BradyLoan.com

HIgher Loan Limits Announced for 2018

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.

WTH Just Happened to the FHA Mortgage Insurance Premium? Politics At HUD

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.

 

San Diego Mortgage Rates Report: January, 2017

WHERE ARE SAN DIEGO MORTGAGE RATES GOING?

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

2017 San Diego County Real Estate Market Outlook

It's been a great run.  Back in late 2011, we were pounding the table for investors to buy a single-family home in San Diego County, especially in what we called  "Blue Collar Beach Towns".  Then, you could purchase a single-family detached property for $250,000.  We were nervous so we advised investors to put at least 25% down and only buy a property where the rent could cover the pre-tax housing expenses (mortgage, taxes, insurance, estimated maintenance).  If you were one of our investors, you are probably sitting on over $100,000 of profit today.  That means you will have almost tripled your investment in a period of about 5 years or earned an internal rate of return in excess of 27%.

It's been a great run but it looks like the party is over.  We think the first half of 2017 is going to be a good time for investors to take some money off of the table, especially if they have a plan for that money in the next 3-4 years.  This doesn't mean we think the market is going to crash, like it did in 2008-2012 but we think the prices are going to soften and perhaps decline 10-15%.

The three reasons we loved San Diego single-family homes, as an investment in 2012, are the same reasons we don't love them today:  median price and median income, price-to-rent-ratio, and mortgage rates direction.  We still like single-family homes for owner occupants but we just don't love them as investments.

The 2016 median income in San Diego County is $73, 500 for a family of five.  This translates to a maximum monthly mortgage of approximately $2050 (PITI) or a $344,000 mortgage.  Add a 20% down payment and the family of five, earning the median income in San Diego county, can afford to purchase a home for $430,000.  A median-priced home, in San Diego county, was $495,000 this past summer.  That's a 15% premium.

Keep in mind that. back in late 2011/early 2012, a veteran could purchase a single-family home, in Oceanside CA, for zero down payment and her mortgage payment would be cheaper than rent.  Today, if that same veteran purchased a median priced home in San Diego County, the mortgage payment would be $2800.  There are tax benefits to owning versus renting so let's make the after-tax costs of owning a home $2500.  That same home can be rented for $2200; this is after a rental shortage in San Diego County spiked rents these past few years.

Look at 3792 Atlas Street as an example.  It is being offered for rent at $2200 and the Zillow Zestimate is for a $528,100 value.  Even if a home buyer had 20% down payment, their after-tax mortgage cost would be about $2300; $100 month more than they could rent the property.  It still makes sense to own that property, if you intend to live in it for 7-10 years but it just isn't a compelling investment when looking at the price-to rent ratio anymore.

Finally, we think the carrying costs for real estate (aka mortgage rates) can only go up from here.  Interest rates may start climbing in a couple of months or it could take as much as a year for mortgage rates to rise.  Eventually, mortgage rates are going to be 1-2% higher than they are today.  More importantly, the threat of higher mortgage rates is starting to affect pricing now.  Back in 2014, people still thought rates could come down so they weren't too particular about paying 5% more than last year's prices; they figured they could refinance into a lower rate soon enough.  Today, the opposite is true.

 What does this all mean to you?

If you are a real estate investor, it might make sense to sell that San Diego County investment property, especially if you plan to use the money in the next 4-5 years.  If you don't plan to use the money, and want to avoid paying capital gain taxes, I have two ideas for you:

1- Consider the Greater Phoenix area.  You will increase your income (the capitalization rates are better) and there is still some upside appreciation to be gotten there (not a ton but better than San Diego County).  We refer our clients to Greg Swann of Bloodhound Realty.

2- Consider placing the proceeds from the investment property sale into a Delaware Statutory Trust.  This is a security so we don't handle these transactions but we refer our clients to investment adviser Tony Krvaric of Krvaric Capital.

What if you just want to buy a home to live in?

There is no greater place to live (in my opinion) than San Diego County.  We have beaches, mountains and deserts.  Our climate is second to none and our business environment is relatively robust.  Unemployment, in San Diego County, is less than the rest of California and the rest of the country.  San Diego County is a great place to own a home.... BUT....

...we think the short-term prospects of higher prices are unlikely.  Even with the Great Recession, if you bought and held a home fir ten years, you made money in San Diego County.  Our advice then is to be judicious when buying an owner-occupied home in 2017.  We suggest that you do three things:

1- Establish your holding period.  If you plan to move in less than 7 years, you could lose money.  If you plan to live in the property for at least ten years, you should make money.

2- Call us to run a rent v. own scenario for you.  This is where we analyze the price-rent-ratio.  For traditional, 20% down payment transactions, it can still make sense to own for the long-term in San Diego County.

3- Negotiate, be patient, and shop around.  You don't have to get a home at 15% under list price to get a good deal but we don't' think you have to pay list price to get a home in 2017.  Sales have slowed in San Diego County, ever so slightly, but they have slowed.

Conclusion:

Inventory is still under three months which suggests that this is a seller's market, That could all change once prices start softening (they are showing signs of that now).  If you are an current investment property owner, the first six months of 2017 will be an excellent time to sell and realize your profits.  If you are a potential home buyer, we think you are going to have more options next year than you do today.

Your agent is why your condo isn't selling

Jill was a good client of mine.  I funded an FHA loan for her when she bought her condo back in 2010.  She was sitting on $100,000 in profit in just five years.  Her original real estate agent left the business so she found an agent who advertised on Zillow  (Jill is pretty tech savvy).  She listed the property with this agent instead of calling me for advice.  The condo didn't sell, Jill called me to ask why, and I had to tell her the truth:

"Your agent was the reason why your condo didn't sell, Jill"

I told Jill of the tale of two real estate agents:  Barbara and Mike. 

Mike listed lots of properties...LOTS of them.  He was constantly on listing appointments, advertised those listings heavily online, and had things down to a "system".  His signs were all over her heighborhood and each listing was prominently displayed on his website;  he was a tech savvy property seller's dream agent...BUT...

Mike didn't know a darned thing about condos and condo loans.  Thus, Mike was always presenting offers which Jill had to decline because Mike assumed that, because the condo didn't have an FHA or VA approval, only cash or conventional offers would be funded.  Naturally, Jill was shown a lot of "low-ball, all cash" offers from investors and Mike told Jill "I guess the market has shifted".  Jill's $100,000 profit looked more like $50,000 when Mike was finished presenting the offers.  Naturally, Jill declined those offers and the listing eventually expired.

I had Jill speak with my friend Barbara, an agent who worked condo listings all over town.  Barbara spent a good bit of time with me after I funded a loan for one of her VA buyers (way back in 2009).  Since then, Barbara has done one thing...just one thing..which helped her take less listings but sell each and every condo listing she DID take, for full price.

Barbara insisted that the seller order the condo docs before it went into the MLS.

Barbara explained to her sellers that they would eventually have to order those condo docs when they were in escrow.  Unlike Mike, who "shotgunned" his listings approach by saying "don't pay for them before you have a contract",  Barbara explained that the couple of hundred bucks investment (in the condo docs), could add tens of thousands to the sales price, if the property qualified for FHA or VA financing.  Barbara would order those docs immedialtely and send them over to me.  I would take one look at them and say one of three things:

1- Barbara, I can get that complex both FHA and VA-approved
2- Barbara, I can get the complex VA-approved but you'll only be able to accept 20% down conventional, VA, or cash offers.
3- Barbara, that complex will only work for 20% down conventional loans and cash

Armed with that information, Barbara entered this into the marketing remarks on the MLS:

"Property may be eligible for VA or FHA financing.  Approvals pending through World Wide Credit Corp.  Call them at 858-777-9751 for cross approval"

Barbara explained to clients that that representation attracted twice as many buyers to her listings and justified charging a "premium" price--that meant more profit for her clients.  You know how the story ends...

Jill listed with Barbara, we ordered those HOA docs, and Jill sold the property to an FHA buyer...for a price which was much closer to what she wanted than the offers she received when Mike had the property listed.

Wanna be like Barbara?  Call me today at 858-777-9751.  We'll grab a cup of coffee and I'll break it all down for you.

These Three Reasons Are Why a Marine Fired His San Diego Real Estate Agent

I see this happen a lot in San Diego.  A real estate agent finds a new buyer who is serving in the military.  That new client wants to buy a condominium with his VA-guaranteed loan benefit but the agent doesn’t know what to do.  In the end, the he fires the agent—here is how it happens:

The agent starts off by showing the veteran all of the VA-approved condo complexes.  The buyer finds a great property in a complex which isn’t approved by the VA.   The agent reluctantly shows the property and the buyer loves it.  The agent asks his lender about a “spot approval” from the VA.  There is no such thing so the lender looks into getting the complex VA approved—he thinks it will take 60-90 days.  The lender tries to offer the veteran a more costly FHA loan with 3.5% down payment and PMI.   The veteran loses the property and fires the real estate agent.  When asked why the veteran fired the real estate agent, these are the three reasons he gave:

1- The agent didn’t want to show me all of the available properties in my price range.
2- The agent and the lender tried to get me to do a more costly loan
3- The agent doesn’t understand veterans or active-duty military buyers

If you are a real estate agent, that doesn’t have to happen to you.

Many of those military buyers and veterans google “VA condo approval” and find us.  We’ve financed over 1000 VA loans in the past 15 years;--close to 100 of those transactions were for condominiums which did not have a VA approval.  We secure the complex approval from the VA (sometimes in less than 21 days), process the VA loan, and typically close these transactions in less than 45 days.

Who are we and why can we do what few other lenders can with VA condominiums?

Debra Brady is an experienced loan originator with World Wide Credit Corp.  Her husband Brian is a NAR-designated “Military Relocation Professional” and Managing Director with World Wide Credit Corp.  They have a combined 27 years experience in residential lending and have glowing reviews, specifically talking about their expertise in VA home loans, on Yelp.  World Wide Credit Corp is a VA-approved direct lender, in business in the same Kearny Mesa office, since 1991.

If you have a VA buyer today, you might want to call us at 858-777-9751 and ask us a few questions.  Otherwise, you can subscribe to our weekly VA emails here.

San Diego Mortgage Rates Report for January 1, 2015

The mortgage bond market is currently at it's 2014 high price levels.  If prices hold, mortgage bonds will close 5% higher than they closed in 2013.  What this means to you is that retail mortgage rates should be about a half of percent lower than they were in December 2014.

This hasn't necessarily happened though.  Mortgage lenders have been wary to pass those bond market gains onto the consumer.  There is an "angst" that the party could end at any given time.  Conventional mortgage rates haven't improved as much as VA home loan or FHA mortgage rates have.  Still, I"m hopeful that next week will see rates more in line with the bond market gaints.

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of December 31, 2014:

30 Year fixed conventional average=  3.97%
15 Year fixed conventional average=   3.07%
30 year fixed VA/FHA average=               3.82%
30 year fixed VA/FHA jumbo avg.=       4.00%
5/1 adjustable rate conv. average=         3.13% -

How can this benefit you?  If you are shopping for a home in San Diego, having a full pre-approval will permit you to lock-in a rate as soon as you receive verbal acceptance of an offer rather than waiting for a contract.  If you currently own a home in Californis, it might make sense to review your mortgage with us today or Friday.  We can run quick numbers to see if it makes sense to restructure your home loan.  Call us at 858-777-9751.  We usually answer the phone right away (or call you back within an hour or two)

If you want to receive a text report of rates, every 10-20 days or so, text the word RATE to 313131 or subscribe to the mortgage rates report via text by adding your cell phone here

San Diego Mortgage Rates Report: September 1, 2014

Mortgage bonds have steadily strengthened since their August, 2014 levels, causing September mortgage rates in San Diego to drop.

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of August 1, 2014:

30 Year fixed conventional average=  4.06%
15 Year fixed conventional average=   3.17%
30 year fixed VA/FHA average=              3.65%
30 year fixed VA/FHA jumbo avg.=       4.0%
5/1 adjustable rate conv. average=         3.52%

We told you last month that San Diego home prices up but the price increases are decelerating.  While I believe that the long-term trend will track the increases in inflation, prices may soften through 2015.  I talked about this on Active Rain today and cited this Redfin article:

The first is a slowdown in home price growth. For the first time in five months, price growth was essentially flat in July. The second is a shift in pricing power from sellers to a more balanced market. That shift has been nearly nine months in the making from when sales began to first decline last November

Deals are going to be made this Fall.  If you're buying a home, you have some price flexibility.  Making offers 15-20% below asking price is almost as nutty as pricing your property $100,000 over recent solds but, without a doubt, buyers will be driving fall sales in San Diego. 

We can lock rates up to 60 days so, if you have to be flexibile with a seller who is trying to close on another house, we can cover you.  Make sure you get a good price concession for your flexibility.

San Diego Mortgage Rates Report: August 1, 2014

Mortgage bonds had a rocky ride this week but still finished at the same level they did last Friday.  Wednesday spooked the market and it dropped a half-point, suggesting that rates would rise .125%.  Unexpected strength today buoyed the market and kept mortgage rates at their July, 2014 levels.

You can follow the national average mortgage rates at Bankrate.com.  San Diego mortgage rates tend to be .125% LOWER than the national average.  Average rates as of Ausust 1, 2014:

30 Year fixed conventional average=  4.21%
15 Year fixed conventional average=   3.28%
30 year fixed VA/FHA average=              3.75%
30 year fixed VA/FHA jumbo avg.=       4.125%
5/1 adjustable rate conv. average=         3.53%

CAUTION:  San Diego home prices up but the price increases are decelerating.  That's fancy double-speak for "you're making money but not as quicly as you did last year".  I don't know if that's the beginning of the end of the boom or the beginning of the boom.  Let me explain:

Six years ago, I said to pounce on the homes under $400,000 because the median income was well above the amount required to support a mortgage on a median-priced home. I was right; those home are all up at least 20% (which means you would have doubled your down payment investment in 6 years).  Today, median income does not support a mortgage for a median priced home.  That sends a cautionary signal to me UNLESS....

...there will be inflationary pressures on wages.  Wage push inflation is usually the last part of an inflationary cycle.  Anyone who eats or drives a car knows that price inflation is real but wages haven't kept up with commodities prices increases.  It looks like wages are about to explode.  That's good news for real estate prices as it introduces a whole new round of buyers, willing to pay higher prices for homes.

While caution should be shown towards home prices, we could see another 20-25% upside in San Diego home prices, then everything turns to $***.  Maybe.  Bottom Line:  buy what you can afford, live in it, and think long-term in real estate.  Flippers will eventually get burned.

San Diego Mortgage Rates Report: August 5, 2013

Mortgage rates improved about 1/4% since last month's report.  Today's best execution rates average 4.375% for a conventional loan and 4.125% for a VA loan.  Keep in mind that a "best execution rate" assumes the highest credit rating, a debt-to-income ratio undee the guidelines limit, and at least 20% downpayment.  Each borrower is an individual and may or may nor meet that criteria.

But it's a guide if you're watching the mortgage rates market.  Speaking of which, you can receive a twice weekly update, via text message, by sending the word "RATE" to 313131.  I'll be sending a text message in the middle of the week and on the weekend with the best execution mortgage rates.  You can always unsubscribe too so I won't be text-spamming you.

July was crazy for the mortgage bond market.  Wild price swings were the norm, with rates getting as low as 4.275% for conventional loans and as high as 4.75%.  While that might not seem like a "wild swing" to you, the home buyer, it has been perpelexing to mortgage industry veterans because we can't get a read on the market at all. 

One school of thought is that the Federal Reserve Bank will stop subsdizing rates, through bond purchases, as early as September.  That would suggest rates could rise as high as 5.0% plus.  The other school of thought, that the Fed woul delay this "cold turkey" approach until next year, was confirmed by the less than robust jobs report.

I gave up trying to outguess the Fed when they started this who quantitative easing policy.  I'm locking all loans at application and recommend that customers do the same.  It's just too volatile and the risk of a being stuck with 5% mortgage is greater than the potential reward of waiting for a 4% rate.