, but still give them their privacy and independence, an ADU can be the perfect solution.

Do ADU’s have to be new construction?

Not at all! While new construction is certainly an option (and generally required for free-standing units,) other options are to convert a garage into a unit or turn attic space or attached rooms into a separate unit.

What do I do if I want to build an ADU?

Step one is to talk with your city’s planning department and see if ADU’s are allowed, and what restrictions there might be for new builds.  All San Mateo County cities have clear guidelines on ADU’s in terms of size, zoning restrictions, and placement on the property.

Will adding an ADU impact my property taxes?

Yes and no. Your primary house won’t be reassessed (you’ll still keep your original tax basis,) but your ADU will be assessed and added to your existing property taxes.  

Keep in mind, if you use the ADU as a rental property, that will impact your income taxes.

What does an ADU cost?

With so many variables, it isn’t possible to answer this question simply.  ADU’s can be simple room conversions, more complex conversions (such as to a garage,) build of a modular unit or build of a unit completely from scratch.  In theory, pricing could range from $25,000 to $200,000 or more, depending on your process, needs and finishes. On average, $400/square foot is a good figure to work with.

Interested in learning more about ADU’s?  San Mateo County has a terrific website devoted to them, including having a calculator to determine cost vs income, as well as a workbook for planning your ADU project and information about individual city guidelines.  All of this information can be found at Second Unit Center SMC.

So what do you think, would you consider adding an ADU?

 

IMPORTANT NOTE:I have not and will not verify or investigate the information supplied by third parties.

 

July 2, 2020

Financing 101: Down Payment Under 20%

down payment

One of my favorite lenders, Jonathan King at Private Mortgage Advisors (PMA,) shares a quick and useful breakdown of ways to buy a new home without a 20% down payment...

As the market appears to shift (which seems evident by the number of offers we see on properties getting into escrow,) it would be a great time to remember about mortgage options that require less than 20%. The minimum down payment requirement is determined by loan amount and loan type (conforming or non conforming). For higher priced homes, minimum down payments offered by PMA are 10% up to a $2M purchase price. Above $2M, a larger down payment is required, generally 15% or more. For lower priced homes, minimum down payments can be 5% for a purchase price up to $715k which can be attractive to condo buyers in our area.

Back to higher priced homes... In a $1.5M purchase, the standard cash to close figure is approximately $407,000 which includes: Down payment of $300,000 (20%,) $15,000 in closing costs, and 12 months of reserves (approximately $92,000). With PMA, that figure is approximately $217,000 which includes: Down payment of $150,000 (10%,)$15,000 in closing costs, and 6 months of reserves (approximately$52,000).

By: Jonathan A. King, Mortgage Loan Officer  NMLS# 519680

At the end of the day, the myth is that you need to have 20% to put down to purchase a home.  The reality is that this isn't the case.  Given the loan amount, as shown above, you can find loans that accept a lower down payment.  But beyond this, there are other ways to get down payment support - assistance from your employer, gifts from family, silent (or non-silent,) seconds.  There are a lot of ways to be creative in your financing and to get you into a home before you get that mythical 20% set aside.

The best thing to do is talk with a great mortgage officer, like Jonathan, and explore the options specific to your unique situation.

Update January, 2020: Jonathan King is no longer a mortgage officer. If you're in need of a great lender, let me know and I'll connect you to some!

 

IMPORTANT NOTE:I have not and will not verify or investigate the information supplied by third parties.

Posted in Financial
June 15, 2020

Top 5 Tips for Decluttering

Decluttering Tips

My friend Karen Wray is the found of a great company called The Move Alliance on the Peninsula that specializes in decluttering, downsizing, and relocation, particularly for seniors.  I love talking with Karen about these topics because I always get such great insight and amazing tips. As a project manager, Karen spends her time helping people prepare for life’s transitions, or to just make their lives a little less messy and stressful.

During one recent chat, I asked how I could cut down on the junk that I feel follows me wherever I move. Here are some of Karen’s tips to help cut down on stuff:

Shop a little less

This seems to make perfect sense, but is much harder than you might expect.  The internet has made it so easy for us to clutter our homes up. All you have to do is think of something you might want, find it online and order it.  Half the time, by the time it arrives, you’ve forgotten you even ordered it. Some things you absolutely need, but for items that aren’t a necessity, consider creating a list.  Leave an item on the list for a few weeks; if you still feel you want it after that time, buy it. If after a few weeks you aren’t sure, just keep it on the list. More often than not, you’ll just laugh that you put it on the list in the first place and take it off.

Donate one bag a week

The goal is to have more going out than coming in.  So start with the easy stuff. Make a first pass through your home and anything you just don’t like or don’t care about, put that in a bag.  In no time, you’ll have your first bag ready to go. If one bag a week feels too much to start, try for one bag a month. The key is to just get started with moving things out of the house that aren’t needed or wanted.  It’s ideal to find old items a new home, versus throwing them away. With so many donation services on the Peninsula, finding new homes for your old things shouldn’t be a problem.

Avoid running through hypotheticals

How many times have you looked at a stack of blankets and rationalized “if I have five people spend the night, I’ll need all of these”?  Now ask yourself, when was the last time you had five people to spend the night (or whatever your hypothetical is)? If you can’t recall, you know you can pare down that pile of blankets, pillows, sheets, whatever you’re stocking up on.  It doesn’t mean you have to get rid of everything now, but at least you can get rid of one or two of those items you’re holding on to “just in case”.

Take an emotional inventory

This is one of the hardest things to do.  There are a lot of items that have various emotions and memories tied up in them, and we keep them because of what they meant to someone else.  When you come across an item like this, set it aside with others that have that same feeling. Then take a day when you’re not rushed or tired, and go through each item.  Ask yourself “does this bring me joy?”, a great tip from Marie Kondo’s book, “The Life-Changing Magic of Tidying Up”. In other words, does it truly mean a lot to you.  If so, it’s worth keeping.  If not, let it go. That unburdening can be very freeing.

Steer clear of self-storage units

Sometimes you need a storage unit.  Perhaps you’re going through a major remodel and need to move everything out of your house.  Or maybe you have business needs for a storage unit. If you do have a storage unit, it’s a good idea to dig in there and evaluate what you’re storing and why.  If it’s got a layer of dust or grime on it, you may not really care that much about it. If you forgot you own it or thought you gave it away years ago, it can probably be donated or thrown away.  Save yourself money and headaches by clearing out that storage unit and cancelling the rental.

One of the biggest challenges for getting rid of stuff and decluttering is that initial feeling of being completely overwhelmed.  Don’t let that happen to you. Start with just one tip, and go gradually. As you get rid of more stuff, you’ll find it’s easier to keep going.

What are your top tips for decluttering?  Which room is your biggest challenge?

 

Karen Wray is Founder and Senior Move Manager of The Move Alliance.

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in Downsizing
May 29, 2020

Financing 101: Equity Lines

Equity Lines - What's a HELOC

Financing can definitely be one of the most complicated parts of the home buying process. Even after you purchase the home there are financing considerations.  I'm fortunate to have some great financing resources who make complicated things easier to understand.  One of those is Jonathan King with PMA Loans.  I asked Jonathan to share a bit about equity lines, aka HELOC's (Home Equity Lines of Credit).  It's a term we all hear, but many people wonder "What's a HELOC?", aren't sure when to procure one or how it can be used.

Here's Jonathan's quick overview on HELOC's.  If you have further questions, click on his link below and I know he'd be more than happy to answer them!

An equity line is a great way to leverage the equity in a new or current home. Equity lines can be obtained during ownership of a home or during the home purchase process. Different scenarios will have different requirements, but in general you can borrower up to 90% cltv (combined loan to value) of the home.

Equity Line Interest Rates & Payments

Equity lines will almost always have a higher interest rate, but a borrower is only paying interest on funds they are using. If a borrower has a $500k equity line with a $0 balance, they pay $0 interest. For the first 10 years, they can use and payoff (like a credit card,) the available line. After the 10th year, the borrower is required to pay down the outstanding balance over a 15 or 20 year period. The borrower can always obtain a new equity line at the 10 year mark.

Securing Equity Lines During Purchase Process

During the purchase process, buyers may want to keep some of their funds in order to complete home renovations after closing. In some scenarios, lenders require reserves. This means that funds that buyers plan to use for down payment actually must be used to meet the bank’s reserve requirement.

Securing Equity Lines Post-Purchase

Existing homeowners can obtain an equity line for “emergency” costs. Most banks have a 6 month waiting period meaning that after purchase, the owner must wait 6 months in order to obtain an equity line. PMA Loans does not have a waiting period. Borrowers can start the process the next day after closing.

By: Jonathan A. King, Mortgage Loan Officer  NMLS# 519680

 

IMPORTANT NOTE:I have not and will not verify or investigate the information supplied by third parties.

Posted in Financial
May 4, 2020

5 Tips for First Time Homebuyers

First Time HomeBuyer Tips

So you’re thinking you might be ready to be a first time homebuyer?  That’s so exciting - and totally overwhelming. Where do you start? How much is it going to cost you? How do you make sure you can get the home you want?

Take a deep breath, I’ve got you covered.  These 5 tips will help you to be ready to roll once you get serious about finding your first home.

Make A Hobby Out Of Open Houses

Long before you start actively looking for a house, you should start going to open houses.  It can be your weekend thing - a hike, brunch, open houses. So why would I tell you to go to open houses if you’re not remotely close to being ready to buy a place?  Think of it as similar to an SAT prep class - you’re not ready for the final exam, but you are ready to learn how to take the test.

The great thing about open houses for a first time homebuyer is that they’re all about learning.  You can explore neighborhoods and see which you like and which you don’t.  Check out different styles of homes and figure out what style suits you and what just won’t work.  Listen to more active home buyers and the questions they ask. Talk to agents to learn more about the area, the market and more (that’s what we’re there for).

Going to open houses is fun, especially if you have nothing on the line.  When you’re going just to learn, you don’t have to worry about the act of actually buying it.  You can meander through, take the information you need and leave the rest. The next house you go into, you’ll be all the more knowledgeable.

Think About The Future

When you’re a first time homebuyer going to buy a house, you need to think beyond just today.  It’s easy to say “I’m single and work in Menlo Park so this little place will be great.”  But what happens when you have a partner or spouse move in? And then what if you have kids?  Yes, I’m going way down the line here, but you do want to give some thought to what the future might bring, at least the next 5-7 years.

Beyond just your personal life, when thinking about the future keep in mind the elements of resale.  A time will likely come when you will look to sell your house (the average American moves 11.7 times in their life).  So even though you may look at it as your forever home, also think of it as your investment. Take a quick look at the state of the schools, the neighborhood and the economic factors around the property.  If they seem to be on the upswing, that’s great. If not, you may want to keep looking.

Have Vision

Tips for first time homebuyerBy this point, we’ve all watched enough Fixer Upper to know you have to look beyond the facade to see the potential.  When you walk into that home with chartreuse shag carpet, try to block that out of your mind's eye and look at what that room could become and how you could adapt it to be just what you want.  

Sometimes it’s as simple as a fresh coat of paint and taking out the carpet. Other times, there may be wall removal involved. But open up your mind and get creative. There is no such thing as the “perfect” house.

Make A List And Check It Twice

That Santa is a wise man with his list making, so we should all take a lesson from that.  This is especially true as you gear up to begin your home search. It’s crucial that you understand what your “must haves” and “can’t haves” are.  For some people, a pool is the be all, end all while for others, they want nothing to do with a property that has one.

A great way to start this list is during your open house tours.  You’ll see all sorts of things you’d never even thought about, so just keep a notebook handy to jot down ideas.  But another way to work on this list is to think about the way you use a house. Do you love entertaining? Gardening? Having friends over for Westworld viewing parties?  The way you live your life is the road map for your “must have” list.

It’s All About The Benjamins

Don’t freak out, money has a way of doing that to people - especially for a first time homebuyer.  In this pre-search stage, it’s the perfect time to start getting your ducks in a row.  Pull your credit report and see where your credit score falls. If needed, you can actively start to work to clean up your report and improve your score.  This can actually be quicker than you might think.

Remember, your credit score is only a reflection of your financial life so if you need to, pay off whatever debts you can (at least get individual credit cards down below 75% of credit limit,) figure out how to save money, and start working on creative planning for down payment sources (gifts, 401k borrowing, life insurance, etc.).

Bottom line, with a little pre-planning, you can make the search for your home that much more enjoyable.  And it should be enjoyable - you’ve worked hard to get to a place of home ownership!

Let me know in the comments section what some of your best home buying advice has been!

 

IMPORTANT NOTE:I have not and will not verify or investigate the information supplied by third parties.

Posted in House Hunting
April 9, 2020

Online Mortgage Solutions - A Q&A With My Mortgage Banker

online mortgage solutions

There’s no shortage of tech solutions when it comes to finding a mortgage.  If you live on the Peninsula, you’ve likely seen the Caltrain wrapped in SoFi advertising and Rocket Mortgages (owned by Quicken Loans,) seems to be advertising on TV every other commercial.  These, along with their main competitors Lenda and Guaranteed Rate, are great resources for home buyers. But are they the best way to go about procuring an actual mortgage?

I was curious to better understand that, and to look into what these tech solutions might offer and lack, so I called up my favorite mortgage banker, John Brunson, to get his thoughts.  (Full disclosure, part of the reason that John’s my favorite mortgage banker is he’s also my brother-in-law and after knowing him for 30 years, I trust his insights!)  Here’s our Q&A:

Q:  What’s the best use for digital mortgage solutions?

Digital solutions are good for simple requests.  They can provide good price discovery and ultimate execution for those most straightforward of applications.

On the downside, once you’ve provided your information to the online mortgage companies, you’ll be part of their lead generation machine and your contact info can be systematically solicited in an invasive way.

Q:  Is there anything these digital solutions are missing or incapable of that makes the “real person “ approach still best?  

The digital solutions provide a large product solution set, but one that does not solve for millions of loan requests.  It’s these individual needs that really benefit from the “real person” approach. The digital solutions are designed to primarily serve people who are salaried borrowers with spotless credit and seeking a loan of less than $679,150.

When your situation is more unique, that’s when it’s best to speak with a real person.  Certainly if you’re self-employed, or seeking a larger loan (which is most common in the Bay Area,) you’ll want to have an advocate who can help you figure out the best options.

Additionally, sometimes credit can be wrongly reported or have complications, and you definitely need someone to help you correct that.  Finally, with complex attributes such as the effects of death or divorce or something such as property or market nonconformity, you absolutely have to talk with a banker or broker.

Q:  Is the “real person” approach faster?

Not necessarily.  Some of the digital solutions can process straightforward loans just as quickly as a banker or broker.  The difference is in the conversion to closed loan rate. The digital solutions have much lower conversions to closed loans (meaning they don’t approve nearly as high a percentage of the loans applied for as a banker or broker).  This really comes down to the fact that a banker works really closely with the applicant to create a solid relationship and have a customized solution for the individual. I close nearly all of my applications because I understand my clients needs so well and set them up for streamlined success.

Q:  Are online loans more or less expensive?

Both.  On the face of it, online mortgages often seem to be less expensive than going through a banker or broker.  But over the long-term, when you get into the most optimum product for your situation, you’re going to save money.  Because the digital solutions aren’t able to personalize your solution for your specific needs, it will end up costing you more and just not being the best fit.

Q:  In 2008, we had the big mortgage disaster.  I’m worried about something like that happening again.  Will the all-digital approach result in less qualified people getting loans, thereby causing more defaults?

No, the online process seeks to automate the easiest to process loans, loans which have lower risk.  If there’s any complications with the application, the loan won’t be approved, hence the lower conversion to closed rate.

Q:  Doesn’t it take working with a person to ensure you’re making the best choices for your situation?

Absolutely.  A customized mortgage solution set empowers the negotiation process to home-buying, giving an individual buyer more power when they present their offer.  A mortgage banker can help buyers to identify the optimum balance between how much of a mortgage to take and how much cash to put down. There are also certain financial life cycle decisions that need to be considered and discussed, such as Adjustable vs. Fixed rates.

For someone who is self-employed or has hard to prove income, working with a mortgage banker is really the only path to getting approved for a loan.  It’s just too complex a situation for the digital solutions to work with.

Finally, when you work with a person, whether a banker or a broker, you have a single point of contact.  Think of it like a project owner to manage your transaction. They will keep your loan application on track to streamline the process and advocate on your behalf.  Keep in mind, these bankers and brokers don’t get paid until your transaction closes (escrow signing,) so they have a real vested interest in applicants succeeding in their loan approval and getting the home they want.

If you’ve got questions on this topic, feel free to add them to the comments section below and we’ll get them answered for you.

 

John Brunson is a Mortgage Banker with Skyline Home Loans Nmls #1086320

IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.

Posted in Financial