Open Mortgage Partners with L.A. LOFTS REALTY

Those of you who know me probably know that I have been a long time resident of downtown Los Angeles. This is why I could not be more excited to announce our new partnership with L.A. LOFTS REALTY! L.A. LOFTS REALTY is one of the most successful and longest established residential real estate companies in downtown Los Angeles having moved into the Historic Core neighborhood in 2006. The partners at L.A. LOFTS REALTY have been key figures in the revitalization of the downtown Los Angeles community working closely with retailers, developers, charitable organizations and civic leaders. As long time residents and business owners in the community, the team at L.A. LOFTS REALTY has their finger on the pulse of the city making them the ideal real estate professionals to assist anyone looking to buy or sell real estate downtown.

As their preferred lender, you will be able to find me in their office on the corner of 6th and Spring every Wednesday. I will also be participating in open houses and the DTLA Housing Tour hosted by L.A. LOFTS REALTY every other Saturday. To learn more about partners Alex, Tiffany, Jim and the rest of the L.A. LOFTS REALTY team visit www.LALOFTSREALTY.com.

Revisiting HARP 2.0: The good and the bad

 

Back in January I wrote a post talking about the new HARP 2.0 program. At that time the program had not yet rolled out and it was uncertain how well it would actually work. Now that HARP 2.0 has been on the market for about 4 months we are starting to get a feeling for where the program is helping and where it is still deficient.

First off, lets review just what the HARP 2.0 program is supposed to do. HARP 2.0 is a refinance program for homeowners who have a Fannie Mae or Freddie Mac owned mortgage that they obtained prior to May 31, 2009. The program allows for homeowners who have little or no equity to take advantage of today's low interest rates. In order to use the program the mortgage balance must be greater than 80% of the value of the property, the mortgage payment must be current and on time for the past 12 months, and the borrowers need to show that they have decent credit and enough income to be able to afford the new payment. The ultimate goal is to help homeowners reduce their payments encouraging them to keep paying their mortgage rather than letting it go.

California's new Homeowner Bill of Rights: What is it and who does it help?

On Monday the California legislature passed the Homeowner Bill of Rights. This is a set of new laws designed to protect homeowners who are facing foreclosure. Lets start with a little history lesson about how this whole foreclosure problem started.

What led up to this new law?

When the housing bubble burst at the end of 2007 California and the rest of the country began to see incredible numbers of homeowners facing foreclosure. The first wave of foreclosure was overwhelmingly caused by sub-prime loan programs. These loans typically had a fixed interest rate two to five years after which time the interest rate would become adjustable. In some cases the fixed payments were actually less than the total interest owed each month which caused the loan balance to grow. On top of that, the majority of these loans were "stated income" loans that did not require the borrower to prove that they could afford the monthly payments. The lenders were willing to offer these risky loans because they were selling them off to Wall Street investors which minimized their risk should a borrower default on the loan. On top of that, property values were rising at record rates because the lack of qualifying guidelines created a huge demand for homes. Suddenly millions of people who should not have been able to qualify for a home loan were now in the market and the property values began to soar out of control.

FHA Streamline Refinance Changes to Help Thousands of Underwater Homeowners

Chances are that if you own a home and used FHA financing to buy your home, you have gotten a ridiculous amount of mail about the FHA Streamline Refinance program. If you're like me, those solicitations probably go straight into the recycling bin. The Streamline is an FHA loan program that has been in place for a long time, it is designed to help current FHA loan holders reduce their interest rate and payment without having to go through the regular loan qualifying process. This means that as long as you have been paying your mortgage on time for 12 months, your credit score is not terrible (over 600), and you can prove that you have a job (or other income stream) you will be able to qualify for the loan. There is no appraisal for the Streamline so even if you owe more than your home is worth you can still qualify for the loan. The program also does not ask you to provide income documentation. The underwriter will verify that you are employed but they are not going to look at how much money you make as there is no Debt to Income (DTI) requirement like there would be on a regular loan. 

With FHA rates now sitting in the mid to high 3% range you would think that everyone with an FHA loan would be taking advantage of this program right? Well as is usually the case, there is one little hitch. All FHA loans have mortgage insurance, or PMI. Over the past two years the FHA has increased the cost for that mortgage insurance multiple times to a level now where the cost is more than double what it was just two years ago. So even if you were able to reduce your interest rate from 5.0% to 4.0%, you still would not be saving much money due to the increased mortgage insurance. Even if you wanted to refinance and save $50 per month the FHA has a minimum benefit guideline which would not allow the loan to go through for such little savings.

Thinking About Buying a Home? Step 5: Closing

We are at the final step of the process, closing the transaction. Now that your offer has been accepted the clock is ticking. Your loan officer will be working very closely with you, your realtor and the escrow officer to get your loan submitted, approved and ready for closing. In this post I will discuss the steps associated with the loan process, the home inspection and what to expect at closing.

Submitting the Loan for Underwriting

At this point in the process your loan officer is going to be working quickly to get your loan submitted and approved. While you probably already gave the loan officer proof of your income and assets during the pre-approval process, they will still need you to provide some additional information. If you have not given the loan officer your most recent paystubs or bank statements they will need those. At this point you will also need to get your homeowner's insurance lined up. Once you have chosen the insurance provider the loan officer will need their contact information. The escrow officer &/or realtor will be providing a fully signed copy of the purchase contract and a proof of the good faith deposit. Once the loan officer has all of this information your loan will be submitted for underwriting.

Property Inspections

While you are waiting for the underwriter to review your loan submission there will be two different inspections conducted on the property. One is the property inspection itself where they will be looking for potential problems with the home. Things such as termite damage, plumbing issues, structural damage, or any problems that may affect the condition of the property. The second inspection is the appraisal. This appraisal inspection is to determine the market value of the property. The lender uses this inspection to make sure that you are not paying more for the property than what it is worth based on other recent home sales in the area.

Loan Conditions

By the time the inspections are complete, the loan officer should have your Conditional Loan Approval. This means that the underwriter has reviewed the loan submission and has agreed to provide you the loan as long as you can meet certain conditions. One of those conditions will be a satisfactory appraisal report. Typically the other conditions are things that your loan officer will be able to handle without your help, but in some cases they will need additional documentation from you. It is important that you give the loan officer the requested information as soon as possible to ensure that the loan process does not get drawn out.

Closing the Transaction

By now your property inspection should be complete and hopefully it was satisfactory, if so you will be waiving your inspection contingency. Once the underwriter has reviewed and cleared all of your loan conditions, they will clear the loan file for closing and send the final loan documents to the escrow officer. When both sides are ready an appointment will be made to sit down and sign your closing documents. These will include the mortgage details and the new deed to the home with your name on it. At this time you will also be delivering your down payment to the escrow officer.

Taking Possession of Your New Home!

After you sign everything and deliver your down payment the escrow officer will complete the closing. To do so they must send the signed documents to the lender who in turn will send the funds of the loan to escrow in order to pay the seller, this is called the funding of the loan. Once the loan has funded the new deed is recorded with the county. Once the county has recorded your deed you are now the legal owners of the property and your keys will be ready to pick up!

Thinking About Buying a Home? Step 4: Making the Offer

Welcome back to our series 'Thinking About Buying a Home'. So far we have discussed how to get pre-qualified for a home loan, how to select a real estate agent and things to consider when looking for your new home. The next step is when things get serious, you have found the perfect home and now it is time to make an offer to buy it.

How Much Should You Offer?

No one ever wants to pay too much for anything. The tricky thing about buying a home is that every home is different so it can be difficult to pinpoint what price is right. Your real estate agent is going to have an opinion as to how much you should offer for the property and if they are doing a good job they will have a good explanation for their opinion.

The first thing to consider is how much other similar homes in the area have sold for recently. You will also want to look back at the listing prices of other active listings that you have seen. Compare these sales and listings to the home you have selected. This should help you come up with an offer price that you feel comfortable with. You will also need to determine how much money you want to include as a good faith deposit with your offer. Usually this will be somewhere between 1% - 3% of the offer price.

You will also want to pay attention to how long a home has been on the market. If the home was just listed within the week and it is nicer than anything you've seen up until then, the seller will probably be less likely to consider an offer that is far below the asking price. If the home has been on the market for months then you should have more room to negotiate.

Concessions: What Should You Ask For?

When you make your offer you can also ask for additional concessions. Maybe the seller has a pool table that you really like. You can stipulate that you want the pool table as a part of your offer. In some cases the seller may be planning to take things that you expect them to leave such as the refrigerator, washer/dryer or maybe a jacuzzi. That may be a good thing if you don't like their appliances, just make sure that you budget accordingly for those items.

The other common concession is to ask the seller to pay for some or all of your closing costs. In many cases buyers will agree to pay more for the home if the seller pays the closing costs. This allows the buyer to roll the closing costs into the home loan rather than paying for them out of pocket at closing.


Contingencies: What Are They and What Do You Need To Know?

Most purchase contracts have two types of contingencies, or escape clauses. The first is the inspection contingency. This part of the purchase contract states that you would like to conduct a professional inspection of the property within a set number of days. Once the inspection has been completed you have the option to back out of the purchase, renegotiate based on the results of the inspection, or waive the contingency and continue on with the transaction.

The second common contingency is called the finance contingency. This states that you have a set number of days to secure the home loan. If your loan is not fully approved by the date of the contingency you have the option to cancel the transaction, ask for an extension of the contingency or waive the contingency and continue on with the transaction. If you decide to waive your contingencies but later do not complete the transaction the sellers have the right to keep your good faith deposit.

In our next and final post of this series I will discuss what happens once your offer is accepted. Thanks for reading, please feel free to comment or ask questions below.

Thinking About Buying a Home? Step #3: Finding the Perfect Home

Recently we have discussed how to get pre-qualified for your home loan, and how to select a real estate agent. This third step is all about how to find the perfect home for you. Once again I have called upon Vanessa Yan of Keller Williams & the blog Soulful Abode to share her expertise on this subject. Once you have read this post please check out her blog and subscribe, you won't be disappointed.

Things to Consider When Buying a Home

Buying a home isn’t just about a great kitchen or square footage. Though important, there are other factors to seriously consider.

1.      Can I Afford It? It’s funny how many people don’t keep this in mind. While you might have a loan approval for $500k, that doesn’t mean you need to go that high and spend at the top of your desired mortgage.

2.      The Neighborhood. Do you really want to be the biggest, nicest home on the block? Appraisers don’t think so.

3.      Square Footage. I’ve seen homes that were 1000 square feet that felt larger and had better floor plans that homes double the size. Don’t get bogged down by needing a certain square footage. My advise: have a 500 sq. ft. buffer. If you want a 2000 sq. ft house, consider homes in the 1500 sq. ft. range and see them in person to determine whether it’s really too small for you. 

4.      Blinded by Bling. The average cost of a gorgeous kitchen is between $15-20k. Do you really want to buy that house that’s asking $50k more than all the other houses you’ve looked at simply because you’re blinded by shine of the granite and stainless steel? The same goes for most other “bells and whistles” like new appliances, a new deck, new flooring, etc. If it’s in the house, you can do it yourself, choose what you really want and pay much less for it. 

5.      The Bones. This goes hand-in-hand with getting blinded by bling. The most important thing to consider when buying a home is the quality of the home. Are the bones good? If it’s in older home, chances are that the materials used to make that home are far superior and stronger than anything you can find today. Do you like the flow and layout of the house because everything within those four walls, like the kitchen and bath, is changeable. The quality of the house, however, is not.

6.      Doing an Open House Right. This goes along with tips 3 & 4. When walking through a house, don’t get blinding by professional staging and blingy kitchens. Look at the big picture. Do you like the home’s presence from the curb? Do you like the natural light? Is the living room large enough to accommodate the 3 kids and the 2 dogs? While staging is nice, it’s unlikely you’ll ever replicate professional staging if you were to buy the home. So think about how you really live, while walking through a home that designed to get you to buy.

For a great agent who can help you find beautiful homes that truly meet your needs and wants, contact Vanessa at www.SoulfulAbode.com