Perfect Storm For Buyer’s

I believe today is the best time for buyers in the last 10 years. It costs less to own today than it did 6 months ago.  Yes Interest rates are higher than they were last year so is gas, and we are still driving. Believe it or not rates are still below the 25 historical averages.  

  If you take advantage of the todays rate and today’s lower home price you will be in good  shape.  Remember you can always refinance when rates go down, and if by chance they don’t come down you will be a genius for jumping in today. 

And you don’t have to pay the rates the big banks are offering at 6%.  I have banks that are offering 30-year fixed rate loans in the low 5% range.

I say the perfect storm as you have more homes to choose from today.  Almost double the first half of the year.   

 

Due to the larger inventory and higher interest rates we are seeing fewer buyers so the prices have dropped. Some homes are still getting multiple offers but many are not. Keep in mind with lower prices come lower property tax. This property tax savings will last forever.  It adds up. Some people say the prices will drop more. Maybe and Maybe not.  In my opinion I don’t think so as San Mateo County has a crazy low unemployment rate right now of 1.9% as compared to last year at 4.5%.  Impossible to time the market. Remember if prices go down most likely interest rates go up so not necessarily a win for you.

 Take a look at San Mateo County Single Family Median Home Prices.

Now the PERFECT STORM. You can buy for less today than in March of this year. 

More Loan Information:

Most banks want your total debt to max out at 43-50% of your gross income.  That is including your new home payment with property taxes and insurance, your car payments, credit cards, any school loans, etc. Some banks will go up to 60% debt to income if you have good assets.  This is a good loan for someone that wants to buy a larger home before selling their smaller home.  There are loans out there not requiring any income. They will base your approval on your assets. Good option for retirees or people with lots of stock, etc.

When banks quote a rate, it is assuming a 20% down payment and a 30 year amortization. But there are so many other options.  To lower the rate, you can pay points (1 point is 1% of the loan) and the bank will lower the rate. Almost like a bribe but it is legal.  Paying 1 point will not reduce the interest rate by 1%.  Maybe a quarter percent. It does vary but the savings adds up quickly.  Always ask your lender.

Rates quoted are for owner occupied single family homes.  Condos, investment properties, refinances with cash out often have slightly higher rates.

A point to note:  The 10yr Treasury rate is a good indicator of mortgage rates.  Not the fed rate that the media builds up.

One of my favorite loans to keep the payments low is the adjustable loan. The payments are fixed for a specific period 5,7, or 10 years and then the rate will adjust every 6 months based on a pre-determined guideline with a lifetime maximum cap and a maximum per semiannual increase.  The adjustable-rate loans are about half to a percent lower than the standard 30 year fixed. That will lower your payment on a million-dollar loan by more than 10%.  I have an adjustable loan. I took It out about 20 years ago and the rate started out at 6.5.  It is now down to 3.4% but I am sure it will go up for the next period.  Also 7 years is a long time.  If this is your first home, there is a good chance you will move within that period, or you can refinance any time the rates drop. 

The other loans out there to keep payments low are: Interest only, this is when for the first 10 years you make only the interest payment and then the payment changes.  But this can lower your payment by 15%.  If you want to buy a home, there is a loan for you.  Let me know and I will guide you to the best loan options and lenders for you. 

Many of these loan options are great for people currently owning their home and wanting to buy a larger home before selling.   Talk to me and I will guide you.

Here are some Loan Options

• FHA 3.5% down
• 1% down option 
• 5% down  
• 10 % down 
• 20% down
• 30 Year fixed 
• 5 yr. 7yr. 10 yr. ARM Products with low rates
• Lower Rates based on property location Census Tract
• 1099 Loan Program   
• ITIN Program - No Social Security # required for Non - US Citizens    
• Investor Cash Flow Program - Qualify using Rental Income from subject property Only 
• Foreign National Program
• FREE Grant Programs based on income and property locations.
• Relationship Banking Discounts- If you have anaccount with them, many offer lower rates.
• Pay Points upfront and get a lower rate

Bank Statement Loan

Benefit  -- Allows Self-employed borrowers qualify with 12 months bank statements (captures Cashflow) versus requiring tax returns (taxes not needed) 

Details 

• Up to 80% LTV $2.5MM (85% to $2MM; 90% to 1.5MM) 
• Uses personal bank statements OR business statements (uses 50% expense factor, unless CPA confirms less) 
• DTI up to 45%  (DTI up to 55% if 55% LTV or less) 

Asset Dissipation

Benefit  -- Allows borrowers with substantial assets to qualify with not tax returns (taxes not needed) 

Details 

• Up to 70% - 80% LTV $2MM (90% to 1.0MM) 
• DTI up to 45%  (DTI up to 55% if 65% LTV or less) 

Distributions – GREAT for Retirees

Benefit  -- Allows borrowers to set up a new distribution from retirement type assets.  

Details 

• Up to 75% - 80% LTV $2.0MM  
• DTI up to 45%  (DTI up to 55% if 55% LTV or less) 

Bridge Loan (“buy before you sell”) 

Benefit  -- Allows borrower to purchase before they buy with little down payment by borrowing from departing residence.  

Details 

• Option 1 -  If 2^nd Lien--- Up to 80% CLTV to $750,000 2^nd lien on departing residence.  Loan placed behind the existing 1^st for departing residence; Interest Only payments; no Prepayment penalty  
• Option 2 -  If 1^st Lien --  up to 65% LTV (pays off existing liens for departing residence and having one 1^st TD).  Departing residence Bridge loan up to $5MM+  
• DTI up to 45%  (DTI up to 55% if 55% LTV or less) 

Cross Collateral Loan (“buy before you sell”) 

Benefit  -- Allows borrower to purchase before they buy with little down payment by securing (Cross collateralizing) new and departing residence into one loan.  

Details 

• Up to 65% LTV with multiple properties.   
• DTI up to 45%  (DTI up to 55% if 55% LTV or less) 
• EXAMPLE:    New home SP = $2MM   Departing Home $1.5MM with lien of $500K 

= ($3.5MM x 65%) - $500K  = $1.775MM  allowed (88.75% LTV to Purchase price or 50.71% CLTV)  

=  down payment is only $225,000 

Interest Only + 40Yr Term  

Benefit  -- If the borrower has assets and can afford both purchase and departing residence PITI payments, lower monthly payments (up to 20-30% lower) can help offset overall monthly cashflow 

Details 

• Lower monthly payments.   
• DTI up to 45%; LTV up to 80% to $2MM  

Departing Residence Program (“buy before you sell”) 

Benefit  -- If the borrower has assets, but CANNOT qualify for both purchase and departing residence PITI payments, this program removed the departing residence PITI to help qualify new purchase  

Details 

• Removes departing residence PITI payment  
• DTI up to 45%; LTV up to 80% to $2.5MM  

Interest Only + 40Yr Term

Benefit  -- If the borrower has assets and can afford both purchase and departing residence PITI payments, lower monthly payments (up to 20-30% lower) can help offset overall monthly cashflow 

Details 

• Lower monthly payments.   
• DTI up to 45%; LTV up to 80% to $2MM