Real Life Real Estate Blog

Do you live in the Washington D.C. area? Do you want fair access to a multiple listings service? Too bad…at least for now. Federal anti-trust lawyers are working to unravel the web of collusion created by a group of Columbia area brokers who formed the MLS company in their area and are using it to exclude other brokers and maintain higher fees…allegedly. For more on the story you can read this detailed article at cnbc.com.

Sacramento’s under $300K market is “popping,” and many first time home buyers aren’t preparing themselves to take advantage of it.  I get calls everyday from folks who’ve finally made the decision to get into the real estate loop. The problem now is TIMING. For the first time in 2+ years, I run a report for active listings in the morning, show about a half dozen homes, pick one we like, call the agent to see if any offers have been made…and find out that the home has just gone pending with 3 to 8 offers.

So what’s happening out there? Well, the investors are swooping in like hawks and scarfing down anything that has a pulse. They often make all cash offers on the best deals; namely bank-owned REO’s. How does a first time home buyer have a chance in this market? The solution is to get PRE-APPROVED, have a good down-payment (borrow it from family if you must), and be ready to pounce the second something scurries onto the market. A good agent can follow default short sale properties and place a low offer just to see if you get it! They should continue to follow the defaults that don’t sell … and be ready when it re-lists as an REO listing from the bank. All can be done simultaneously. Many inexperienced buyers don’t know you can make offers on different properties at the same time. So find a good, honest loan person to help you be armed and ready. I have a few trustworthy sources …as I’m sure many an agent does.

Ever hear the phrases, “turn that frown upside down” or “see the glass as half full?” Each one is a reaction to the palpable pessimism of the person at whom it is directed (try saying this three times fast…palpable… pessi… uh!). Depending on your mood, or which parking space you didn’t get into this morning, these phrases can be quite annoying. Yet, other times you’ll find yourself repeating these colloquialisms to a downtrodden friend or co-worker. Even though I’m a pretty optimistic person, I am certainly not one of those suspiciously cheerful gals who smiles widely no matter what’s going on around me. However, I am willing to run the risk of offending some of my more pessimistic readers (none of which is intended) by applying a “look on the bright-side” mentality to the current Sacramento Real Estate market.
I know there are people out there whose houses are “upside down” and that is definitely reason to frown. But even in the worst of situations some good can be found for someone. Short sales with governmental debt forgiveness help or even a phone call to the bank for loan modification might possibly save some owners from complete despair. Instead of going down the path of Chicken Little, I would like to address the flipside of the housing downturn for the new fortunate members of society. There are plenty of people who would like to own homes that never have before, and others who are finally able to afford to invest in real estate for the long term benefits. These people are the yang (tranquility) to the housing markets ying (chaos). While average home prices are still lowering, the number of great deals on homes for sale is slowly starting to decline. “Why?” one might ask. It’s simply because… many people who buy homes now for $250K that sold years ago for so much more…are finding their “diamond in the rough” instead of a “sinking ship.” Great deals are going into “pending status” daily in the greater Sacramento area. My advice, change your frame of reference and act now because people will still be complaining of the housing market woes when the glass really does get to half empty and the housing market starts to bubble up again.

Please, do not confuse the seccesion that took place in South Carolina with what I discuss in this article. A whole war was already fought over those issues. It is in no way my intention to revisit them here. The topic today is the debate over the Arden Arcade Community incorporating as its own city and leaving the control of the County of Sacramento. The discussion over the issue has gotten pretty hot, although I have yet to see cannon and calvary marching down Fulton Avenue. However, a vote won’t even be possible until November. So, why all the hullabaloo?

Because LAFCO ( Sacramento Local Agency Formation Commission), the entity that oversees contracts for consultants on city/county matters, allowed an environmental and fiscal study necessary to making the legislation to miss the deadline for going to a vote in November. Read more about it here on the Sacramento Bee’s website. Also, read more about both positions on the matter below.

Those opposed say Aye

Those in favor say Aye

Zillow.com is adding yet another “user friendly” element to their website. Kevin Boer goes into great deal about it in an article on his site, 3oceansrealestate.com.

My advice is to forget the media, water-cooler buzz, bank advertisements, etc… and go straight to your favorite Realtor and ask for recent pending & sold statistics within a 1/4 mile neighborhood radius of your “dream home.” Why? Because the bottom has literally gone up in some markets. Since February 1st, I have been involved with more multiple offerings than all of last year combined! Anatolia and Elk Grove in the Sacramento Valley have people clammering over short sales and bank owned properties. Just last week, I could no longer find what 2 of my buyers were looking for in these areas. They were priced out with 8 offers on one home and 15 on another. Ok, I admit the homes are priced to sell, but eventually they will ALL sell. I think you get the point. Don’t hedge your bets so closely that you get greedy! Think about it for a minute. That was pretty much the mindset that got us into this mess. All I can say is go out and purchase now and make any reasonable offer on a traditional listing, short sale or bank owned home you like. Regardless of what you hear about the market going up or down…you are likely to get a great home in the scheme of things. So cheers, California has NEVER been so affordable…and I’ll drink to that!

It’s official. The conforming loan limit has been temporarily raised. While it won’t save the economy, it will definitely make it easier on those who are encountering difficulties when looking at their home finance options. Check out this article in the Seattle Times.

I feel as if there should be horns blaring from every mortgage office in America with the news of a bill that will raise the conforming loan amount from $417K to $625-$725K. Either number would add some much needed help. One of the main obstacles in doing a loan in California or New York or any area where the median home price is more than $150K is the conforming loan amount. Most people don’t know what the conforming loan amount is, so if you are not already privy to it, here it is. The conforming loan amount is the maximum total loan amount (includes fees, taxes, insurance,etc.) that either of the two government entities, Fannie Mae or Freddie Mac, will guarantee to buy on the secondary market. What does that mean? That means that under the current rules, if your bank does a loan for you for under $417K and they can’t sell it on the secondary market as a mortgage security, the government guarantees them that either Freddie Mac or Fannie Mae will buy them. Because loans over this amount are somewhat more risky because there is no guaranteed buyers for the banks, these loans cost more and are often prohibitively expensive to home buyers.

I was never a boy scout. Camping and fishing were, and still are, very fun activities for me but I was able to do them without dressing up in a funny uniform. Maybe I was too self conscious as a kid. Despite not liking the uniform, I did like some of the principles the Boy Scouts had, especially their motto to always be prepared.

As a loan consultant I speak with people all day long about their financial situations and the only conclusion I can come up with is that not too many homeowners used to be Boy Scouts, because no one I speak with comes to the phone with the tools they need to get financing. I’m not saying they are stupid, they just haven’t prepared or don’t know what they need to do in advance to help them get good loans. Hopefully I can make the situation a little easier for the both of us. If a borrower is better prepared from the bat, the person doing the loan is going to be able to finish the process a lot sooner and be armed with the knowledge about that person that he/she needs to be able to custom fit a loan to that client.

There are four main factors that mortgage professionals look at in determining what kinds of loans they can do for someone. By the way, if you haven’t told your mortgage professional any of these factors and they quote you a rate that you are “pre-qualified” for, it’s hooey. No one can tell you what your rate and payment will be unless they have analyzed these key facts:

1.Loan to Value Ratio

2.Credit Report (yours and your spouses)

3.Income Documentation

4.Your Financial Goals

Loan to Value Ratio (LTV): Before you pick up the phone and call the 1-800 number on the “Refinance Now!” letter you received in the mail from “your bank,” (if you read the letter carefully, chances are it’s not from your bank) find out exactly how much you owe on your home including: second mortgages, withdrawals from home equity lines of credit, judgments (i.e. back child support or collections attached to the title of the home), and good old tax liens along with your first mortgage. All of these things have to be paid off in a refinance. Compare what you owe with what your house is worth. Don’t be discouraged if the percentage seems high. If you owe 90% or more of what your house is worth, don’t give up hope, you just have to get creative and work harder to find something that’s right for you. Also, keep in mind that if the LTV is 80% or more, you are not going to get that 5.875% everyone is shooting for.

Credit Report: Never give your social security number to mortgage professionals, unless you have chosen the one you want to work with and credit simply needs to be verified for the loan program that you already discussed with that person. If you are shopping for a loan, each time someone pulls your credit report, your score can go down 1-2 points. Five phone calls later, and your score went from a 600 to a 590. That can be a big difference in what you are eligible for. An easy way to look at your credit is with one of the credit report websites. I’ve heard that www.annualcreditreport.com is quite good, but I can’t vouch for it personally because, well, as a loan consultant I don’t need to! Do some research to find one that gives you your full report with information and scores from all three agencies without charging you a ton of money (it only costs $10-$15 to check someone’s credit). You can also go to your bank most of the time and for a small fee you can request them to give you a credit report. If you are married, always get the report with both spouses on it. Your credit report is an essential tool in getting financing. It allows you to see what you owe and to whom you owe so you can determine your LTV. Also, if you know your exact score, mortgage professionals have an easier time finding exactly what they can do for you without having to pull your report and cost you points off of your score. Remember, your credit score is not the highest score you receive from the three agencies. Unfortunately it is the middle number of the three. If I have scores of 615, 631, and 650, I don’t have a 650. As far as the bank is concerned, I have a 631. I frowned too when I found that out.

Income Documentation: This is quickly becoming a hot-button issue in the mortgage industry. First of all, it is the hardest obstacle to overcome in finding a loan for someone. Second, banks are tightening their guidelines and many of the loans that were possible two years ago just can’t be done today or can only be done at a higher rate. Lastly, it is the one factor in financing that people know the least about. Often when I speak with people they may know what they owe on their home and what their credit score is but have no idea how much money they make each month, their monthly bills, whether they are a W2 employee or a 1099 self-employed person. This is a huge factor in finding a loan because the banks want to know how you are going to pay their money back. Find out how you are taxed, what your employment status is (self or otherwise i.e. retired), how much you make each month, and how much you have in savings, retirement accounts, or any other liquid or semi-liquid assets you have such as money market accounts or certificates of deposit.

Your Financial Goals: Chances are if you were asked, “What are your financial goals in refinancing your home?” you would simply say, “Duh, a lower rate and payment. What else you stupid mortgage broker?” Everyone wants the lowest rate and payment possible. To mortgage professionals that is a given. They know that if someone has a 6.5% mortgage, chances are they won’t go for an 8% mortgage, and they shouldn’t unless the value was sucked out of their house and they are looking at 8% or foreclosure. What you really need to figure out is if you want a normal, secure 30-year fixed mortgage, or if you don’t care about risk and you want to take out all the equity you can and invest it in securities that have a higher return than what you pay in interest. Think about how you want to fit your home into your finances for the rest of your life because it can be your biggest asset or like a lot of people it can be your biggest liability. Discuss this with your spouse before hand, and if you did your homework and find a professional who knows something about mortgage planning, discuss it with them and formulate a strategy on how to best use your mortgage to help you achieve your over all financial goals. This is the part that good mortgage professionals will talk with their prospects about for the longest amount of time because it helps them find a product that truly benefits their client.

Just like a lawyer prepares to make his/her case before the court, so must you prepare to make your case before the bank. Applying for financing is exponentially easier if you can prove that you can pay the bank back. The more details you know about the four factors above, the better prepared you will be to get a good loan and avoid becoming a statistic.