FHFA just announced the new (higher) loan limits for 2018. You can see each county's new loan limit here but this is the summary for Southern California:
San Diego County $649.750
Ventura County $672.750
Orange and Los Angeles Counties $679.850
Riverside, San Bernardino, and Imperial Counties $453,100
FHFA sets loan limits for Fannie and Freddie backed conventional loans but, over the past few years, FHA and VA has followed their lead. We expect the VA and FHA loan limits to be the same as the FHFA loan limits.
What does that mean?
It means more buyers can afford more homes and that's good news for you. If FHA and VA follows (we think they will), fundings could be tricky in the next 60 days. If you have clients who are banking on that higher loan limit, you should call us at 858-777-9751 before you enter escrow so we can determine a strategy so they can get a loan for the higher amount.
Multigenerational homes are coming back in a big way! In the 1950s, about 21%, or 32.2 million Americans shared a roof with their grown children or parents. We know how to provide the best financing options for multigenerational buyers. Our years of experience and background in financial planning helps us match multigenrational households up to the most cost effective finaicng programs; especially when the older generation is trying to preserve and grow assets for retirement.
According to an article by Realtor.com, “Nearly 1 in 5 Americans is now living in a multigenerational household – a household with two or more adult generations, or grandparents living with grandchildren – a level that hasn’t been seen in the U.S. since 1950.”
Another report that proves this point is the National Association of Realtors’ (NAR) 2017 Profile of Home Buyers and Sellers which states that 13% of home buyers purchased multigenerational homes last year. The top 3 reasons for purchasing this type of home were:
To take care of aging parents (22%, up from 19% last year)
Cost savings (17%)
Children over the age of 18 moving back home (16%, up from 14% last year)
This shift can be attributed to several social changes over the decades. Growing racial and ethnic diversity in the U.S. population helps explain some of the rise in multigenerational living; Additionally, women are a bit more likely to live in multigenerational conditions than are their male counterparts (12% vs. 10%, respectively). Last but not least, basic economics.
Valerie Sheets of Lennar Homes brings to light the fact that home prices have been skyrocketing in recent years. She says that, “As home prices increase, more families tend to opt for living together.”
Multigenerational households are making a comeback. While it is a shift from the more common nuclear home, these households might be the answer that many families are looking for as home prices continue to rise in response to a lack of housing inventory.
Speak with Debra or me and find out why we are the best financing consultants for your multigenerational buyers. I can be reached at 858-777-9751
STEP 1-- Determine how much you can afford. This is best done with a loan pre-approval (which Debra, my wife, will handle). She will send you a list of documents to upload to the DropBox (copies of W2 forms, most recent LES, bank statements, IDs). With that information, she will pull your credit and input your income and assets into the underwriting program. The underwriting program is provided to us by the VA and will give us the amount for which you are approved.
STEP 2--- Determine how much you want to pay (as long as it doesn't exceed the loan approval amount). You may be approved for $500,000 with a $3000/mo payment but you may not want your payment be more than $2700/month. If that's true, you want to be searching for homes at a lower price point. Also, you'll need about $9-10,000 for closing costs. If you don't want to pay for closing costs, we can ask the seller to pay them
STEP 3--- Shopping for a home. There are two things I want to determine when I initially show you homes: What neighborhoods do you want to live in AND What are your "need to haves" and "nice to haves"?. We will look in neighborhoods you like, in the price range you determined in step 2. Now that we know which neighborhoods you like, I will want to determine what your MUST HAVES are (a garage, three bedrooms, two baths, etc). Then I will try to ask you what your "nice to haves" are (a TWO car garage, a single family detached home, a big kitchen, etc)
STEP 4: Look for homes in the neighborhoods you like with the must haves. When you find one, we will make an offer.
STEP 5: Prepare an offer to purchase a home. We fill out an offer form (about 30 pages long). Here, we specify the price you will pay, whether or not the seller will pay closing costs, how long before we close the transaction, when you get your keys, and when your move in date will be. The seller can accept the offer, reject it, or counter the offer (in writing). An example might be this: You offer to purchase the home for $440,000 with the seller paying $10,000 towards your closing costs and we will cose it in 45 days. The seller counter with a $450,000 price and only offers to pay $5,000 of your closing costs and wants to close the transaction in 30 days.. You can counter back (in writing) or accept the seller's counter offer.
STEP 6: Once we have an accepted offer, we "open escrow". To do this, we deposit the executed and accepted contract, along with a good-faith deposit, with a neutral third party (we call that an escrow company). The escrow company acts like the "referee" in the transaction and makes sure that all parties follow the contract. The California contract has a 17-day contingency period. During that 17 days, you can to order a property inspection (about a $400 cost), need to get the loan submitted to the underwriter (Debra will help you with that), and order an appraisal to determine whether or not you are paying a fair price (Debra will order that).
STEP 7: Request repairs and remove loan and appraisal contingencies. At the end of the 17 days, we have to remove the contingencies on the transaction and submit a request for repairs The seller can agree to some, all, or none of the repairs and, if we are satisfied with their response, we remove contingencies. This means that you agree to buy the house and your good faith deposit becomes non-refundable.
STEP 8: Review the closing disclosure statement. Debra will send you an updated loan disclosure statement. This will have your final monthly payment and cash-to-close figures on it.
STEP 9-- Sign the final loan documents (3-4 days after the closing disclosure statement). This is where you agree to the terms of the loan and sign the deed to the house
STEP 10-- Final walk through. We will walk through the home one last time to make sure that the agreed upon repairs were completed and that the condition is the same or better when you offered on the home.
STEP 11--- Lender wires the loan funds to escrow. The seller signs the deed.
STEP 12-- The escrow company sends the deed to the County to be recorded.
I just reviewed two solar contracts today, for clients, and here is my opinion:
1- The HERO Program is high risk, low reward (high cost with an expensive second mortgage on the home). It takes more than the 20-year loan term to "break even". The argument for the HERO second mortgage program is that you have a paid-off power plant at the end of 20 years. Okayfine BUT...you lost a significant portion of money over the 20-year term. The repayment costs are three times the average power bill.
A $40,000 solar plant costs about $400/month and generates monthly power savings of as much as $200 (which is high). You are losing $200/month. At the end of the 20-year term, you have cumulative losses of close to $48,000. That will take another 20 years to recoup those costs. I'm sure SDGE rates will rise so maybe...MAYBE the cost recuperation can be shortened from 40 years to 25 years but this is a VERY high risk proposition.
2- The Vivint Solar Program is medium risk with, medium reward (it has a back-end disconnect charge which is half the cost of the HERO program. That penalty declines to zero over the 20-year term). I call this "the production lease model" because it costs nothing to install, you pay only for the energy you use, and the cost per kilowatt hour (kwh) is about 30% less than SDGE.
If you are buying a home with a production lease (like Vivint), you will get price increases but they are in the contract and thus, predictable. You have to decide whether or not the expected SDGE price increases will be equal to the increases in the Vivint contract. Today, the scheduled price increases of a Vivint contract won't reach the current SDGE prices for 12 years. This means that, if SDGE hold prices at this level, you would start "losing" money with Vivint after year 12. The buyout clause with Vivint however, declines each year so you could get out of it for about $6000. You could also ride out the contract and, over the 20 years, you will still have saved money. I believe however, that SDGE power rates will continue to rise
3- SDG&E is low risk, low reward. It is NOT as expensive as you might think. It has no upfront costs and no back-end costs. You pay for electric usage as you go. The one thing you can NOT control is future rate increases
If you are buying a a home with an existing HERO solar solution, you should demand that the HERO lien be paid off in full (even if you have to pay a bit more for the property). Do NOT assume that liability because it's a bum deal.
All in all, the Vivint production lease model offers cost savings and predictable power bills. I am inclined to think that SDGE will always be more expensive than the production solar model but capitalism is beautiful-- competition will make SDGE get more competitive.
HERO is a horrible deal, Vivint is a pretty good deal, and SDGE ain't such a bad deal after all....at least for today.
...and a worse time to be a San Diego buyers' agent.
San Diego is in a housing crisis and the simple explanation for it is that we have a tremendous backlog of new housing--the politicians aren't helping us either. NIMBY-ism, water restrictions, and traffic density are core issues which restrict housing and, while they are legitimate issues, the county has a 65,000 unit backlog of new housing.
Experts believe that San Diego County needs 170,000 housing units built from 2012-2025 to meet demand and population growth- some 15,000 housing units each year. Over the past five years, San Diego County has averaged 2000 new housing units.. We are already 65,000 units behind and, if we continue at this anemic pace, we will end up 120,000 housing units short in 8 years. That is pushing up prices of existing homes.
You might think that rising housing prices, and double digit rent increases, will halt population growth in the County. While it might, SANDAG believes the region will grow by another million people within 25 years. Increased demand for housing and restricted supply means one of two things to your clients: they have to move out of San Diego County or home ownership is now, more than ever, the only defense against this housing shortage. Your role, as a buyer's agent, is now more important than ever to your clients' futures.
We are here to help you--here are three ways we can do that.
1- TBD approvals: this isn't a pre-qualification, this isn't a pre-approval, this is a full underwriting approval for the buyers' credit and income. We take an application, gather up supporting documentation, submit the file to the underwriter, and have a clean approval within 5 business days. What this means is that we can close a transaction in 21 days, giving your buyers a competitive advantage when they make offers.
2- "Selling" the buyer to the listing agent: a lot of the buyer's agents we work with ask us to speak to the listing agent when they make the offer. We communicate to them that we have that underwriting approval and, more importantly, tell them exactly what that means. It means that the only issues for a full loan approval are property related: appraisal, homeowners insurance and title insurance. When we explain the process to the listing agent, and represent the strength of the buyer, more offers get accepted.
3- VA and FHA condo approvals. So many condominium buyers are shut out because the complex lacks an agency approval, The perception is that VA and FHA condominium complex approvals are burdensome and lengthy--nothing could be farther from the truth. Debra and I are experienced experts at VA condo approvals-- we have approved over 130 of them in the past 8 years and we get those purchase transactions closed in 45 days or less. FHA condo approvals are easier for us because we have a HUD-delegated underwriter who has the ability and discretion to approve the complex FHA-eligible
This is a great time to be a real estate agent in San Diego County, especially if you list a lot of properties. Representing buyers however, is difficult. We're here to make that job easier on you.
Whether you like President Trump or not, his Presidency (like President Obama's) should be positive for San Diego real estate. Two things are driving San Diego real estate prices higher right now:
1- A back log of housing. Population growth in the County created demand for an average of 15,000 new housing units each year, for the past five years. Only an average of 2,000 housing units a year were built in the County during that time. This means that today, we have a housing back log of some 65,000 housing units. The NIMBYs and environmentalists are fighting every new development proposed so that problem will likely become more severe. This means higher rents and home prices are on the horizon.
2- Good paying jobs are being created. A housing back log means nothing id residents can't afford higher prices and/or rents but employment data suggest otherwise. San Diego County is created a (positive) disproportionate amount of well paying jobs. Our base industries are: 1- military 2- technology 3- life sciences and 4-tourism The top three base industries are attracting higher than median income jobs to the County.
In 2011, President Obama shifted American foreign policy towards the Asia-Pacific Rim. This makes sense because most world wide growth is coming from that region rather than Old Europe. Obama believed that trade opportunities and foreign threats are more likely to come from Asia rather than the Middle East and/or Europe. This shifted defense spending from East Coast military facilities to West Coast military installations.
If you have an FHA loan in process this month. you were "given a gift" only to have it "taken away" nine days later. It was a political stunt by past HUD Chairman Julian Castro and it's a darned shame it happened to you. Let me break it down for you:
The FHA charges borrowers money to insure their loan against default. It adds 1.75% to your loan and charges a monthly mortgage insurance premium in addition to that added 1.75%. You can avoid this by having at least a 20% down payment and getting a conventional loan (although FHA rates are lower than conventional rates)
The FHA monthly mortgage insurance premium WAS based on an annual charge of .5% of the loan amount prior to the Obama Administration taking office. During the housing crash, the FHA insurance pool (the money collected from the premiums) was depleted because of all the foreclosures. The first term Obama HUD Secretary (Shaun Donovan ) started to increase the monthly mortgage insurance premium cost, from the annual charge of .5%, to an annual charge of 1.4%. This increased the monthly cost of a new $400,000 FHA loan from $166/month to $466/month.
This was a bummer for new FHA borrowers because they were essentially paying for the failures of the past borrowers. Still, if FHA was going to be sustainable, it had to do something so they opted this approach. It worked. The FHA insurance pool grew from being depleted to sustainable. As the size of the FHA reserve pool increased, the HUD Secretary during Obama's second term (Julian Castro) started reducing the monthly mortgage premium from an annual charge of 1.4% to its current annual charge of .8%. This reduced those monthly mortgage costs (on a $400,000 loan) from $466 to $266.
A few months ago, HUD Secretary Julian Castro floated another premium cut from its current .80% annual cost to .55% annual cost. This would reduce the monthly cost (on a $400,000 loan) from $266 to $183. This move was met with vocal opposition from career HUD bureaucrats and the Republicans in Congress. The prevailing thought was to leave the annual FHA mortgage premium be for now and let the reserve fund grow more.
HUD Secretary Castro ignored the advice of career HUD bureaucrats and issued the order to cut the FHA monthly mortgage cost anyway. He issued this order on January 11, 2017 to take effect for loans FUNDED after January 27, 2017. I thought this was suspicious when he issued it because all previous HUD orders were effective for loans STARTED after the effective date. This seemed "too good to be true".
If it looks too good to be true, it usually is untrue. HUD Secretary Castro's order, breaking with normal HUD policy on effective dates, was a legitimate HUD order anyway. We (like other lenders and REALTORS) delayed closings so that borrowers would benefit from the monthly cost reduction. Here's what you need to know:
Castro's FHA order to reduce costs was never gonna happen and Castro knew it when he issued it on January 11, 2017.
Castro was playing politics with borrowers' money. His intention was to put the new HUD Secretary (Dr. Ben Carson) and the new President into the tough spot of saying "Sorry. This was never a good idea". As such, Castro timed the repeal of the January 11, 2017 FHA order to come out just an hour before the new President was inaugurated. Castro was quick to release this repeal order to the media so that it could run with the story that "The New President RAISED FHA monthly mortgage costs".
Let me give you a simple analogy:
I am the principal of a school and you are taking my job next Friday. Last month. I asked all the teachers if we could cut the dismissal time from 3PM to 2PM, The teachers said "this is a bad idea" and you (the new principal) agreed with the teachers. Last week, I ignored the teachers advice and sent an email to all of the pupils saying that the new dismissal time would be 2PM, effective the Monday after you become the new principal. My last act as principal, before I hand you the keys to the school, will be to send an email to the pupils saying "Sorry, the new principal might be a meanie so I can't keep that 2PM promise to you". Guess who won't be popular with his new pupils next Monday? You.
It's political scheming and it's garbage. The Obama Administration took a parting shot at the incoming Trump Administration and, if you have an FHA loan in process, you are the loser in this political game. In my opinion, the incoming Administration should honor the reduction for 30 days and restore the (higher) premium for loans funded after February 28, 2017. They might not have time to do that and I don't make policy so, if you have an FHA loan in process, expect to pay the original (higher) amount.
Mortgage rates are at the lowest levels since the week after the November election, VA/FHA rates are still under 3.99% and conventional rates are above 4.125%.
Right after the New Year, I suggested that rates would be lower at the end of January but higher by this summer. This gives buyers a good opportunity to move quickly. There is no guarantee that rates will move lower in February, but at the very least it leaves buyers with more options.
Check out our hot homes list. These are new-to-market listings. all over San Diego County, for single-family homes. If you want to narrow this list down to a specific area, call 858-777-9751 and we will tailor the list for you.
Seven years ago, I said this about our ability to get condominiums added to the VA Approved condominium list in California:
I've probably funded 40 VA home loans in 2009, many of them for unapproved condominium complexes. In Southern California, it's quite common along the coastal communities for buyers to look at condos, townhomes, or PUDs as lower-cost alternatives to single-family homes. Declining prices, along with higher VA loan limits have afforded many active duty and former service members the opportunity to scoop up a piece of the California coastal lifestyle by purchasing one of those properties.
Sellers often cringe when they receive an offer using VA home loan financing. The general thought is that the VA condominum complex approval process is time-consuming, onerous, and difficult...
Nothing could be further from the truth.
All loan types, including FHA and conventional vet the condominium association's organizational documents, finances, and residency mix. In fact, the VA guidelines tend to be the least restrictive of all three loan types.
Over a year ago, we started getting the complexes VA approved without the use of an attorney opinion letter, saving our clients thousands of dollars in legal fees. Here are some comments from happy customers:
Air Force veteran, Marina del Rey:
Brian and Debra helped us through the loan approval process for a townhouse in Marina del Rey. My husband was trying to use his VA loan benefit, but in this hot real estate market, a lot of the seller's don't understand or care to understand the VA loan process. There's just a big misconception that the process is unduly difficult, or the VA loan is not as good, which is not the case at all!
Brian went above and beyond and talked repeatedly to our seller's agent to assure her that the VA loan process would be fine. Anytime she had a question, she would call him. When we closed, she went on and on about what a professional he was throughout.
Brian and Debra helped us to get our townhouse a VA condo association approval. It was daunting for us, since we didn't know how to get through it, but they started our paperwork as soon as we got an accepted offer, and made sure all the proper documents were gathered and sent to the VA. The VA is notorious for being slow, but they managed to get our condo association VA approved by the closing date. We could not have done it without them
USMC Officer, Los Angeles, CA:
I, like many other of Brian and Debra's clients, wanted to use my VA loan and wanted someone with expertise with VA loans. My situation was also complicated by the fact that condominiums / townhouse complexes must be VA approved for the VA loan to be used. Fortunately, Brian and Debra have done over a hundred VA condo complex approvals and are experts with the VA loan process. Working with them made my life very easy. Brian was able to educate my real estate agent and the seller's real estate agent on the pros and cons of the VA loan and let them know what he would need to facilitate the home purchase. He was always reachable, whether at 7 am in the morning or 9:30 pm at night, Brian always responded within an hour.
US Navy Officer, San Diego, CA:
OUTSTANDING experience during my first time condo purchase working with Brian and Debra. Brian came referred by 2 of my co-workers, and I could not be happier that I decided to use him. From start to finish, Brian and Debra handled my purchase as if they were buying it for themselves. They continuously kept me in the loop, and answered emails promptly. Brian went out of his way to work with the VA to get my condo approved in record time, and watched the market closely to get me the best possible VA rate. I was impressed with their professionalism during the entire process
US Navy Officer, Oxnard, CA:
We were told by our agents and their lender that the condo we were buying was on the VA Approved list, and all was good to go. Once into escrow, we learn it was not. Our agents said "we are sorry" and basically gave up. So we quickly figured out if we wanted this home, that we needed to get it on the VA Approved list of condos and quick. Google search. Up comes Brian. We call, and he calls back immediately even though it was quite late that night. We met the next day, and he took control of the process guiding both agents (buyer and seller) through the process. We closed and have the home we always wanted. He is a pit bull kind of guy who gets it done.
US Navy Officer, San Diego, CA:
I started the home buying process while still on deployment, and Brian graciously worked with me across 13 time zones to begin explaining the ins and outs of home buying. The building we had looked at was not VA approved, which is crucial to securing a VA loan. I googled VA home approval, and his was the first name to pop up. Brian is an absolute master at working with the VA, within 5 weeks from putting in an offer on the home, the complex was VA approved, and we closed within six
We can help you with this process. Call ,e at 858-777-9751
Non-farm payrolls reported today at 156K vs. the expected 178K; the unemployment rate ticked up to 4.7%. The mortgage bond market is DOWN a quarter point. That doesn't compute.
Today's released data also signaled an uptick in wage growth. Uh oh, that means we are seeing inflation, right?
Not so fast. As Debra points out, a lot of minimum wage laws were passed; 19 states raised the minimum wage effective Jan 1. Businesses often meet those laws prior to the effective date to be in compliance.
The wage growth is probably just a reaction to legislation rather than organic growth. It's a "false positive".
I still think we see lower mortgage rates at the end of January and higher mortgage rates at the end of the summer. If you want to know how this would affect you, call me at 858-777-9751. A real conversation, with someone who has worked in capital markets for three decades, will give you greater insight