How Do Rate Locks Work?

There is one thing in common among all of our clients.  No matter what price point, no matter what loan size, no matter good credit or bad, no matter first-time buyer or seasoned investor, all are looking for the lowest interest rate at the lowest cost.  But how does a mortgage borrower secure such terms?  A part of the home loan process is “locking an interest rate” and this process could use a bit of explanation, so as to dispel some of the myths and offer a better understanding of how things work.

What Is a Rate Lock?

You’ve done your interest rate shopping and made a decision about working with a mortgage lender/broker.  The time has come to “lock” a rate.  What does this really imply?  A rate lock is a commitment the lender makes to you to preserve a given rate for a specific period of time.  In exchange for this commitment, you, the borrower, are insulated from market risk.  Once your rate is locked, that is (barring a few exceptions) the rate you will obtain for the life of the loan.  With many lenders today, there is no cost to lock a rate, but as you’ll see below, there are implications once a lock is in place.  It is fair to say a rate lock is a commitment on both sides of the transaction, borrower and lender.

Time Is of the Essence

All rate locks exist in finite periods of time and the most common lock periods are 30 days, 45 days and 60 days.  Longer locks will commonly have higher rates or costs associated with them, and this is a function of risk.  The longer a lender commits to preserve a rate, the more the lender is exposed to underlying financial market volatility.  Think of your rate lock in the same light as a life insurance policy.  Purchasing a policy with a longer term will be more expensive because the likelihood of a claim increases for the insurer as the years go by.  

Breaking the Chains

So now that you’ve locked your rate, what happens if your lock expires, or you decide to break the lock, or rates go down?  These are all valid questions and they can all be addressed by the blanket statement that just as in life in general, breaking a commitment in finance has consequences as well.  Some lenders offer enticing “float down” policies and suggest that clients can have it both ways — both locked and floating.  There is always an offset with such approaches because behind the scenes in the mortgage secondary market, rates locks are complex hedges that involve costs and have metrics that impact a bank’s efficiency and cost of providing funds.  All lenders want to have strong “pull through” on locks, and their ability to offer future clients competitive rates depends on this.  All this said, sometimes rates do drop dramatically while a borrower is in process and there is potential for a “renegotiation,” but this is not common and any rate lock should always be perceived, first and foremost, as a “for better or worse” proposition.  Finally, transactions that run longer than their lock periods are faced with extension costs, which are best avoided.  Borrowers should know that they cannot deliberately exhaust a rate lock in the hopes of capturing a new, lower rate with the same lender.  In those cases there is often a 30-day “freeze” where a new lock would be subject to “worst case” pricing.

Locking your interest rate on a mortgage is an important decision and an important commitment.  A good lender can help you navigate the nuances of the choices before you.  Fundamentally, one locks a rate to prevent the risk that rates will go higher while in the process of purchasing or refinancing a home.  What we see, in practice, is that deliberate action tends to relieve stress and assure a better outcome.  “Floating” a rate for better is always tempting because as we agree, everyone is enticed by the idea of lower rates and lower costs.  But remember, temptation can lead to unecessary risk and risk is what a rate lock strives to address by tamping down market volatility and containing aspects of your process that you don’t control.  Understanding how a rate lock works and formulating your own plan on locking is a smart move, and we’re here to help you with it.  

Lock ’em and doc ’em,

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

How Long Is a Pre-Approval Good For?

You’ve decided to make the leap and enter the real estate market as a buyer.  You’ve been looking at homes online, the temptation has become too strong and you realize it’s time to hit the street and actually start looking at properties.  Your Realtor almost immediately informs you that not only will she not participate in your search before she knows you’re pre-approved, but also that in this pandemic day and age, without a pre-approval letter no serious listing agent will even let you step foot in the home for a viewing.  And so you reach out to your preferred lender and you get pre-approved for a mortgage.  Now, how long will that preapproval be good for?

There are a few elements involved in the lifecycle of a pre-approval so let’s look at some of the ones that typically govern the validity of your profile and the day it may expire:

Credit Report

It’s safe to say that your credit report has a 90-day expiration.  Even in cases where a lender will permit 120 days, we have to assume that a purchase timeline might be 30 days.  Since it’s largely not in your control, you never want your credit report expiring while you’re in contract.  At some point between 75 and 90 days, credit expiration becomes a material factor.  Now, if the original credit pull has you with 800 FICO scores and you’ve done nothing that would jeopardize your strong credit rating, it’s highly unusual for your credit report to suddenly become an issue, but a re-pull is warranted if you think you may enter a non-contingent contract when you’re coming up on your expiration date.

Tax Filing Deadline

In 2020, the income tax filing deadline was July 15, but in most years, April 15 is the day by which you either need to file your tax returns or file an extension.  If your pre-approval did not include this year’s filing and you’ve since filed your return (including e-file), your pre-approval must be updated accordingly.

End of Year

During January and February, most of us get our W-2 forms, our 1099s, K-1s and other year-end statements of earnings.  All of these must be included in your file, so if your property search crosses the end of the year, your pre-approval would need to include the newly released information.

Life Events

If you get a new job, your hours on your current job are reduced or changed, if you get divorced, buy a new car, etc., all of these events could impact your pre-approval.  A good way to conceptualize your pre-approval would be to assume that anything that impacts your income, assets or credits could influence your mortgage application.  Let us know when these things happen and we’ll make the necessary adjustments.

Your mortgage pre-approval is always a work in progress until you go into contract.  We can make any necessary changes and advise on financial aspects in advance too.  We’re here to help and ultimately our goal is to build and maintain and strong and ready file so that you have the best chance of winning your offer.  We need your help to do that and we, in the industry, can all help by reminding you it’s not over until the keys are in your hands.

Best if used before,

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

How Long Does It Take to Get Pre-Approved?

Many real estate markets in California move fast, but it’s been this way for years.  When a hot property hits, perhaps there’s a showing on Sunday (more on that in a bit, and in the context of COVID-19) and then offers are due on Tuesday, with some buyers scrambling to make a preemptive offer, if possible.

This reality can run counter to some buyers’ inclinations to get their mortgage financing in order by dipping one toe in the water at a time.  It’s not uncommon for us to get a call that starts something like this:  “My partner and I are thinking about buying a home in the next 3 to 6 months, but we’re first-time buyers and not really sure where to start.  We were told by our real estate agent that we need to get pre-approved and might have some time over the next few weeks to look into this.  Can you help us get started?”  It’s also not terribly unlikely that a house will pop up that grabs these prospects by the heartstrings.  Before we know it, there will be a successive call that goes something like this:  “OMG!  We just saw the perfect home!  Offers are due tomorrow at noon!  What do we need to do to get pre-approved right now?”

So the real question here is, how long does it take to get pre-approved for a mortgage?  Of course, the answer will vary from one borrower to the next.  Some scenarios are quite simple — both borrowers get a W-2, have funds for their down payment in one account and have squeaky clean credit.  Others are massively complex — self-employment, multiple rental properties or entities owned, RSU or other variable income, a credit hiccup in the past, etc.  But at the end of the day, the single biggest factor determine the speed in which we can “decision” a pre-approval and get a buyer into the game comes down to the borrower’s organizational skills.  In other words, if any borrower(s) can complete a thorough and accurate application, then bear down and get us complete documentation for their income, assets and credit, usually and irrespective of complexity, we are almost always able to turn a pre-approval in under 24 hours.  Often, under six hours.  Right now, due to the pandemic, you may not even be able to view a property without a pre-approval letter in hand, so we are seeing a resurgence in interest for pre-approvals on short notice.  

The process and steps for pre-approval generally follow this pattern, and there is no cost or obligation associated with making an application:

  1. We always welcome an initial call to discuss objectives and answer questions.  Call any time!
  2. Our digital mortgage application is one of the industry’s best.  You can complete this user-friendly form in 10 to 15 minutes and whenever convenient.  It is best to tackle the application from a place where you have access to your financial documents so that you can assure accuracy, but even if this is not possible, some will complete the application from their smartphones with perfectly efficient results.
  3. Upon completion of your application, you’ll be prompted to securely upload your financial documents such as paystubs, bank statements, tax returns, etc.  While you can skip this step at this phase, consistent with our theme above if you are able to provide complete documentation, we are able to return a decision with less delay.
  4. We will follow up with you to review your information and issue a pre-approval letter for your search.

If you are “in the market” and your market is in motion, timing to pre-approval should not be a concern.  Yes, if you are able to start and complete the preapproval process without urgency, that’s helpful but not necessary.  We get how the housing market works and we understand what needs to happen when an opportunity arises or materializes.  Let us know when you need our assistance!

Point and shoot,

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

Pride

My most formative years were spent in the suburban Chicago-land area.  Our subdivision was an island among sea of cornfields.  The high school from which I graduated in the late ’80’s would have won no awards for diversity.  And if, at that time, you were my age and knew your sexual orientation was anything other than straight, you probably kept it to yourself.  The three-letter slur we freely bandied about at that time to denigrate homosexuality is harsh enough now that if I hear it, I cringe. 

As fate would have it, in my late teens, I moved out to Hollywood to pursue a career in music and it didn’t take long until I was exposed to others who were lesbian, gay, bisexual, transgender and who also happened to be wonderful people.  They were my co-workers and my friends.  They were damned talented musicians and artists and in the blink of an eye, I was forced to see the world very differently.

Just over my lifetime, I can observe and marvel at the increased ability by which LGBTQ individuals are able to express their sexual orientation.  Like with other efforts to expand human rights, equality, dignity and freedom, we are far from perfect.  But we have made unmistakable progress and many minds have opened.  We have had openly gay politicians and legal gay marriage in many states, including California.  And this trend shows, thankfully and with my full support, no intention of slowing down.  I will never imply to my young son that any discrimination against race, religion, sexual orientation or other cannot be lessened and, hopefully, eradicated over the course of his lifetime.  We know when the drum beats loud enough, when the water builds so high behind the dam, no army can stop an idea whose time has come, to quote Victor Hugo.  

I am not a member of the LGBTQ community myself, but I am out and proud to support their cause.  Our doors are open and we welcome them and their partners into our business.  We can offer not only great financial products and service, but a place where they will face absolutely no discrimination or prejudice and an overabundance of due confidentiality and privacy when and where required.  While I am optimistic enough about the future in our nation and our ability to pursue and prevail with equal rights for all, I am realistic enough to know it’s not OK to be silent about these matters any longer.  

With pride,

Rob Spinosa
Senior 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

Your Pandemic Guide to a Jumbo Mortgage

“Our Realtor said it’s very difficult to get a jumbo loan these days.”

“We tried to do a cash out jumbo refi on our place but our bank told us that they’re not doing those anymore.”

“We wanted to refinance our jumbo loan but by the time we did the research the rates weren’t any lower than what we have already.”

“Is it possible to refinance a jumbo loan without having to move our savings and investments to the bank who’s making the mortgage?”

“We have a 20% down payment and are looking to buy a house that requires a jumbo loan.  We had no idea that would be so difficult.  Why are banks now telling us we need more than 20% down?”

As we go into the second half of 2020, it’s unquestionably true that we’ve seen a complete reshaping of the mortgage industry due to financial turmoil wreaked by the COVID-19 pandemic.  And one of the products under most pressure has been the jumbo loan — programs that accommodate loan amounts greater than the conforming or FHA limits.  Access to this tier of credit is essential to the higher-cost coastal real estate markets as well as to larger cities with luxury markets, like Chicago.  So is the home buyer or owner looking to refinance out of luck if he or she needs a competitively-priced jumbo loan?  Fortunately, the answer is a resounding “NO!,” though some research may be required to find it.

As of June 1, 2020, here are some of the jumbo mortgage options we will permit:

  • 20% down payment purchase jumbo mortgages to $3MM.  Max purchase price is $3,750,000 in this case.
  • Cash out refinances to 70% loan-to-value (LTV).  Cash out amounts can exceed $250K.
  • Jumbo purchase and refinance mortgages that do NOT require transfer of assets to us.
  • 10% down payments on jumbo mortgage options.
  • “Rate and term” refinances to 80% LTV, up to a $3MM loan amount.

While we are not out of the pandemic woods yet, we expect that our jumbo options will continue to strengthen and expand so long as real estate sales remain robust.  While much of the country can make do with conforming loan products there are many key markets that rely on efficient and cost-effective jumbo loans.  We’re here to address that need if it applies to your scenario.

Go big and/or go home,

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

Will My Property Taxes Go Up If I Refinance?

Because the current interest rate environment is so conducive to refinancing, a concern that some have about taking action stems from confusion related to how their property taxes are determined, and specifically the question, “Will refinancing cause my property taxes to go up?”  It goes without saying that nobody wants to save money via refinance, only to see it evaporate in the form of higher real estate taxes.  But is this a real threat?  Or is it safe to assume that simply by refinancing you would not see a change in your tax basis?

Our answer must first address, well, the address — of the home, that is.  Since I’m a licensed loan officer in the state of California, working out of an office in Marin County, I’m only going to view this topic through my designer sunglasses.  In California, properties are assessed to market value when they change ownership, and change of ownership does not typically happen in a refinance.  So if you purchased a home for $500,000 in 2015, and it appraises for $650,000 in 2020 when you obtain your refinance appraisal, the county assessor is still working off your original assessed value as far as your tax basis is concerned.  Behind the scenes is a more complex calculation that has to do with changes to the ad valorem portion of your tax bill, adjusted by the lesser of a 2% annual increase OR the rate of inflation, as dictated by Proposition 13.  If you have questions about how to interpret your tax bill, give me a call or send me an e-mail any time and we’ll review it together.  But again, the incremental adjustments to the original basis prevail here and not a jump to the appraised (or market) value at the time of refi.

“But wait!” you say.  “My tax bill really did go up when I last refinanced!”

OK — let’s look at this a little closer.  We know that a refinance alone would not usually trigger a reassessment, but are there some things that could cause a fluctuation in the amount of tax you’ve been paying?  At times in the past, and especially during the downturn in 2008 through 2012, some homes were eligible for a temporary reduction in tax rate.  Those will revert back to their regular basis with rising values, though this may seem disconnected and cause one to think the property tax rate has been reassessed.  But the most common culprit is an escrow account for taxes and insurance.  Adjustments by your loan’s servicer that are required to maintain a sufficient balance might show up as increases to your PITI payment.  Both of the above examples could have coincided with your refinance and they may have changed your tax payment amount, but they would not have been a result of the refinance itself.

I realize that property taxes are a significant component of your total monthly housing payment.  After all, I pay them too!  So if you’re thinking about refinancing to get into better terms or a lower payment, and you have been reluctant to do so because you feel a mortgage lender’s appraisal and process could trigger an increase in your property tax bill, you can step back from the ledge and take a deep breath.  Refinancing, in and of itself and the vast majority of the time, does not cause your property taxes to increase in California.

Eureka!  I have found it,

Rob Spinosa
Senior Vice President of Mortgage Lending
Guaranteed Rate
415.367.5959  Cell/Text
rob.spinosa@rate.com
NMLS:  22343

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

How Hard Is It to Refinance a Mortgage?

On a weekend morning you wake up:

A)  Before 6AM.

B)  Before 8AM.

C)  Before 10AM.

D)  Yeah, yeah, I’m awake…

It’s time to take out the trash when:

A)  Pickup is the following day.

B)  The level of trash is approaching the top of the trash can.

B)  The level of trash has crossed the plane of the top of the trash can.

C)  Expert levels of jenga skill are required to balance your trash on the top of the steaming heap.

If you answered “D” to either of the above, and you have a mortgage in California, this blog post is dedicated to you.  You may be sitting on a pile of savings but are also concerned that refinancing your home loan may be too difficult or expensive, require tons of paperwork and inconvenience and may even end up in failure.  So let’s get serious about how to refinance your home here in 2020, even when the COVID-19 pandemic shows little signs of disappearing like a miracle.

What’s Involved?

If your only experience with the home finance process was getting a loan when you bought your home, you should find that the refinance process is far less stressful.  This is because you don’t have the ominous deadline requirements imposed by a purchase contract.  Time’s still of the essence — your rate lock is only valid for a specific period of time, but unlike with a purchase, if you run late, your earnest money deposit is not a risk.  I’ll generally ask a refinance prospect to send me a copy of a current mortgage statement and with that, I’ll do a complete analysis to determine if it even makes sense to refi.  This work up is free and has zero obligation.  If it makes sense to proceed, we’ll have a client fill out a digital mortgage application (if that is convenient) and then we’ll request the usual suspects as far as documentation is concerned; paystubs, bank statements and tax returns.  Often, the list is very manageable because we strive to reduce paperwork and variables at every turn.  We may even learn at this stage that the transaction does not require an appraisal.

What Does It Cost?

A typical refinance for a loan size ranging from $250,000 to $1,250,000 will usually cost between $3000 and $5000.  Sure there are ways to make these costs significantly higher or lower, but when you factor in the fundamentals; lender fees, title/escrow fees, prepaid interest, insurance, appraisal, etc., this is a reliable range for a “no point” refinance.  If an appraisal is required, it’s usually the only fee paid “up front.”  Most refinances will “roll” the closing costs into the new loan balance as well, and this prevents the borrower from having to write a check at close of escrow.  One can also choose to do a “no cost refinance” but the best fit for any client is always a math equation of financial objectives and available savings.  We are happy to help with this discussion.

How Do I Start?

Kicking off a conversation about a refinance involves no cost or obligation.  If you think you may have an opportunity to lower your rate, lower your payment, lower your interest payments over time, get cash out of your home or consolidate higher interest rate debt, get in touch.  It can’t hurt to learn about the options, but it can often help to act on them. Especially in the current, and historic low, interest rate environment.

You snooze you lose,

 

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

To LinkedIn, With Gratitude

A big THANK YOU for helping make me a top originator in 2019.

I’m proud to be among Guaranteed Rate’s top originators in the country, as ranked by industry publication Mortgage Executive Magazine.  For 2019, Guaranteed Rate placed 45 of us in the nation’s Top 200, and we could not have done this without your support. We always strive to provide the best financing experience possible and we wouldn’t be here without you and your referrals.

With gratitude,

 

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’m Here to Help You

  • Be clear.
  • Be specific.
  • Reduce uncertainty.
  • Speak to the most pressing need.
  • Keep running. You still have a long way to go.

No, I did not just come down off the mountain of some Tony Robbins motivational speech. No, I did not use the featureless timescape of shelter-in-place to read all of the self-help books heretofore exerting their gravitational force on my office’s shelves. Instead, I am recalling one long night in June of 2019.

Some of you know I dabble in the sport of ultramarathon. These are (usually) trail races that exceed a distance of 26.2 miles. The sport’s Super Bowl is the Western States Endurance Run. One hundred miles on foot, from Squaw Valley to Auburn, CA, mostly following the trail of the historic Tevis Cup horse ride. This might be a good place to remind readers that horses are generally not as bright as humans, but back to the story. You might be surprised to know that there are so many applicants for entry each year that, for most, a lottery provides the only remote shot at toeing the start line.

Like with many things in life, there are exceptions. Since it takes even trained ultra runners almost, if not more than, 24 hours to cover 100 rugged miles, let’s say you volunteer to pull an overnight shift at one of the aid stations that service the course? You might then be eligible for one of the few spots reserved for and assigned to aid station captains, to dole out at their discretion. Now, when I say “aid station” I don’t mean a folding table lined with cups of warm Gatorade. At “States,” we’re talking huge productions with food, medical, HAM radio operators, spectators and pacers. One, in particular and to which I had access through my running club, Tamalpa Runners, sits at “Rucky Chucky.” Here, at just under Mile 80, runners traverse the American River, sometimes by wading via guide rope or, in high-water years like 2019, they are shuttled across on rafts.

So it was that I found myself on “the Far Side.” There, on its sandy and overgrown bank, we would help runners out of the rafts, undo their life vests, and send most of them on their way up into the darkness of the summer night via headlamp. It was a surreal scene. At one point shortly after midnight, I found myself working alongside another volunteer. This individual, a young man who clearly had some first responder experience, stood prominently at the front of the line and enthusiastically directed the runners in a clear, loud voice as they clambered off the rafts in various states of exhaustion and quasi-delirium. Here’s a paraphrased smattering of what was hitting their ears:

  • “Runner 146, I am here for you. You are doing great. Come directly up and I will help you take off your life jacket!”
  • “Runner 318, I have been waiting for you. Keep up the great work! Look right at me. I will take care of everything for you.”
  • “You are looking great, Runner 212. I will assist you from here. Proceed to me, watch your step and don’t worry about anything else.”

I could not believe what I was hearing and experiencing. The comfort I — the guy who was NOT running — felt each time he directed an athlete in this manner was palpable. Ah, the sweet relief of not having to make another decision in my tired state! The reassurance the runners must have experienced in the dead of that night may have touched them for just an instant, but isn’t that what execution of all imposing tasks requires? They are almost always a series of individual moments where doubt must be quashed and the spark to continue must be ignited yet again, and again, and again.

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The 2020 Western States Endurance Run has been canceled due to COVID-19. There will be no race this June, no Rucky Chucky support crew, and my own dream to someday run will have to be postponed. But upon hearing the news of the cancellation, I recalled my experience volunteering. In this uncertain, weary, stressful time, I was encouraged to revisit my communication strategy with my clients and referral partners. Am I clear? Do I project certainty, optimism and offer a beacon of help? Do I help eliminate the stress of unnecessary choices and do I help get them on their way to their own success, even if my role will not necessarily be remembered in the chaos of all else going on? We, in many of our professional roles, are ultimately in a service business. How we go about assisting others in the toughest of times, in the dark of night, when we least feel like doing it, says the most about what we’re made of and who we really are. And that…that can never be canceled.

One day, 100 miles,

 

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

10% Down Payment Mortgage

But I don’t get it.  2020 started just like the many of the years that preceded it.  Sure, there was a seasonal slowdown in home buying activity as we got through 2019’s holiday season and got the new year underway, but with interest rates at historic lows, a strong seller’s market in the San Francisco Bay Area and lots of buyer competition for any desirable home that came on the market, it looked like deja vu all over again for anybody looking to purchase a home.  In other words, here we go again with having to come up with a large down payment (or even all cash), a push to offer without any contingencies in your contract and a general sense that it was going to take an act of God to actually get into contract.

Well, we got the act of God part.  Just not the one that any of us, save for the disbanded Global Health Security and Biodefense Unit, had planned on…

So, here we are, going into the heart of the spring buying season, in the middle of shelters-in-place and a COVID-19 pandemic.  Yet with all due respect given to the very real health concerns most of us share, real estate is an essential activity and some buyers and sellers have no choice but to be “on the market.”  For a handful of these buyers, who are not yet in a position to have saved a full 20%, or who have seen the value of their stock portfolios decimated by recent market volatility, a 10% down payment may be the only realistic way to purchase a home during the months to come.

The good news is that they can still do it.

“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.

In a very uncertain time, 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.  Sellers may not have the luxury of waiting around to get multiple offers in a market defined by the great uncertainty we all face today.  But in these challenging times of being shut in, will lie opportunity for the buyer who may have previously been shut out.  If I can help you better understand the inner workings of a 10% down payment mortgage option, we are available and open for business.

Take care and stay safe,

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