Tag: purchase

How to Rock a Bridge Loan

~ Rob Spinosa ~ Leave a comment

If you’ve been lamenting how tough it is to get your offer to buy a home accepted these days, think about how much more difficult it is for those who must buy a new home BEFORE selling their existing one.  After all, it’s practically impossible to make a contingent offer — defined as one that would allow you to sell your existing home first.

It’s usually in this stressful environment that someone well-meaning; a friend, a co-worker, even a Realtor, will swoop in and advise our buyer to “Just get a bridge loan!,” as if there is a simple, ready-made solution for our otherwise complex problem. 

So, let’s go under the bridge and learn about the waters that run the “buy before sell” dilemma.  Let’s figure out if a bridge loan is the right fit for you, or if perhaps a HELOC, a cash-out refinance or some other mortgage product can help you reach the higher ground. 

If you don’t ever wanna feel like you do right now, and you want to buy that great new place before you sell your current property, give me a like or subscribe on YouTube!

Give it away, give it away, give it away now,

Rob Spinosa
SVP 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.

How to Rock a Mortgage Application Without Hurting Your FICO Score

~ Rob Spinosa ~ Leave a comment

“What’s your rate?”

“How much will I qualify for?”

“Are you a banker or a broker or a lender?”

Nope, nope and nope.  None of these are the #1 question we get before a prospective borrower makes an application for a pre-approval.  So what is the most asked question?

“Will making a mortgage application hurt my FICO score?”

Yep, that’s it.  That’s the one that keeps some otherwise strong and qualifiable buyers on the sidelines and paralyzed by the irrational fear that simply by having a lender make a hard credit inquiry, and access their Equifax, Experian and Transunion scores, that they will somehow see their excellent credit rating vanish in the face of that lone (or multiple) inquiry.

So, let’s walk around all day long and have a little bit of fun busting the myths about credit scores, credit inquiries and mortgage applications.  

Need some solid advice about mortgages and credit scores?  Give me a like or subscribe on YouTube!

Hurts so good,

Rob Spinosa
SVP 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.

#OKBoomer, You Don’t Need 20% Down

~ Rob Spinosa ~ Leave a comment

Bound to happen from time to time in the digital age, a saying goes viral — in this case, “OK, boomer,” — which is meant to expose a close-minded or out-of-touch opinion, thought or mindset of one generation by another (I’ll let you figure out the age demographics here). Hopefully, the topic of this blog will transcend generational differences and address the assumptions about the down payment one needs to make when purchasing a home, versus the reality of what we see every day with those who are actually buying homes. I think you’ll be surprised at the expanse between fact and fiction.

Let’s start by saying that in the US, it’s been widely assumed that a homebuyer must make a 20% down payment of the purchase price. This concept has been propagated from one generation to the next and since Americans have been buying homes instead of carving them out of frontier land. In fact, not a week goes by where we don’t get a call from a prospective buyer that starts with an iteration of, “We’d like to buy our first home but we haven’t saved 20% yet…” Yet, over at least the last 20 years, the average down payment across the US has hovered closer to 6 or 7% of the purchase price. A far cry from the gold-standard 20% many buyers struggle to save. Let’s look at the number of ways that contribute to a buyer’s access to lower down payments:

0% Down Payment

Veterans and those in rural areas may have access to 100% financing. The VA loan program is a huge benefit and great way for our industry to show appreciation for those who have served our nation. The USDA loan program has geographic restrictions, but for some may also allow access to the financing without a down payment.  VA loans also have access to 0% or reduced down payments at loan levels that exceed the nationwide, $484,350 1-unit max.

3% Down Payment

Conforming loans still permit a 3% down payment up to a loan amount of $484,350 (thus permitting a purchase price of approximately $510K at max leverage). Yes, these loans have PMI, but they can be a great entry program for the first-time buyer, and they are not restricted to veterans, rural areas, income limitations or property types. Conforming loans are accessible by all who qualify and programs like the Home Ready mortgage have PMI that is less expensive as well.

3.5% Down Payment

FHA loans come in at 3.5% down, and in many areas, FHA loans are the bread and butter of the market. Borrowers with lower FICO scores, higher debt-to-income ratios and other challenges that could trip up a conforming loan, may find the FHA program to be the best fit. And, FHA will permit 3.5% down even in high-cost areas where the conforming loan limit exceeds $484,350. Remember that on conforming loans, even in high cost areas, once above a loan amount of $484,350, the down payment requirement steps up to 5%.

5% Down Payment

Conventional, high-balance (or super-conforming) and even jumbo will come into play with a 5% down payment. Again, the higher loan amounts and purchase prices may not touch every state, but across the country stats have proven that this level of initial investment is closer to the norm when it comes to buying into the real estate market.

10% Down Payment

Even in super jumbo land (loan amounts that exceed the high-balance conforming limits) and up to price points that much of the country would consider absurd ($3MM+), believe it or not, a 10% down payment mortgage is an option. And we do them with frequency here in CA. For a while, the toughest aspect of getting a 10% down loan had nothing to do with the borrower, but instead we observed that sellers in competitive markets overlooked these offers in favor of buyers who structured their financing with a larger down payment. Now that we’ve seen some softening in the higher price points, motivated sellers are again considering qualified buyers with 10% down payments.

If you examine the statistics for down payment patterns, you’ll see that some states, like California, tend to trend toward the higher end of percentage down payments (approaching 20%). This is due to higher purchase prices in many cases and the fact that those prices push out some of the programs that permit lower down payments. But in other states (GA, for example), home prices in concert with percentage of veterans, rural areas, and so on, can push the down payment average percent below 3%. As always, all real estate is local and you should consult with local professionals on your options. But make no mistake, boomer or otherwise, you don’t need 20% to get into most markets. And if you have questions, send me a letter or give me a call or page me or e-mail or text or Skype or message me when you’re ready to set aside your preconceived ideas and focus on the way it really is today.

Stop, hey, what’s that sound? 

 

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

How Can I Make My Home Appraise Higher?

~ Rob Spinosa ~ Leave a comment

Whether buying or refinancing a home, when obtaining a mortgage it can be expected that an appraisal will be required. I talked in a previous post about how we are able to use appraisal waivers in certain instances, but still, most residential real estate transactions that involve a mortgage also involve an appraisal. An appraisal is a professional opinion of value, completed on a standardized report by a licensed appraiser. Are there steps the buyer or homeowner can take to assure that this value comes in as favorable as possible? Here are a few tips from the experts:

  • Choose a lender that uses an appraisal management company (AMC) with access to local appraisers. At Guaranteed Rate we place a high degree of importance on contracting with appraisers that know any area first-hand. This has the obvious advantage of bringing “boots on the ground” perspective to the property being appraised. But let’s not forget too that local appraisers are also often well-known appraisers to local real estate agents and these relationships are valuable.
  • Clean the house and yard. The cleaner the home the better it shows, and the higher value you will get.
  • Prepare a list, including cost estimates, of improvements completed to the property in the last year. If any updates have been done to the kitchen and/or bath within the past 15 years, include them on this list as well.
  • If you, or your Realtor, know of a good sale (or two) in the area within the last six months, you can give the address and sales price to the appraiser.
  • If refinancing, tell the appraiser the predominant feature of your home — the reason you bought it and the characteristic a future buyer may find most important and desirable. This may seem everyday obvious to you, but could easily be lost on even the best appraiser — who doesn’t live in the home each day.
  • Be mindful of “health and safety” issues, regardless of how minor. An opening in a wall, water stains on the ceiling, a disconnected faucet, peeling paint or a missing handrail on a staircase may all seem trivial, but they could require further notation in the report, potentially stalling your transaction. Make the small repairs in advance (or have the seller do so), even if it means hiring a handyman.
  • Install smoke and carbon monoxide detectors because in many areas (if not all!) it’s the law. Also, here in California, if you have a water heater, it must be double-strapped for earthquake safety.

Stacking the deck in your favor using the tips above, and working together with us before and after the appraisal is complete, you can maximize your potential to attain the highest value. This can then open up financing options and opportunities, and even factor into the interest rate you’re able to obtain. When you are refinancing a home, the home’s value relative to your existing loan balance determines your eligibility. When you are buying a home, you and your Realtor will want to know the appraised value supports the contract price. In both instances, if you have questions about the appraisal process, and especially if you have concerns about the subject property’s value, we are here to help.

I spy, 

 

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

How Long Do I Have to Wait After a Foreclosure to Get a Mortgage?

~ Rob Spinosa ~ Leave a comment

When economic war ravaged the real estate market a decade ago, statistics show that peak foreclosure activity in the US occurred somewhere in 2010.  We continued to experience an elevated level through at least 2013, which means that as I write this post in late 2019, almost the entire rat is through the seven-year snake.   That waiting period — 7 years —  is the gold standard after a foreclosure.  So what do those looking to reenter the housing market need to know?  What about if they need something other than an FHA mortgage?  Let’s look.

What is a Foreclosure?

When it comes to “letting a house go” we could say that a foreclosure is the equivalent of the homeowner’s “nuclear option.”  Basically, an atom bomb is dropped on the owner’s credit and when the dust settles, which could take months if not years, there’s not a trace of the home he once owned.  Though the legal foreclosure proceedings vary from state to state, a foreclosure is ultimately what happens when the owner of a mortgaged property stops paying and takes no other legal or financial steps.  Ultimately, a notice of default will be filed on the property and absent drastic measures to restore payment on any lien attached to the title, the lender will end up selling the property via a foreclosure sale.

What Happens After a Foreclosure?

With a history of foreclosure (or “deed in lieu”) on one’s credit report, conforming loan guidelines state that a buyer re-entering the market must wait seven years before obtaining a new mortgage. If using an FHA loan program, that waiting period is cut to three years. In the case of jumbo mortgages, however, the waiting period will be established by the actual investor — the entity that provides the loan. Because of this, the institution/investor can set its own rules about the seasoning required. They can also set rules about how a foreclosure is qualified. Was it due to financial mismanagement? Strategically done to avoid consequences of the market falling further? Or, was it done due to a legitimate hardship on the part of the borrower? Each of these might be viewed differently by any investor and the waiting period might change accordingly.  The best advice I can give is that if you experienced extenuating circumstances (death, loss of job, etc.), ask how this could impact your options because several of our best-priced investors will reduce the typical 7-year wait in these cases.

Sorting Out Second Chances

At Guaranteed Rate, one of our strongest suits is that we have multiple jumbo investors available for most scenarios. We will see our strongest-priced jumbo investors re-enter the market for the buyer with a foreclosure also at the 7-year mark — identical to conforming. But below you’ll find some of the other tiers of available as the loan-to-value (LTV) increases or decreases, the loan amount goes up in size, and the FICO score factors into the picture:

5% Down Payment

We require a three-year seasoning period and will go to a loan amount of $1.5MM (purchase price of $1.58MM). For this program, we’ll need a 720 FICO and 9 months of reserves.

10% Down Payment

We require a three-year seasoning period and will go to a loan amount of $2MM (purchase price of $2.23MM).  Like with the 5% down program above, we’ll need a 720 FICO and 9 months of reserves.  If both your FICO score is lower (to 680) and your loan size is smaller (to $1MM), we’ll then permit a 4-year seasoning on the foreclosure but require 6 months of reserves.

20% Down Payment

All of the investors above are in, plus several others with varying FICO and reserve requirements, even down to a 661 credit score with a maximum loan amount of $1.5MM (purchase price of $1.875MM).

The jumbo mortgage market is inherently more complex than conforming or FHA and because of this, your jumbo lender needs to have the options and expertise that will accommodate the demands of getting a new home loan post-foreclosure.  But purchasing a home with a history of a foreclosure is indeed possible. We understand the requirements, restrictions and tips of the trade that facilitate many of the best second chance options in existence. Maybe more importantly, my experience as a loan advisor covers a time period before, during and after the real estate recession.  I reserve no judgment for what happened in that very different market. Instead of looking back and telling buyers what they can’t do, I see it as my responsibility to look forward and help them do what they can to realize the benefits of ownership again.

Bombs away,

 

Robert J. Spinosa
Vice President of Mortgage Lending
Guaranteed Rate
NMLS: 22343
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

What Is an Impound or Escrow Account?

~ Rob Spinosa ~ 1 Comment

When renters desire to become home buyers, they quickly learn once in the mortgage process that their single rent payment will morph into “PITI” or “principal, interest, taxes and insurance,” or a “total monthly housing payment.” So, yes, there are additional monthly expenses to consider when you become an owner. Historically, ownership has bestowed tax benefit on the buyer and that’s been an offset to the higher cost of ownership and because of this, the “rent vs. own” calculation has been used to more fairly compare the cost of putting a roof over one’s head. Rent may be simpler, but ownership is more comprehensive, if more expensive.

Let’s assume that our buyer has done the comparison and decides to move forward with purchasing a place of his own. At some point, his or her mortgage lender will offer a choice (or maybe not…) about how they will pay their property taxes and homeowner’s insurance. There will be two options:

  1. Waive impounds. The owner foots the property tax bill and insurance premium when due.
  2. Impound or “escrow” taxes and insurance.  The lender creates an account through which the borrower pays 1/12th of the tax and insurance bills along with the principal and interest payment (P&I) each month. When the bills come due, the lender pays them instead of the borrower.

What does this mean, how does it work and which is better? Let’s look at all three in plain language.

What Is an Impound Account?

As outlined above, “escrows” or “impounds” are a financial account where your loan’s servicer can collect, hold and disburse your property tax and homeowner’s insurance payments. The servicer maintains this account and documents it on your monthly statement. Escrow accounts are required on government loans, such as FHA and VA, but are elective in many other cases. Here in California, escrow accounts are required on a loan-to-value (LTV) of 90% or greater. Interestingly, in most states across the country, escrow accounts are customary (if not required). But here in CA, it is more common not to have an escrow account. Go figure…

How Does an Impound Account Work?

Escrow (aka, “impound”) accounts are “pre-funded” at the time of purchase and thus can make your settlement more costly. Why is this? Let’s look at California’s property tax year. It runs from July 1 through June 30. Let’s say you close on your home purchase on June 30. You will live in the house from July 1, forward, but you won’t make your first payment on the mortgage until August 1 because unlike rent, mortgage is paid in arrears. Our first installment of taxes is due November 1 and for a six month installment (July through December of the fiscal year). But note that if your mortgage payments start on August 1 and you have to pay your first installment on November 1, you will have only made three payments by the time the tax bill is technically due for six. Unless the servicer “pre funds” at least three months at close, it cannot cover your installment. This is why you’ll see a number of months of taxes and insurance added to your closing when you have a loan with an impound account. It’s important to note that even though your ongoing mortgage payments continue to add a fraction of your total tax and insurance bills each month, your servicer does not pay the county or the insurer monthly. They pay when the bill is due, just like those borrowers who waive an impound account.

Which Is Better, Taking or Waiving Impounds?

As mentioned, some loan types require impounds. Where that happens, buyers must carefully consider and accept the payment requirement. If there is a choice, it comes down to personal preference and budgetary discipline. Those who waive an impound account do have a smaller monthly expense to cover because they are only paying the principal and interest portions of their total monthly housing expense. When their insurance and tax bills inevitably come due, they have to be prepared to pay them in full, and that requires budgetary discipline on their part throughout the year — just as if the loan servicer was requiring allocations for these expenses. So like with most things in the mortgage industry, there are pros and cons but there is no free lunch. No matter how you opt to pay it, your tax and insurance bills will be the same and must be paid in full at the end of the day.

If you have additional questions about escrow accounts for property taxes and homeowner’s insurance, get in touch any time. As you can see, there are instances where using or foregoing an escrow account comes down to a choice. If you’re wrestling with the best fit for your situation, it often helps to remove the myths and emotions from the decision making process. We can help you do that and get the facts and math straight, and from there, the choice to take or waive escrows often becomes so much more clear.

Paid in full, 

 

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

Are You a Lender or a Banker or a Broker?

~ Rob Spinosa ~ Leave a comment

“So are you a broker or a lender?” “Or a banker or a lender?” “Or a broker/banker?” Yes, yes, and yes!

We get this question all the time, but I think it comes from a good place. Naturally, everybody shopping for a home loan wants to get the best rates and terms and some confusion swirls around how the type of mortgage originator one uses has a bearing on the outcome. So when they work with me, who is really behind the curtain?

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

Banker / Broker / Lender

In the post-downturn lending industry, there are really only three primary channels for obtaining a residential home loan; mortgage banker, mortgage broker and mortgage lender. It’s important to know that no matter which you choose there is ALWAYS a “middleman” and that person is called the mortgage loan originator or “MLO.” Now don’t confuse an MLO with a single individual — it could well be a call center with a series of “clerks” that work to get your loan from start to finish. Regardless, there are some distinct characteristics of each channel:

  • Lender: This is usually a single-entity banking institution that will fund your mortgage with their own money (most of the time…). Maybe you have a checking or savings account with this bank already. A lender will have its own specific set of guidelines for a jumbo loan and it may have its own “overlays” for conforming and government loans, like FHA and VA. Overlays are defining characteristics — let’s say a minimum FICO score, for example — that are technically not a guideline of the government-sponsored entities (Fannie Mae and Freddie Mac), but that are adhered to by this individual institution on top of the standard guidelines. So, if you’re going to be a customer of a direct lender, you have to meet their guidelines. If you don’t you won’t qualify with them.
  • Broker: A broker can be seen as the opposite of a lender. A broker has none of its own money to lend, but instead works with many lenders to offer a variety of options to its clients. A broker just may have more flexibility to get some scenarios approved, though when they are in the process of doing so, they turn the control and authority of the file over to the lender.
  • Banker: An independent mortgage banker fits between the lender and the broker and can often offer the services of both. Instead of lending its own money, an “inde” will have warehouse “lines of credit” from lenders and will have authority to fund loans with that money. Thus, an independent mortgage bank has a combination of in-house control over your application and the ability to match a specific profile to a specific lender. Many indes can also broker loans when brokered options prove to be the best fit. Guaranteed Rate is one of the nation’s largest independent mortgage banks, for example.

Who Has the Best Rates?

Great question! But you won’t find the answer here. And you won’t find the answer anywhere but in your own research. As mentioned above, there are many complex factors that go into a consumer’s rate and the entity type alone does not exclusively determine the outcome. Can a broker beat a lender? Yes. Can the opposite be true too? Absolutely. It’s very important to note that many originators advertise exclusively based on rate, but for consumers it’s practically impossible to shop exclusively on rate — there are often too many variables for the scenario, let alone the fact that rates can change every day.

What a Roundabout!

Not really. The purpose of this blog is not to get you to resign to the fact there’s no one option better than another. In fact, by understanding the differences, it may help you get best positioned to optimize your research. For 10+ years, I have worked for an independent and the reason I really enjoy doing so is because we can say “Yes!” to more clients. We have a great variety of choices when it comes to programs, rates and terms and this power, when understood and effectively communicated gives, I feel, our customers the edge in today’s market.

I’m happy to discuss the mortgage industry and what we can do for you today. Get in touch any time and I look forward to being of service!  And of course, you can always begin the pre-approval process, free of cost or obligation, by clicking HERE.

So much better than a, 

 

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