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Which offer should a San Diego home seller accept during the COVID shutdown crisis?

Q- Which offer to buy your home should you accept?

A- The highest net offer which is most likely to close.

 

That seems obvious, doesn't it, Let's consider the second part of the answer though. An old friend and Phoenix real estate broker Greg Swann, was promoting this new listing on his Facebook and asked me this question:

 

Q- Can you reflect on the current state of borrowers? I've never loved FHA-ish loans, especially not in cash-poor offers. Obviously, everyone loves cash, and 80/20 conventional is hard to turn down. Are government loans still doable? If so, are they more or less risky to close than they were two months ago?

 

My answer is:

 

Great questions. Government loans are fine and, based upon whom the buyers may be, might be preferable. Here is the biggest concern from a lender/servicer's point of view; will the new buyers start deferring mortgage payments under the blanket of COVID?

 

Lenders are going to verify employment before the loan is approved, right before the loan docs are drawn, and right before they fund the loan-- yes, three times.

 

How might a seller mitigate that risk? Consider the buyers' jobs as well as their qualification standards. "Essential" workers are good buyers but government-funded paychecks are the best buyers.

 

If presented with a VA offer, from a Staff Sergeant at MCAS Miramar, take it. If presented with a VA offer, from a Navy veteran working for a start up, scrutinize it.

 

If presented an FHA offer from a Law Enforcement Officer, take it. If presented an FHA offer from a security officer for an office building, scrutinize it.

 

If presented a 40% down conventional offer from a business owner, scrutinize it. If presented a 20% down conventional offer from a public school teacher, take it.

 

The old saw "money cures all problems" isnt applicable anymore if there is a loan involved.

Each acceptance should have an addendum and/or counter which states that the buyers lock their interest rate within 24 hours and order the appraisal within 48 hours of acceptance.

 

Unless you have a cash offer, there is ALWAYS going to some risk that the loan is declined. Most lenders are looking for a 680 minimum credit score for conventional loans and a 640 minimum credit score for VA/FHA loans. Downpayment matters only inasmuch it can mitigate a low appraisal. Ability to repay a loan, especially in a time when forebearances are handed out without much scrutiny, has underwrters worried about the continuity of the income and employment.

 

It's a whole new world in mortgage lending...AGAIN. As always, Debra and I can help you

 

Call or text Brian at 858-699-4590. Call or text Debra at 858-228-0617

VA home loans and FHA mortgages could be shut off as early as April 15, 2020

Want to hear something scary? Mortgage industry association executive Anthony Casa thinks VA and FHA lending will cease to exist as soon as April 15, 2020. He breaks it down for mortgage brokers in this 9-minute video.

 

If you don't want to watch Anthony's video, mortgage trainer Barry Habib explained the VA/FHA liquidity crisis in this long article.

 

I might suggest that you watch Anthony's video and read Barry's article if you are a REALTOR who services veterans and first-time homebuyers. If you don't want to watch the video or read the article.

 

Here is an explantion (pay close attention to emboldened statements)

 

There are four major particpants in the mortgage market:

 

1- lenders (originators)

2- servicers (collect monthly payments and remit them to investors)

3- investors (for VA/FHA loans, those are GNMA pass-through securitires)

4- Wall Street (hedges interest-rate risk for lenders and packages loans sold from servicers to investors)

 

Servicers buy loans from lenders and sell them to investors (through Wall Street) for a cost of about 1% of the loan amount-- they earn about .35%/year in fees for servicing the loans. Thus, servicers need to hold a loan for about 3 years before they make a profit.

 

Lenders lock interest rates for borrowers, guaranteeing the terms from the application date through funding date. Without getting into the technical details, it costs lenders about .25% of the loan amount to hedge that interest rate risk through contracts with Wall Street.

 

When the Federal Reserve makes a huge drop in the Fed Funds rate, and intervenes in the market by directly buying mortgage-backed securities, it has unintended consequences:

 

1- Borrowers break interest-rate loacks with lenders and switch the loan to another lender-- lenders who "paid" that .25% to hedge the interest rate risk dont recover it with a loan funding and are out that money-- that eats into the lenders' capital and Wall Street requires them to put up more cash as collateral for future rate locks (which they may not have)

 

2- When loads of people rush to refinance the loans they took out less than 18 months ago, servicers "lose" the premium they paid for the servicing contract, Servicers typically borrow against their servicing contracts to buy more loans, using those servicing contracts as collateral. If that collateral disappears, Wall Street issues a "margin call" to the servicer, asking them to put up more capital (which they don't have)

 

This is no big deal is it happens over a period of 3-12 months (as it has in the past) but when it happens in a 2-3 week period, the whole mortgage industry gets hit with a margin call-- both lenders and servicers are scrambling for capital they dont have.

 

3- But wait, there's more bad news. You know how the federal government is trying to "help' borrowers by staying foreclosures for a 90-day period? That hurts the servicers even MORE. When the borrowers dont make their mortgage payments, the servicers STILL have to remit those payments to the investors, draining their capital even MORE. It's like that scene from the 90s movie Goodfellas.

 

There is some hope. GNMA announced yesterday that they will try to alleviate the third problem but the first two problems still exist: lenders are getting burned on locks and servicers are losing their shirts on rapid refinances.

 

The problem wont last forever but we may see major changes (for the next 4-12 weeks) in the VA and FHA loans markets. Here is what to expect:

 

1- borrowers may not be able to lock rates until they have full loan approval

2- some lenders could go out of business altogether

3- some lenders could delay loan closings because they have a liquidity crunch

 

Call us to plan for this market interruption. 

HIgher Loan Limits in Southern California for 2019

The 2019 San Diego County loan limit is $690.000, up from $649.750 in 2018.  

In Orange & Los Angeles counties, it's $726.525 and in Riverside, San Bernardino, and Imperial counties, it's $484,000.

 

The higher loan limit affects FNMA, Freddie Mac, and FHA loans. For VA loans, the county limit is for zero down payment loans ONLY.   VA loans have no loan "limit"  but may require a down payment for prices over the county limit. Read about how to calculate the VA downpayment for purchases over $690,000 here

This year, the FHFA published this interactive loan limit map, showing the loan limit for every county in the US.

For fun, compare the 2016 Presidential election map (by county) with the FHFA interactive loan limit map.  If you click both links, the maps will open side-by-side

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.

VA Condominium Approvals Are Easy, We Close Them In 45 Days

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

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.

Avoid These Common Mistake When You List a Condo

You just listed a new condominium and you're excited; you priced it right and you expect it to sell and close within 45 days.  Financing is a big deal for most condo buyers; in San Diego, condos are often bought by first-time home buyers.  You might be making these common mistakes which could cause the offers to come in much lower than you want, have deals fall out of escrow, or delay the closing.

1-  Not checking to see which financing is available.  See if the complex is approved for FHA financing and be careful to see when the expiration date of the approval is.  Check to see if the complex is approved for VA financing.  If you can't find the complex on these lists, call me at 858-777-9751.

2- Check with the HOA to determine the owner occupancy percentage.  If the percentage of homeowners is under 50%, the buyers won't be able to use FHA financing or conventional mortgages with less than 20% down payment.  If the percentage is below 50%, consider having us submit the HOA package to VA for a complex approval. 

3- Not ordering the HOA documents immediately.  Most agents tell owners to wait until you have an accepted offer,then ask the escrow company to order the documents.  This is a huge mistake because it delays the process.  It's a cost to your seller but the seller has to provide those docs to any buyer; they might has well get it out of the way.  Committed sellers will do this up front.  You can call me at 858-777-9751, to review those documents, so you are prepared for any offer.

Too often, agents make these mistakes and are chasing their tails in escrow.  We can help you to stop chasing your tail,  maximize the price your seller gets, and guarantee a quick and successful closing.

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.

Welcome Home to San Diego Veterans. Thank You For a Great 2014

We are grateful for ALL of the people, who have chosen Debra Brady and I, for their mortgage financing in 2014. While the year started off slowly, it really picked up after August 1, 2014--that may be an indication of what 2015 volume will be.

We have focused on veteran housing issues since we lived near Luke Air Force Base in Arizona. This year marks our 11th year serving our San Diego veteran community.  We moved here in 2003 and, while VA home loans were "out-of-style" for a few years, higher loan limits (and lower housing prices) made them a popular mortgage product again.  Popular or not, we still plugged away.  Today, San Diego recognizes us as VA home loan experts; we have a special expertise in getting a VA  condominium approval.

We are proud to close out December, 2014 by funding loans for a Marine Corps veteran, a Marine Corps Staff Sgt, an Air Force veteran, and a Coast Guard Officer. Thank you to all the "sheepdogs" for serving our country and thank you for making us a part of your home buying process.

Happy New Year and welcome home service members.

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