How a Refinance Can Drive Down Your Monthly Expenses

While all real estate may be local, so too is it true that one homeowner, confronted with the opportunity to save $250 per month through refinancing, for example, may view that as a significant financial relief while another may feel it’s not even worth it to get off the couch to consider going through the hassle of the loan process. As we work into the second half of 2019, there is no mistake that the low rate environment we are enjoying again is providing opportunities for homeowners to refinance. Often in these cases, having an open mind about any level of savings can help us determine whether or not a refi is “worth it.”  Here in the San Francisco Bay Area, if we take an average loan size and make some assumptions on monthly savings through a refinance at today’s rates, we see that it’s not unreasonable to think that our clients can save between $150 and $350 per month. When you look at this in relation to the most significant household budget expenses; auto loans, student loans and credit car payments, it’s easy to see why a careful review is a great idea. Need more proof?

  • As of 2018, it is estimated that 44% of American adults have a car payment. On average these individuals owe over $30K on their auto loan and they pay over $500 per month on their payment. Interest rates vary but with an average FICO score of 695, you can bet your bottom dollar that some of these merry motorists are not enjoying 1% interest rates on their auto debt. It’s possible today’s refinance could cut your auto payment in half — or at least that’s the way it would feel until the car is paid off.
  • The average student graduates (or not…) college with about $25,000 in student loan debt. It’s estimated that the payment on this would hover around $280 per month. Owning a home is a big financial responsibility. Owning it alongside student loan debt can turn it into a financial burden that refinancing might ease.
  • Depending on what stats you review, it’s estimated that the average American carries between $4000 and $7000 per month in credit card balances that roll from month to month. And you can be sure that as this revolving debt ages, the interest rate on it does not suddenly get better. To break this cycle, a refinance can provide needed monthly budget space to slash the credit card balances and get off the minimum payment treadmill.

Bear in mind that in each case above, I am not advocating that our clients take on more debt! We are not suggesting that they do a cash-out refinance and pay off these other obligations. That may prove to be a good strategy and might warrant further examination. But even in cases where a borrower simply does a “rate and term” refinance and lowers the rate and payment on an existing mortgage, the savings that result can go a long way to comprehensively addressing the other components of any household budget.

We’re here to help when you’re ready to look under the hood, roll up your sleeves and do the work.

My uncle has a country place, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Jumbo Mortgage with an H-4 Visa

“I pledge my head to clearer thinking,

my heart to greater loyalty,

my hands to larger service,

and my health to better living,

for my club, my community,

my country and my world.”

Hold on a second! That’s the pledge for 4-H Club, Rob, and you’re supposed to be discussing the H-4 visa here. You’ve got it backwards. Ah yes….sorry about that.

The H-4 visa. This is a visa issued by the U.S. Citizenship and Immigration Services (USCIS) to immediate family members of H-1B visa holders. These individuals are not US citizens or permanent resident aliens (green card holders) but “non-permanent resident aliens.” Make special note that they are also not “foreign nationals” or “non-residents.” That aside, it is not uncommon for us to get a call from H-1B/H-4 holders who have attempted to qualify for a home loan and been told by their lender that the income from the H-4 holder cannot be considered. Naturally a married couple purchasing a home would plan to use the combined household income and often they’ve used online tools and calculators to determine their debt-to-income (DTI) ratio in this manner. However, the vast majority of lenders will not permit the income of the H-4 holder and when the spouse’s income is removed from the loan application, often a denied loan is the result. But there is hope and we do have jumbo mortgage programs that will allow H-4 income.  These programs will also allow for a 10% down payment up to purchase prices approaching $2MM.

Here in California, we will accept the income of both the H-1B and H-4 visa holder assuming, in addition to other requirements, we have the items below:

  1. Social security numbers for both borrowers.
  2. At least two years of filed tax returns in the United States.
  3. At least two years of US credit history and acceptable FICO scores.

Aside from the H-1B and H-4 visa, I am no stranger to the other types of non-permanent resident alien visas that we commonly see here in California, and they include; E-1 and E-2 visas, the L-1A and L-1B, the L2 and others. If you’re unsure if your visa type is eligible for mortgage financing, please get in touch any time.

To make the best better,

 

Rob Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Lock Watch for the Week of 3/11/2019

Volatility-O-Meter:

A lot of key reports this week and on the heels of the real dud of a jobs number Friday. Could this be an inflection point? We’ll see. Oh, and let’s not forget auctions too.

Economicalendar (all times are Pacific):

  • Mon, 3/11:   Retail Sales (5:30am), Business Inventories (7am), 3-Yr Note Auction (10am).
  • Tues, 3/12:   CPI (5:30am), 10-Yr Note Auction (10am).
  • Weds, 3/13:   Durable Goods and PPI (5:30am), Construction Spending (7am), 30-Yr Bond Auction (10am).
  • Thurs, 3/14:  Jobless Claims and Import/Export Prices (5:30am), New Home Sales (7am). Fed Balance Sheet (1:30pm).
  • Fri, 3/15:    Empire State Mfg Survey (5:30am), Industrial Production (6:15am), Consumer Sentiment and JOLTS (7am).

10-Year Treasury History

  • 2.64%   Market Open
  • 2.74%   One Week Ago
  • 2.63%   One Month Ago
  • 2.87%   One Year Ago

(Need a rate quote for your specific scenario? Click anywhere on this link.)

Marin Ultra Challenge 50K

The weather forecast called for 100% chance of rain. High of 52F, low of 39. A great day to tackle another ultramarathon and my second 50K (31 miles in name, closer to 29 by way of my Garmin), right? The Inside Trail Marin Ultra Challenge started at 6:30am at my favorite House of Horrors, Rodeo Beach. This time, the course would be different than last month’s Coastal Trails 50K, but employ many of the same trails, ascents and descents. Combined again with the muddy conditions, it was shaping up to be one of those days where you would be wise to live by the motto, “Don’t think, just do.”

So up we climbed out of the staging area. Oh, and lest I not be grateful, it was not pouring rain while we waited to get underway. The first miles of an ultra should always be uneventful and traversing Gerbode Valley, I kept my pace in check and focused on not repeating the epic fade that defined last month’s race. At the first aid station, some 5 miles in at Conzelman, I felt zero strain. I pressed on to the Tennessee Valley aid station at mile 10 using the same cautious, at times even absurdly slow, approach. The climb out of Tennessee and down to Pirate’s Cove was also very conservative and the trail here was treacherously slippery. Too early to make mistakes, fall or otherwise get discouraged. As the skies opened I was mostly thinking about my son’s Junior Warriors basketball that I would be missing, and that would be getting underway shortly.

Out of the Cove, we climbed up to the ridge above Muir Beach and then descended to the aid station there. At this point, none of us were protecting our feet any longer. There were too many puddles, too few firm patches of trail and one simply resigns to having their feet soaked. At Muir, we started an out/back on Dias Ridge and were greeted with the day’s worst weather; cold, dark, rainy, ridiculous.

Returning to the Muir Beach aid station, my mindset shifted to the two key climbs required to get me home. First, to ascend out of Muir valley, then once back in Tennessee, to go up and out of there, gain Hill 88 and downhill to the finish. It would work out to be almost another two hours of running and despite the mud at Green Gulch, there was some promise of sun, and it was a promise fulfilled upon gaining the top of the last ridge.

At about this point, I realized I might make a time goal that seemed improbable at the start but within the grasp of reality assuming a strong push and no mistakes. That was a mixed blessing because now I had to work hard and not let up. I would have much rather cruised home while taking in the sweeping coastal vista, but instead I downed another caffeinated energy gel and gave it a go.

I learned a lot last month about what not to do in a 50K. I can be pretty hard-headed, but since I don’t have time to train very much and because I’m playing with fire every time I suit up to run long distance these days, I figured it was a safe bet to apply those new skills and, for the most part, it worked. I felt pretty good upon finishing, got into dry clothes and hung around to cheer others in. Oh, and though still brisk at the beach, the sun smiled and capped a really solid day in the saddle. Next stop, twice the distance, but that’s a bit off and not something to think about right now.

It keeps you runnin’,

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

I Got Another Rate Quote. Can You Beat It?

Talk may be cheap, but money is not. And you can bet your bottom dollar that most consumers seeking to get a mortgage will shop for the best rate quotes through any number of ways; their local bank, the internet, etc. We will often get requests to match or beat rate quotes as a result. Instead of publishing rates and promising that we’re the cheapest and best source for all rate shoppers, which is something that is frowned upon by the regulators of our industry, I instead want to shed some light on some of the governing principles that guide rate quotes from any and all lending sources. Below are three constants that apply in each case and to all shoppers for all programs.

[Too lazy to read the rest? Watch the rockin’ video below for all the information covered in this blog!]

Follow the Regs

With the passage of the Dodd-Frank Wall Street Financial Reform Act, the mortgage industry became subjected to the ‘anti-steering provision’ which prevents a mortgage loan originator from earning any more or less in commission depending on the rate charged to the consumer. In short, whether we provide you with a 3%, a 4% or a 5% rate, our compensation is the same. We have no incentive to put you into a program with a higher rate. In fact, you could argue that we have an incentive not to do this. After all, lower rates give an edge in winning rate competition and they bestow more qualifying power on the borrower. But there is an ugly side to the anti-steering provision — the lender’s inability to leverage their compensation to be more competitive. For example, prior to Dodd-Frank, originators had flexibility with their commission. If they needed to cut it in order to win a deal, they could. But now, our regulators say that if we had the ability to charge less to Consumer A, who does a lot of homework and negotiates strongly, what would prevent us from raising our compensation on unsuspecting Consumer B? The ability for us to negotiate is largely a thing of the past. Sure, we can submit for price exceptions on occasion, but they are just that — the exception. And the rule severely limits a lender’s ability to match or beat.

Time Is of the Essence

In real estate, we write “time is of the essence” into our contracts and this philosophy holds true with rates too. Just like the stock and bond markets, rates fluctuate every day and sometimes even multiple times when the markets are especially volatile. So it is vitally important that consumers shop for rates on the same day. A common scenario we see will have a borrower apply for a home loan in, say, January. Maybe they will get all the way to the altar with a pre-approval but then not find a property. During that process, the lender likely quotes a specific rate. Now, fast forward a few months and the borrower is working with a different lender and gets a quote that is higher or lower. This does not necessarily mean that the second lender’s rates are organically any better or worse. It might simply mean that the market has changed during the interim. So, collect your rate quotes on the same day if you’re comparing multiple sources. It may be time-consuming but it’s the only way you can truly be accurate.

The WebMD Syndrome

Lastly, when pitting one source of rates against another, make sure they’re all on equal footing in terms of the depth of the quote. Look at it this way. If you wake up one morning with a rash, you can research your symptoms online and get an idea of your condition. Or you can actually visit your doctor who will do a physical exam, perhaps blood work and then give you a diagnosis. Now you have a choice, you can follow the instruction of the doctor or of the internet. You see where I’m going with this. So too in the field of rate quotes, if you have had a lender pull your credit, review your complete application and provide terms for your loan, placing this on equal footing with an online quote could be risky. Rate quotes for jumbo mortgages are most sensitive to the finer qualifying attributes of the applicant and for this reason, I highly advise those in the jumbo market to get a complete credit approval prior to comparing rates.

I have always believed that an educated and informed consumer is our best client. And this applies to rate shopping as well. I similarly feel we always have a very strong chance of earning business based on available rates so long as quotes are on a level playing field, and getting the shopping public up to speed on this is something I’m very happy to do. If we can help you with your next home mortgage, let me know!

No one wants to be defeated, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Jumbo Mortgage for the Self-Employed

One thing of which our industry does a terrible job is promoting a sense of optimism among the self-employed.  Whether the one-man-band sole proprietor, or the complex, greater-than-25% owner of a multi-million dollar S-Corp, this long-suffering subset of the borrowing population has traditionally experienced stiff headwind in the mortgage process because the objectives of running one’s own business frequently fly in the face of what it takes to qualify for a jumbo mortgage.  There are a combination of reasons why this has been the case and we’re going to look at those here, along with what the self-employed borrower and business owner can do to stack the deck in his/her favor when it comes to qualifying for any mortgage, but especially one that exceeds the conforming and FHA loan limits.

Choose Your Lender Wisely

I realize the temptation to seek a mortgage at the institution where you have your business checking account may be great, but don’t let convenience trump expertise.  As an industry insider, I can tell you right now that I have known MANY colleagues who cannot decipher a business tax return.  Simply, you very well could find yourself working with a mortgage loan originator who does not know how to accurately calculate your income and give you the benefit of every qualifiable dollar.  Of course, many of the self-employed write off as many expenses as possible in an effort to limit their tax exposure.  But beyond this truth, loan officers who do not know how to distinguish between sole proprietorships, partnerships, S-corps and corporations and the documents each require are definitely going to struggle to give the buyer/borrower the benefit of the qualifying doubt.  This becomes even more evident when jumbo mortgage financing is at stake because here, nuances in how income is qualified will be investor specific and often single-entity retail banks will not have the flexibility to qualify the maximum percentage of all buyers — their guidelines simply do not accommodate enough scenarios.  Inexperienced, uninformed and even lazy loan officers can work at some of the largest banks in the nation.  Don’t let the name and the convenience of your checking account’s home fool you.

Understand the Alternatives

At the end of the long, hard workday, some of the self-employed may simply have a really tough profile, one that doesn’t fit neatly into the standard credit box.  For them, a loan originator needs to be well-versed in programs that perhaps allow bank statement or asset-backed qualifying parameters.  While these are not the stated income loans of yesteryear, some of them compare very favorably to “A paper” options and often we find that these loans are a viable alternative.  Once we stop trying to put a square peg into a round hole, the self employed borrower begins to realize how much more in-step these programs are with the way they actually run their business.  For some of these options, no tax returns are required.  And for a partner who may have many K-1 forms, you can imagine the relief they sense when we actually make the documentation process easier rather than the opposite.

Running a business is challenging enough for the self-employed owner.  Getting a mortgage should not be equally as difficult and understanding the lending environment goes a long way towards fostering success.  As a mortgage lender who is fluent in self-employed business entity types, and who has access to an independent mortgage banking platform that provides many options to the business owner, I want business owners to know that they should indeed be optimistic when they go to qualify for a home loan.  Loan agents like me are out there and we want to help.  Let me know if I can be of service today.

Takin’ what they’re givin’, 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Lock Watch for the Week of 2/11/2019

Volatility-O-Meter:

Amid a backdrop of economic slowdown abroad, the US kicks off the week quietly but then things ought to heat up. And let’s not forget the threat of another government shutdown (Nightmare on Elm St. Part II).

Economicalendar (all times are Pacific):

  • Mon, 2/11:   Quiet.
  • Tues, 2/12:   JOLTS (7am).
  • Weds, 2/13:   CPI (5:30am). Treasury Budget (11am).
  • Thurs, 2/14:  Jobless Claims, PPI, Retail Sales (5:30am). Business Inventories (10am).
  • Fri, 2/15:    Empire State Mfg Survey and Import/Export Prices (5:30am). Consumer Sentiment (7am).

10-Year Treasury History

  • 2.66%   Market Open
  • 2.72%   One Week Ago
  • 2.71%   One Month Ago
  • 2.86%   One Year Ago

Coastal Trails Golden Gate 50K

On Saturday I ran my first “ultramarathon.” The Coastal Trails Golden Gate 50K (that’s 31 miles for us non-metric folk and 33.6 miles for us looking-at-my-Garmin-Fenix5-running-watch-stats folks) was, to cut to the ‘being chased’, a tale of suffering the likes of which I have not felt in some time. Even though I would consider myself a “seasoned” endurance athlete as a result of 14 Ironman triathlon finishes and countless other long distance competitions, not much could have prepared me for the exquisite combination of distance, climbs and descents, cold rain and mud that I experienced on this glorious day. Now, granted, hardcore ultramarathoners will consider my journey here, and 50K itself, a dance among the daffodils, but when career and parenting conspire to allow you to run only 15 to 20 miles a week in training, giving a fat 30 miles a go elevates the term ‘Weekend Warrior’ to a whole ‘nother level.

Anyway, let’s get dirty. The race started at Rodeo Beach and despite the rainy forecast, the day could only muster breaking clear and cold. From sea level, there is nowhere to go but up and that’s exactly what we did, climbing the Coastal Trail past Battery Townsley and up over the ridge to then descend into Tennessee Valley — another awesome place for a nice hike. But again, today was not that day. From TV, we headed up the Fox Trail and then descended into the Pirate’s Cove loop, which is Marin coastal scenery at its best. The weather held nicely and the muddy, uneven steps out of the loop were manageable. By the time we were back on the valley floor we were about 10 miles into our day and ready to tackle the long, steady Marincello ascent towards Wolfback Ridge. I was hanging in on the descent to the Golden Gate Bridge but somewhere along the subsequent climb alongside Conzelman Road I started to feel the fatigue of 16+ miles setting in. But still, not even halfway there.

The Persians have a saying, “The drowning man is not disturbed by the rain,” and oh, did this prove to be true. On the long descent back to Rodeo Beach, the rain set in, the skies grew dark and it got cold. The two, short and steep insulting stretches along the Coastal Trail at the bottom of the descent were mud-choked runnels of Slip-and-Slide fun. And so it was that I returned to the start area again and headed back up the hill for loop two. But not after a very kind volunteer helped me pull a fleece hat out of my running vest and send me off with words of encouragement. One thing I learned while racing long ago? Don’t linger at transition points that come through any start/finish area. The temptation to bail is too great and it makes succumbing to such temptation much easier. In fact, don’t even look at the festivities. Keep moving.

I somehow managed to top out without too much pain. I even descended consistently and with gratitude, as for this loop we did not need to retrace the Pirate’s Cove section. Instead, we turned right back up Marincello and repeated the half marathon loop. It was on that descent that I realized my training-deficient legs had the endurance to run only about 24 miles and that the remainder of this day, if I was to complete it, would be a mixed bag of hiking the ascents quickly, running downhill gingerly on my shattered quads and then playing a game of mental poker comprised of the phantasmogoric next hands of psychological milestones I could soon reach before throwing in the proverbial sponge.

Just shy of 6 hours, I brought her in. My wife and son were there in the rain to greet me. Despite the self-inflicted hardships and what the author of this post might otherwise have you believe, this was a profoundly moving experience. And it was also an important step on the path to a larger goal. Like most such endeavors, it didn’t go exactly to plan and it was way bigger than myself. Part of what excites me now is the prospect of figuring out how to do it better. What seems daunting at this moment, will be the skill and ability I will possess later. And I will be better for having stuck with it.

Get there when you get there,

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Am I Too Old to Get a 30-Year Mortgage?

Does your job ever, from time to time, force you to provide the answer to what you feel is a simple and obvious question? Do you feel a twinge of embarrassment at your inability to contain slight laughter upon responding?

If you can relate to this situation, I want to confess that I have, on more than one occasion, spoken with a mortgage prospect who, shall we say, would be “of retirement age.” This person will ask, “Am I too old to get a mortgage?” The logic, of course, is that if the likelihood the mortgage term would exceed life expectancy, there’s no way the bank would want to take the credit risk. Makes sense, right?

This is incorrect.  We may not exercise age discrimination in lending. So long as the borrower is not a minor and otherwise has legal capacity to make important decisions, then the qualifying criteria such as income, assets and credit, are the same for the 91-year old borrower as the 31-year old.

As I write this in 2018, what’s interesting to note is that the Greatest Generation, a demographic that generally hated debt to start, is often the same that has the belief that their age prevents them from perhaps getting the loan they need for any number of reasons. The aversion to debt and the assumption that no lender would take the age-related risk often prevent so much as inquiry being made about feasibility. Hopefully, this post will confirm that we’re happy to help — even if you should survive to 105.

Carpe diem,
Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960

Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Closing in the Name Of

There will be no profanity in this post, just in case you get the cultural reference in the title. I won’t even repeatedly scream at you. Instead we’re going to cover a topic that sidesteps injustice, drama or even frequent occurrence, but it deals with a scenario that comes up occasionally and when it does, there is quite a bit we should know before taking action. So let’s talk about closing a residential real estate transaction in the name of an LLC or other business entity, like a partnership or a corporation. Can you do that? What’s different and where does one start the process?

[Too lazy to read the rest? Watch the video instead!]

Guarantee, Guarantor, Guarantas

The first two words above, anyway, are the key concept here. It is indeed possible for a one- to four-unit residential property to be closed or vested in the name of a business entity, but when this happens, essentially what’s transpiring on the lending side is that one or more of the business owners are using their personal income, asset and credit profile to guarantee the loan on behalf of the entity. So, in essence, the “borrower” becomes a “guarantor.” Again, critical to grasp the concept that the business itself is not the borrower(s). If that were the case, we’d be talking about a commercial loan and not a residential mortgage, as here.

Wage Against the Machine

Consistent with a traditional mortgage for a traditional borrower with a traditional credit profile, our business entity borrower will have to provide an additional layer of documentation pertaining to the business itself. When vesting or closing in the name of an LLC, partnership or corporation, the owners of the business, if not the same as the borrowers/guarantors for our loan, will need to provide articles of incorporation, partnership agreements and other forms and questionnaires to support that the owners are all aware that a mortgage is being taken on the subject property. Perhaps most importantly, when seeking to obtain a loan in the name of a business entity, expectations need to be set up front to assure that the “borrowers” as well as the other majority owners in the business understand what will be involved.

So yes, we can close in an LLC. We can close in a partnership or corporation too. But we have to view things differently from Day 1 in order to get it right and our clients must understand what will be expected of them and their co-owners. With the new tax laws and with an increasing number of real estate investors holding their properties in an entity for both legal and tax purposes, closing in an LLC or other entity is becoming more common. If you have questions about how to efficiently get a mortgage in the name of such an entity, let me know how I can assist.

Some of those that work forces, 

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959
rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960

Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

Jumbo Mortgages with 10% Down (80-10-10) 

Just a few short years ago, if a buyer here in the San Francisco Bay Area attempted to purchase a home with a 10% down payment, the call I would anticipate from the listing agent might have gone something like, “Uhhh, your buyer is only putting 10% down.  Can they even do that?”  But as we get 2019 underway, with some higher-priced homes sitting on the market for longer and others seeing price reductions from their original list price, savvy buyers are taking advantage of these trends and again putting forward strong offers — albeit some with only 10% down.  Can they still do this and win?

Of course the answer is “Yes!”  But since some doubt still swirls around the topic, why don’t we look closer at jumbo mortgages with 10% down.  Particularly the piggyback option.

“What is 80-10-10 Financing?”

I remember my grandmother calling the refrigerator a “Frigidaire” and our jeans “Dungarees.”  So it is with 80/10/10 financing.  It’s sort of the brand name we bandy about when what we’re really discussing is a concept, and the manifestation of that concept is subordinate financing, AKA as a “piggyback loan.”  Most simply described, a buyer using this structure will be obtaining two loans instead of one in the purchase of a home.  This is often referred to in broad strokes as an “80-10-10” loan.

“How Do 80/10/10 Loans Work?”

When we say “80/10/10” we are specifically implying the following:

  • A first mortgage to 80% of the home’s purchase price.
  • A second mortgage equal to 10% of the home’s purchase price.
  • A buyer’s down payment for the remaining 10% of the purchase price.

Since the lending world is replete with guidelines, it doesn’t always play out exactly this way, and for any number of reasons.  Just keep in mind that “80-10-10” could also just as easily be 75-15-10, or sometimes when we need to use a conforming first mortgage, you could even see a 62-28-10, for example.  You get the idea, we don’t always have to be at a strict 80% and 10% for the loan amounts.  But no matter how we structure the transaction, the sum of both loan amounts plus the down payment will equal 100% of the purchase price.

“Can I Qualify for a Piggyback Mortgage”

 When obtaining a jumbo 80-10-10 loan, the first mortgage will typically be a fixed rate loan (30-year fixed) or a hybrid ARM (10/1 ARM, 7/1 ARM or 5/1 ARM).  The second mortgage is most often a home equity line of credit (HELOC).  There can be different qualifying criteria for both loans and your loan officer will have to navigate two sets of guidelines in most cases.  Not all loan originators are adept at subordinate financing but for my clients, the pre-approval process for a piggyback loan is identical to the process for obtaining a single loan — we understand it on every level.  While an 80-10-10 can sometimes be harder to obtain than a single loan, there are also cases where it can enable an approval that otherwise would not exist.  For example, a buyer may not qualify for a single loan of $750,000, but may pass with flying colors if the loan is restructured as a first mortgage of $625,000 and a second loan of $125,000.  Same total sum borrowed, but two very different outcomes.

As a home buyer looking for a jumbo loan with a 10% down payment, it may be intimidating to search for the perfect loan options.  A preponderance of outdated and confusing information will often greet you “in the field,” and many real estate professionals will still tell you a 10% down payment jumbo loan is not possible.  But as we stand on the cusp of 2019, we presently have the capacity to allow a buyer to make a 10% down payment, using the 80-10-10 structure, on a purchase price almost as high as $2,200,000.  And here in the San Francisco Bay Area, this is not an uncommon scenario.  Get in touch today if you have a home loan need of this nature!

Happy New Year!

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
Cell/Text: 415-367-5959 Fax: 415-366-1590
rob.spinosa@rate.com
Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960
Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283

So You Wanna Buy a Home in 2019?

You’ve decided that 2019 is the year when you stop throwing away your rent money and paying someone else’s mortgage. Maybe you’ve even made this a written resolution and saved up a down payment to show for it. But up until this point, it’s just been a vision, an item on a wish list or — how millennial of you — a dream board. Perhaps you came close to pulling the trigger in 2016, 2017 or 2018, but the thought of getting beat out by the severe competition was just too anxiety inducing to bear. However, this time will be different because as the last strains of 2018’s Auld Lang Syne faded into the midnight air, you decided this is it. This is the year. Good for you.

What You Need to Know

2019 is starting with interest rates trending lower and (once normal market activity resumes) a greater amount of housing inventory. The extreme sellers’ markets of years recently passed are giving way to more price reductions and longer days on market. These are all very good signs for the buyer, first-time or otherwise. Credit availability is at its best levels since before the downturn of 2008 and while you still need to qualify to get a loan, even the self-employed borrower or the entrepreneur without a steady paycheck now has a multitude of mortgage options that allow them to jump into the market with their less-financially-complex brethren. And low down payment options remain as well; 0% down for veterans, 3% down for conforming loans, 3.5% down for FHA and 5% and 10% down on super jumbo. Speaking of conforming and FHA, new and higher limits exist for the higher-cost areas of the country. Can you find anything negative in the paragraph above? Me neither! It’s still a great time to consider buying over renting.

What You Need to Provide

As mentioned above, we are still squarely in a “fully documented” world, even if bank statement and asset depletion mortgages don’t follow the traditional documentation guidelines entirely. Still, for most, getting your paperwork organized is a worthwhile exercise if you plan to purchase this year. As the year gets underway, you’ll want to create a folder for the following:

  • 30 days worth of paystubs. If you earn bonus or commission income, save your year-end paystub from 2018 as well.
  • 2 years of W-2 forms (you’ll have your 2018 W-2 by the end of January).
  • 2 years of Federal tax returns. Until you file your 2018’s, we’ll work off of 2016 and 2017.
  • 2 months of bank statements. Save all pages of your statements, even if blank.

Now if you’re self-employed, this list will vary, but we’re happy to help you understand your specific requirements. And remember, WE LOVE THE SELF-EMPLOYED. You work hard to maintain your business and we work hard for you.

What You Need to Do

Admittedly, looking at homes is the exciting part of your search and also admittedly, that piece does not fall within a mortgage lender’s purview. I’m sorry about that. However, no top-notch Realtor is going to take you out to look at property without a pre-approval letter in hand and that’s where we can assist. Our pre-approval process can be entirely digital (if you prefer), it’s free and it doesn’t obligate you in any way. Your pre-approval is valid for at least 90 days and can be updated if necessary. The exercise, even in a worst case, is insightful, informative and confidence-instilling. In my nearly 20 years as a mortgage professional, I can attest that going through the pre-approval process is the single best step any potential homebuyer can take. It makes you serious. It makes you smarter. It makes the difference and sellers can sense it when you make an offer. So invest in your pre-approval once you resolve that you’re serious about buying a home.

With diligent care, thought and planning, there’s no reason 2019 cannot be the year that sees you become a homeowner. Real estate ownership is, in many high-cost areas, a fundamental pillar that supports financial freedom and we’re here to help you understand what it takes to turn a resolution into reality.

Should auld acquaintance be forgot, 

 

Robert J. Spinosa

Vice President of Mortgage Lending

Guaranteed Rate

NMLS: 22343

Cell/Text: 415-367-5959 Fax: 415-366-1590

rob.spinosa@rate.com

Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960

Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.

Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283