The San Mateo community

But while being a business owner is a great deal of work, it is part of the American dream. The downside is that if you are in the market to purchase a new home in San Mateo and are planning on applying for a loan based on your self-employment income, you may be faced with some challenges you weren’t expecting.

Unfortunately the current economic situation has forced many lenders to tighten their requirements and that may make getting a loan more difficult than in past years for self employed home buyers. Here’s the score on what today’s lenders are looking for.

1. Forget about a ‘stated income’ mortgage – you are going to need tax documents, bank records and at least a two year history of business stability for a lender to even consider your application. Even if you are just branching out in the same kind of business that you have done for years, expect tight requirements and nearly perfect credit to move forward with qualifying.

2. Do your homework – research the banks or mortgage lenders you want to approach and find out exactly what paperwork and documentation they require to process a loan for a self-employed borrower. Spend time putting your documents together carefully and thoroughly in advance of your application.

3. Look for lenders who have a track record of accepting self-employed borrowers and try to meet with them in person to review your paperwork and find the right kind of loan package for your needs and situation.

4. Take a break from write-offs for a couple of years – those tax deductions help with your disposable income, but they also take down your gross income level. Lenders want to see a good debt-to-income ratio,not how clever you are about expensing your income away. Direct any questions about how to manage your expenses and write-offs to your CPA.

5. Stay liquid – build your bank account so that lenders can see your ability to make payments even if you have seasonal or other fluctuations in your income levels month to month or year to year. A solid savings plan and liquid assets can be helpful in getting your application approved.

Finally, if you have a strong co-signer, one with great finances and a steady income, you may be able to overcome your lender’s concerns and hesitation when it comes to considering the source and level of your personal income.

Are you self employed and have more questions? Contact me for more information, I would be happy to help!

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Although rates are low right now, the present economic crisis has caused a lot of lenders to reduce the amount of loans they give out.  This is a drastic change from the last few years when requirements were very loose and almost anyone was eligible for a mortgage. If you are figuring out how to save on your mortgage refinance, its vital to make sure you do your homework and get your facts right.

First, look at your loan-to-value ratio. In a no-cash-out refinancing (where the amount of your new loan doesn’t exceed the balance of your existing loan, plus points and closing costs, if applicable), you may be able to borrow as much as 95% of your home’s value. However, if the value of your home has fallen below the amount of your existing mortgage balance, you may not be able to refinance at all. This sadly, has been the case for many homes.  But you may be able to proceed through the American Recovery and Reinvestment Act of 2009′s Home Affordable Refinance program.

The major advantage of refinancing to a new lower interest rate is that you will save a substantial amount on your monthly mortgage payment. This is of course why most people choose to refinance their mortgage. It is important to keep in mind however that there are going to be costs involved with refinancing such as closing costs, points, and possible appraisal  and attorney fees.

Do your research and shop around for the best refinancing interest rates. All banks are not created equal, some banks and financial institutions charge higher rates than others. Normally, the smaller Community Banks and Credit Unions are more consumers oriented and charge lower rates.

In addition, when shopping around, look and compare interest rates and points versus no points before you refinance. Look out for embedded points included in the closing costs. Keep in mind, some lenders will include points in the closing cost without necessarily actually quoting these costs as points.

Have questions?  As a homeowner it is important you do your research and educate yourself on the refinancing process. It is not a one size fits all and may or may not be the best idea for your situation.   Contact me today for help understanding the entire refinancing process.

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What is an escrow?
An escrow is an arrangement in which a disinterested third party, called a escrow holder, holds legal documents and funds on behalf of a buyer and seller, and distributes them according to the buyer’s and seller’s instructions. The escrow becomes the depository for all monies, instructions and documents pertaining to the purchase of your home.

How does the escrow process work?

 The escrow is a depository for all monies, instructions and documents necessary for the purchase of the home, including  funds for the down payment, lender’s funds and documents for the new loan. The duties of an escrow holder include: following the instructions given by the principals and parties to the transaction in a timely manner; handling the funds and/or documents in accordance with instructions; paying all bills as authorized;  closing the escrow only when all terms and conditions have been met; and, distributing the funds in accordance with instructions.

Do I need documentation?
Receipt of your deposit is generally included in your copy of your purchase contract. Your funds will then be deposited in your separate escrow or trust account and processed through your local bank.

What information will I have to provide?
Typically you will be asked to complete a statement of identity as part of the necessary paperwork. Because many people have the same name, the statement of identity is to identify the specific person in the transaction through such information as date of birth, social security number, etc. This information is kept confidential.

How long is the escrow?
The length of an escrow is determined by the terms of the purchase agreement and can range from a few days to several months. Typically an escrow often takes an average time of 30 to 45 days.

When does the escrow process end?

The escrow process ends when you actually close on the home, during the closing procedure. This is when all funds are transferred accordingly, when all documents are signed, and when you get the keys to your new coastal home.

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1.) An All-Cash Offer

Obviously, a cash purchaser is always favored by any seller. In today’s real estate market, an all-cash offer is even more enticing. Last month, one in four real estate transactions were impacted by a low appraisal. An all-cash buyer eliminates the need for the bank appraisal.

2.) A Non-Contingency Offer

If you don’t have the cash reserves for an all-cash purchase, the next best thing would be to make a non-contingency offer. To do this you should be already pre-approved for a mortgage and have your current house already in contract. This gives the seller the confidence that you are already a qualified buyer who will be able to complete the purchase.

3.) A Contingency Offer

Some buyers start the process of looking for a new home before their current home is sold. This could be a big mistake. If you find the home you were hoping for (perfect for your family AND priced right), it will be very difficult to get your offer accepted because you are not actually qualified to buy.

Asking a seller to wait for your home to sell is somewhat unreasonable in today’s environment. One of the reasons you would want the home is because the seller priced the home at a value to sell it NOW. They want to know it is sold when they accept an offer. They normally will not even entertain a contingency offer. 

Bottom Line

Unless you have the ability to purchase with cash, the best thing to do is to be pre-approved for a mortgage and have your current house already in contract before looking for the home of your dreams. That guarantees you will get the home you love at a price that makes sense.

Article from KCM Blog

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Four major institutions project rates: The National Association of Realtors (NAR), Fannie Mae, Freddie Mac and PMI. Here is what each is seeing in the next year.

Bottom Line

If you are looking to buy a California coastside home and are waiting to see what will happen with prices, remember interest rates will also impact your housing cost.

Article from KCM Blog

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Last year, the stimulus package worked beautifully. This year, comparing the stats from the same period last year, the market is showing how much that stimulus package meant to sales. This year is down significantly. Also, the investor pool where many loans were funded has dwindled. The bottom line was that the real estate market will not look much different over the next few years. Interest rates will level out at around 7%. The concern for high priced areas like California is a government cap on the mortgage interest deduction. The new proposal is a $500,000 cap on the value for the interest deduction. When you fly across the country, every area between the West and East coasts would be OK with the cap at $400,000 or even less. So there won’t be enough of us to speak up and be heard on placing a lowered cap. Now this next one is a biggie-in 2013 any appreciation from a home sale that goes over the new cap, proposed now to be $500,000, will be taxed at 3.8%. Lastly, Fannie and Freddie loans are planning to be phased out. Higher down payments are going to be required to secure a loan.

What all this means to you is about timing to sell. It would seem that with the current information, a buyer might want to close on a sale prior to 10/1/11. You are going to incur the same dynamics when you purchase in a new area. Because you are going to buy and sell, market timing for local prices is less important as they will balance themselves. The known and unknown changes the government makes is what we are going to be most affected by.

The San Francisco Bay Area is an Oasis in the Desert as it is the Gateway to the Pacific Rim, Silicon Valley and the new center for companies like Facebook, Zanga and SalesForce.  New wealthy buyers will be coming from these companies in the next 18 months.

The main reason to buy versus rent is because we need to build wealth.  Renters can take advantage of the same benefits as home owners.  They get the benefit of location but not appreciation.  Now we have affordability and appreciation as inflation is down.  With interest rates in the 5% range anticipated through 2011, this may be the the open window for buyers.

Related: Banks Push Home Buyers to Put Down More Cash (WSJ.com)

This program provides 100% financing and requires a 3.5% (2.25% for refinances) Guarantee fee (a fee charged by the USDA Rural Development Agency) that is rolled into the loan amount.   In addition, closing costs and pre-paids may also be rolled into the loan providing that the total loan amount doesn’t exceed 103.5% of the homes appraised value for purchases and 102.25% of the homes appraised value for refinances.   (Please note this is not a farm or acreage type loan contrary to what the loan name suggests. )   Below are just a few of the highlighted terms of the USDA Guaranteed Rural Development loan:

- 100% Financing
- No Mortgage Insurance
- No Minimum Fico Score
- Flexible Credit Underwriting
- No Reserve Requirement
- No Maximum Seller Credit
- No first Time Homebuyers Requirement
- Single Family Homes and Condos

If you are interested in reading more about this new loan, you can visit the USDA California website or contact us with any questions you may have!  Buying a new home in the beautiful communities of Half Moon Bay, El Granada, Moss Beach or Montara is a great decision and we would love to help you each step of the way.  We have years of experience with both buyers  and sellers in the San Mateo Coastal area and understand each communities’ real estate market.  Don’t miss out on this new loan opportunity; contact us today!

Kathy & Michael Rain
Your San Mateo Coastal Real Estate Experts

San Mateo Coastal Real Estate
View San Mateo Coastal Listings
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Just a few years ago, homes in foreclosure were rare and many didn’t fully understand all was entailed in having a home become “bank owned.”  Today, “foreclosure” seems to be the markets’ buzz word as many are seeing loss of jobs and the markets’ decline in home sale prices.  Consequently, this environment has brought a new term to the surface: underwater homes.  Underwater homes are those that have mortgages that are greater than the home’s current worth on the market.  This, in turn, is resulting in an increase in foreclosures.

Recently, CoreLogic, a Real Estate date provider, noted that there were  11 million homes with underwater mortgages at the end of June.  Of course, this seems to be good news since the number of underwater homes at the end of March was 11.2 million.  However, these homes are simply turning into foreclosures instead of proving that the market is actually turning around.  Typically, underwater homes rise when the market sees falling home prices.

An article by CoreLogic explained, “In all, 23 percent of U.S. homes with mortgages were underwater at the end of June.  Another 2.4 percent of homeowners with a mortgage had less than 5 percent equity in their home, making them more likely to end up underwater if home prices drop further.  The total number of underwater mortgages represent roughly $2.9 trillion in mortgage debt.”

Once homes are underwater, homeowners have a harder time recovering.  They oftentimes are unable to qualify for mortgage refinancing and therefore find themselves just scraping by to make payments in order to keep their head above water.   California is in the top five states for underwater mortgages and has therefore become one of the top states in the nation for foreclosures.

We’ve seen some changes in the San Mateo Coastal area, but are happy to see the numbers are not as drastic as other areas in our state.  Below are current numbers of active and foreclosed listings in our market.

If you have any questions regarding underwater mortgages or are facing a prospective foreclosure; please let us know!  We have years of experience in the San Mateo Coastal area and can help guide you each step of the way!

Kathy & Michael Rain
Your San Mateo Coastal Real Estate Experts

San Mateo Coastal Real Estate
View San Mateo Coastal Listings
View San Mateo Area Open Houses
Visit Our Website
Email Us

1. Be expedient and thorough- When initiating a loan, and throughout the loan process, it is imperative to provide complete documentation to your Mortgage Advisor as quickly as possible. For instance, if all pages of the bank statement are requested, it really means all pages. While you and I might not think it’s necessary to include the reconciliation page of the statement, the lenders do. And, when they receive only five of the six pages of said bank statement, the loan process can become inefficient and stalled.

2. Keep detailed financial records- If it is necessary to transfer funds from one account to another or to sell stock for a down payment, keep a detailed paper trail of all transactions, deposits and liquidations. Lenders will request it.

3. Spill the details- Be sure to notify your Mortgage Advisor of any changes to the purchase transaction. Unidentified last minute changes, such as escrow holdbacks, seller credits or termite work can wreak havoc with closing dates.

4. Keep your day job- Lenders always contact your employer just before the loan funds. If you have left that company (quit, moved to a new company or retired), the lender will stop the loan from funding and recording.

5. Know the facts- If you are in the process of divorcing, most lenders will not approve or fund a mortgage loan until the final decree (settlement terms) is recorded.

6. Safeguard your social security number- Talk to your Mortgage Advisor before making any significant credit or purchase decisions. Lenders rely on using credit scores to assist in mortgage credit decisions. Incurring new debt during the loan process increases your debt-to-income ratio and could reduce the amount you can borrow. Each credit inquiry – whether you ultimately make a purchase or not lowers your credit score. The same holds true for pre-approved credit card offers that you receive in the mail; responding to them will result in a credit check.

7. Be available- Be sure to leave a contact phone number with your Mortgage Advisor if you are traveling for business or on vacation. Until all the loan approval conditions are met, you may be required to provide additional documentation or information.

We understand that buying a home is a huge investment! The paper work, hoops to jump through and getting everything you need in order can be a lot to handle. Using these seven tips will help cut down on the stress and will help streamline the process. If you are looking to buy a home on the San Mateo Coast, we can help! We’ve had years of experience and would love to help you find the home of your dreams! There are many great homes in the San Mateo Coastal Area from which to choose. Contact us and we’ll be happy to answer your questions and give you a tour of the homes in the area!

Kathy & Michael Rain
Your San Mateo Coastal Real Estate Experts

San Mateo Coastal Real Estate
View San Mateo Coastal Listings
View San Mateo Area Open Houses
Visit Our Website
Email Us

In late January the Federal Reserve met and confirmed that the Mortgage Backed Securities (MBS) purchase program will end on March 31, 2010. We expect rates to begin moving up as a result of this–what is uncertain is how quickly and how much. Most experts place the rate change value at 100 bps difference, or 1% higher mortgage interest rates. Our best guess at the outlook places rates at the beginning of the year (now) in the low 5′s and ending in high 5′s to low 6′s. However, expect volatile cycles.

The wild card with regard to short term interest rates (which would affect prime rates, and adjustable rate mortgages) is any change in the Fed’s pre-commitment language which, as of their meeting, is currently committed to keeping the Federal Funds Rate exceptionally low for an “extended period.”

We don’t expect the Fed to raise short term rates any time in 2010, but long before the Federal Open Market Committee (FOMC) actually does the deed, it will have to change its language. That could very well happen in 2010, and there is genuine uncertainty over how quickly and strongly the market will anticipate a tightening process.

Keep in mind that rates are currently about 1% lower than they would be if the Fed weren’t buying all those Mortgage Backed Securities. This means when that 1% suppression is no longer in effect, it would cost about $21,000 to buy the rate down by that 1% on a $700k mortgage. When you combine the 1% lower rate with the tax credit, you see that homebuyers stand to gain between $27,500 and $29,000 on a home in the $800,000 or under price range. That’s a big incentive to act now, while both incentives still exist.

Andy Block
Mortgage Advisor & Financial Advisor
Reverse Mortgage Specialist
DRE License 01096311
Opes Advisors, Inc.
400 S. El Camino Real, Ste. 250
Ph: 650.931.0605
San Mateo, CA 94402
www.opesadvisors.com
OPES/ope’s • n./latin for wealth

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We’re here to help with your Real Estate needs.  Let us know how we can best serve you!

Kathy & Michael Rain
Your San Mateo Coastal Real Estate Expert

San Mateo Coastal Real Estate
View San Mateo Coastal Listings
Visit My Website
Email Me