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An Insider's Guide to North San Diego County's Coastal Real Estate
Jim Klinge, broker-associate
858-997-3801
klingerealty@gmail.com
Compass
617 Saxony Place, Suite 101
Encinitas, CA 92024
Klinge Realty
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Are you looking for an experienced agent to help you buy or sell a home? Contact Jim the Realtor!

Jim Klinge
Cell/Text: (858) 997-3801
klingerealty@gmail.com
701 Palomar Airport Road, Suite 300
Carlsbad, CA 92011


Category Archive: ‘Mortgage Qualifying’

Down-Payment Assistance

Another example of someone getting caught while exploiting a loophole, who then tries to use discrimination as their lever:

Link to Article

The Trump Administration is cracking down on national affordable housing programs because of concern over growing risk to the government’s almost $1.3 trillion portfolio of federally insured mortgages.

The effort targets providers of money for borrowers who can’t afford the 3.5 percent down payment typically required on Federal Housing Administration loans. Such help — from government agencies and families — enables 4 in 10 FHA loans. Borrowers in government down-payment assistance programs become delinquent at about twice the rate of those who put up their own money.

A new U.S. Housing and Urban Development guideline, published on its website late last week, would be particularly harmful to the Chenoa Fund, one of the largest down-payment programs in the U.S.

A Utah mortgage entrepreneur named Richard Ferguson runs the Chenoa Fund on behalf of the Cedar Band of the Paiutes, a tribal government in Utah. It is providing about $100 million a month in loans to borrowers who can’t meet FHA down-payment requirements.

While many cities, counties and state housing finance agencies also provide similar help, they typically limit the loans to local residents. Chenoa operates nationally. HUD said government agencies must document that they are helping borrowers buy property only within their jurisdictions. Tribal governments, it said, may only offer assistance to members living on tribal land or elsewhere.

“This is obviously very concerning,” Ferguson said in a phone interview. “It appears that HUD is trying to put the tribe back on the reservation.”

Read More

Posted by on Apr 22, 2019 in Jim's Take on the Market, Market Conditions, Mortgage Qualifying | 0 comments

Exotic Financing, 2019

Everyone who is financing a home purchase should strongly consider the standard 30-year fixed-rate mortgage.

Though I recommend you move every 6 to 12 months (it’s good for business) these days most people are in it for the long-term.  Even if you knew it wasn’t going to be a lifetime house, consider keeping it as a rental when you move.

But for those who have very strong income, or know they have an inheritance coming, a business or property to sell, or know their lucky Lottery numbers are going to pay off sooner or later, you may want to consider today’s version of exotic financing.

You should only take an alternative to the 30-year fixed rate if you had a solid plan to pay it off early.  Don’t get an ARM thinking you’ll refinance someday, because it’s likely you’ll never get around to it – the fixed rate loan will have a higher payment, and you’ll shrug it off.

Here’s a choice today for mortgages up to $1,500,000:

3.875% fixed rate at 1.25 points, or

4.375% interest-only for ten years, no points.

Let’s say you want to finance $1,500,000:

The 30-year fixed option is $7,054 per month, and will cost $18,750 up front.

The ten-year ARM is $5,469 per month for ten years, with no points.

A benefit of the regular 30-year fixed-rate mortgage is the principal reduction every month – it’s a forced savings plan.  After ten years, you will only owe $1,137,917, instead of the full $1,500,000 with the interest-only loan.

The ARM will feel like a fixed-rate loan with no payment change for ten years – which could lull you to sleep, and come back to haunt you 8-9 years from now.

Don’t take the 10-year deal just to get a lower payment. Take it because you know you have the ability to pay it off in the next ten years.

Posted by on Feb 3, 2019 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 0 comments

More Exotics?

Hat tip to both Rick and Richard sent in this article from the WSJ on alternative underwriting for mortgages, which is on the rise:

https://www.wsj.com/articles/no-pay-stub-no-problem-unconventional-mortgages-make-a-comeback-11548239400

Excerpted – bold added:

Aryanna Hering didn’t have pay stubs or tax forms to document her income when she shopped around for a mortgage last year—a problem that made it tough for her to get a loan.

But the nursing student who works part time providing home care for children and the elderly eventually hit pay dirt: For a roughly $610,000 home loan, a mortgage company let her verify her earnings with 12 months of bank statements and letters from clients.

Ms. Hering’s case highlights how a flavor of mortgage once panned for its role in the housing meltdown a decade ago is making a comeback. These loans, aimed at buyers with unusual circumstances such as those who can’t provide the standard proofs of income, are growing rapidly even as rising interest rates and higher home prices crimp demand for mortgages.

Lenders issued $34 billion of these unconventional mortgages in the first three quarters of 2018, a 24% increase from the same period a year earlier, according to Inside Mortgage Finance, an industry research group. While that makes up less than 3% of the $1.3 trillion of mortgage originations over that period, the growth is notable because it came as traditional home loans declined. Those originations fell 1.2% over the same period and were on track for a second down year in 2018.

Tom Jessop, the loan consultant at New American Funding who handled Ms. Hering’s loan, said he has seen demand for unconventional loans double over the past 18 months and they currently makes up more than one-third of his business. “I think it’s just catering to an audience that’s been neglected for years,” Mr. Jessop said. “Now they have an opportunity to get financing finally.”

At the same time, Wall Street investors who buy home loans are scooping up unconventional mortgages that have been packaged into bonds, edging back into a corner of the market that is riskier but provides higher returns. There were $12.3 billion of such residential-mortgage-backed securities sold in 2018, nearly quadruple from a year earlier, according to credit-rating firm DBRS Inc.

Nick also put it on twitter, where I responded:

Back in 2006-2007, Countrywide was funding neg-am mortgages up to $1,500,000 with no money down and just a decent credit score – the example given is far from that.

The mortgage industry needs to find a balance in between – it’s not out of line to finance a borrower who can show income via bank statements and has substantial equity/skin in the game.

Posted by on Jan 23, 2019 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying, Neg-Am | 5 comments

Landlord Loans

Higher prices, higher rates, slowing sales, and now easing loan guidelines? On non-owner-occupied properties?  Buying a rental property with 5% down is unheard of, and even with higher rents they are likely to negative cash flow:

Freddie Mac is consolidating its Home Possible program with its Home Possible Advantage Mortgages program. These programs offer greater flexibility and higher loan-to-value ratios (LTVs) than traditional mortgage programs.

The combined product will be called Home Possible Mortgages, and will closely align with the purpose and requirements of the previously-named Home Possible Advantage program, with some changes.

Beginning October 29, 2018, lenders will be able to offer Home Possible Mortgages to buyers with limited down payment funds. Under the consolidated program, eligible homebuyers will include:

  • non-occupant buyers for mortgages secured by one-unit properties with LTVs no higher than:
    • 95% for Loan Product Advisor Mortgages; or
    • 90% for manually underwritten mortgages (non-occupant buyers were previously excluded from the programs);
  • those who own other properties (buyers who own other properties were previously limited);
  • buyers with super conforming mortgages (mortgages with high maximum mortgage limits for homes located in high-cost areas) when the mortgage:
    • is submitted and receives an “Accept Risk” classification through the Loan Product Advisor; and
    • has an LTV no higher than 95% (super conforming mortgages were previously not permitted);
  • buyers with secondary financing, including home equity lines of credit (HELOCs), for most cases when the mortgage’s LTV is no higher than 97% (secondary financing was previously limited to 95% LTV);
  • buyers using adjustable rate mortgages (ARMs), when the LTV is no higher than 75% (ARMs were previously not permitted); and
  • buyers with a maximum 45% DTI for manually underwritten mortgages.

These changes are meant to both widen the pool of qualified homebuyers, and streamline programs for lenders’ ease of use.

Housing market risks broaden

By loosening the requirements for its Home Possible Mortgage programs, Freddie Mac’s hope is to encourage lenders to qualify more applicants, thereby increasing homeownership opportunities nationwide.

However, loosening requirements by allowing high LTVs, DTIs and ARMs makes lending — and by extension the housing market — riskier. For veteran real estate professionals, a growing presence of dangerous mortgage products and loose lending restrictions will sound familiar, as they all increased during the Millennium Boom and ultimately played a big part in the cause of the housing crash and 2008 recession.

Link to Article

Posted by on Sep 21, 2018 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 5 comments

Bank of Mom and Dad

Nothing wrong with distributing the estate early to help out the kids, and mortgage guidelines encourage it – the down payment can be 100% gift:

When Melanie Gerber started working as a mortgage loan officer in Riverside seven years ago, she didn’t see many first-time buyers hitting up their parents for help.

Now she sees it all the time.  “I have one that just went into escrow yesterday,” Gerber said. “They’re having money gifted from the family.”

She estimates about half of her borrowers are now getting money from mom and dad.  “I think the parents just want them to make it on their own and know they can’t do it,” she said.

Gerber’s observations are backed up by federal data. If you want to buy a home in California, it increasingly helps to have relatives who can chip in.

KPCC crunched the numbers on more than 600,000 FHA loans, a type of government-backed mortgage that’s common with first-time buyers.

FHA borrowers can use money from relatives for their down payment. In recent years, that kind of family financial help has been on the rise in California.

Back in 2011, about one in four FHA loans in California included down payment money from relatives. Today, it’s one in three.

Link to Full Article

Posted by on Aug 1, 2018 in Jim's Take on the Market, Mortgage Qualifying | 2 comments

Bridge Loans

Are you turned off by the e-buyer who wants to lowball your home’s value, and then knock off another 7% to 9%?  But you like the idea of having your equity available for the next purchase?

How about an old-fashioned bridge loan?

Joel arranged financing for a recent buyer of ours who changed jobs during the week of escrow closing – Joel re-verified employment and still closed on time. This was on 97% financing of a converted-apartment condo built in 1979.

Thanks Joel!

Posted by on Jul 15, 2018 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 0 comments

Freddie Mac To Compete With FHA

Freddie Mac’s underwriting also allows self-employed buyers to submit tax returns for one year only, instead of the customary two years’ tax returns.  I’m not sure if they will do that on this new program?

It’s been more than three years since Freddie Mac rolled out a conventional mortgage that only required a 3% down payment for certain borrowers.

But now, Freddie Mac is about to supercharge its 3% down program and launch a widespread expansion of the offering.

Freddie Mac announced Thursday that it is rolling out a new conventional 3% down payment option for qualified first-time homebuyers. What makes this program different is that there are no geographic or income restrictions.

The new program, which is called HomeOne, puts Freddie Mac in direct competition for mortgage business with the Federal Housing Administration, which also only requires 3% down on some mortgages.

Read More

Posted by on Apr 27, 2018 in Jim's Take on the Market, Mortgage News, Mortgage Qualifying | 8 comments

San Diego Housing Affordability

Reader Rob asked,

Can you do an article on the housing affordability index related to NSDCC?  Just wondering what percentage of people need x amount of dollars with 20% down to afford a median priced home?

Let’s include data on the median price of detached-home active listings, and those sold in the last 90 days. I used an interest rate of 4.50%, 20% down payment (25% down payment on $2,395,000 price), and qualifying ratio of 35%:

Category
# in Category
Median Price
Cash to Close
Annual Income
SDCo Actives
3,912
$824,823
$170,000
$115,000
SDCo Solds
4,744
$624,700
$130,000
$87,000
NSDCC Actives
822
$2,395,000
$605,000
$312,000
NSDCC Solds
608
$1,327,500
$270,000
$185,000

The fixer market feels the impact. When it takes both spouses holding down good jobs to qualify, they don’t have the time or patience to fix up a house – they want and need a house in good shape. Maybe this is where Zillow and others can provide more renovated homes to fit the needs of today’s buyers.

Posted by on Apr 17, 2018 in Jim's Take on the Market, Mortgage Qualifying, North County Coastal, Sales and Price Check | 8 comments