Archive for the ‘Home Buyers’ Category

An Update On Mortgage Rates

Mortgage rates inched higher, rising for a 7th consecutive week, with the benchmark 30-year fixed mortgage rate rising to 4.18%, according to’s weekly national survey. The 30-year fixed mortgage has an average of 0.21 discount and origination points.

 update on mortgage ratesThe larger jumbo 30-year fixed inched to 4.18%, while the average 15-year fixed mortgage rate climbed upward to 3.42%. Adjustable mortgage rates were mostly unchanged, with the 5-year ARM remaining at 3.45% and the 7-year ARM holding steady at 3.69%.

Mortgage rates continue to climb, reaching the highest levels since July 2015. While the run-up in mortgage rates was driven largely by the expectation of government stimulus and more government borrowing with the new administration, the Federal Reserve’s upward estimate of economic growth and projection of three interest rate hikes in the new year are continuing to drive mortgage rates upward. Inflation will be another variable to keep an eye on as any upside surprises would force the hand of the Fed into raising interest rates even faster.

At the current average 30-year fixed mortgage rate of 4.18% the monthly payment for a $200,000 loan is $975.70.


30-year fixed: 4.18% — up from 4.15% last week (avg. points: 0.21)
15-year fixed: 3.42% — up from 3.40% last week (avg. points: 0.19)
5/1 ARM: 3.45% — unchanged from 3.45% last week (avg. points: 0.30)

The survey is complemented by Bankrate’s weekly Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next seven days. The majority, 63% forecast that rates will continue to rise in the coming week, while 13% expect rates to go down. The remaining experts, 25% predict that rates will remain more or less unchanged over the next 7 days.

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Credit Reports – What You Need To Know

Credit reports and the “secret formula” for calculating one’s credit score remains a mystery for most people. When a lender “runs your credit,” that means the bank is getting your credit information from one of three independent national credit reporting bureaus–Equifax, Experian, and TransUnion.

what is my fico scoreCredit reporting bureaus collect information about your credit card use, rental history, loan history, including vehicle and student loans. They then analyze the results and tabulate them into credit scores, using software created by the Fair Isaac Corporation. Your lender can purchase the reports, as the FICO scores to serve as summaries of your credit history. Your FICO score is the middle of the 3 scores.

Each of these credit reporting bureaus collects and analyzes its own data which results in 3 different scores. The bureaus don’t share information between each other, so if you want a true picture of your credit, you have to check with all three bureaus.

If you have a mistake on your credit report from one bureau, the same problem may not appear on the other bureaus’ reports. You have to get the negative item removed by sending a copy of your proof, full payment, release of lien, or other evidence.

Getting one of these items removed can take as long as 30 days, which will delay your loan. That’s why it’s best to clear these things up before the lender brings them to your attention. If your lender sees something negative enough to decline the loan, they will tell you to fix it. Lets say you may have had a dispute with a contractor that resulted in a lien on your home. It doesn’t matter who was right, you’ll have to pay the debtor, obtain a release of lien or payment in full receipt, whichever applies.

This evidence should go into the loan file. Make sure to keep multiple copies of the lien release or payment in full. Why? Because that lien can always reappear on another credit report. Property liens from the IRS are particularly hard to eradicate because the proof of payment has to come from the IRS, along with the county where you owned the property, which must record the release of lien.

You may see a problem in your credit report that’s over 10 years old. An account in collections can stay on your credit report for much longer than 7 years; which is the length of time it takes for bad accounts to drop off your credit record. When the debtor finally gives up trying to collect, that’s when the 7 years begins.

FICO credit scores can be in the range of 300 to 850. To get the best mortgage rate, your score must be as high as possible. Today, most lenders will give you their best rates if your credit scores are 750 or higher.

Factors that make your FICO score and credit historyYou can raise your credit scores by managing your credit the way that generates the highest scores. About one-third of a FICO score is your payment history (paying on-time). Another third is based on how much of your available credit-line you use. You can improve both areas by paying down your debts down as quickly as you can. If you are only making the minimum payment on your accounts, you’re living beyond your means and thus lowering your credit score. Don’t max out any credit card.

You can also improve your scores if you pay debts off early and avoid late payments. Data in your credit report includes the loan terms, payment history — on time, early or late payments, unpaid monthly balance rollovers, payment amounts, minimum payment history, income-to-debt ratios, and percentage use of available credit. Always pay off those credit cards that charge the highest interest first. Try not to incur new debt.

Managing your debts well does more than earn you a great mortgage rate. It ensures lenders that you are more likely to buy wisely within your affordability range. And that will make any lender view you as a good risk.

You’re entitled to a free copy of your credit reports once/year. You can contact all 3 credit bureaus or visit


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Myths of Owning Rental Property

There are many commonly misunderstood myths people have about owning rental properties. While owning a rental property isn’t as easy as “sitting back and collecting the rent,” it can be a very good investment when done correctly. Here are some common myths about owning rental properties.

Myth #1: I can’t afford it!

Truth: Many banks will lend to you with as low as 20% down on a rental property. You can get these funds from available cash, retirement accounts or a home equity line of credit on your primary (or other) property. On a $250,000 condo, that’s as low as $50,000 for a down payment.

myths of owning rental property in san diegoMyth #2: It’s hard to manage properties!

Truth: Property management is actually simple to learn and do! Have you ever rented an apartment? That is all you need to do. Most Realtors will gladly provide all the forms you need, tips on running your rentals, and vendors who can handle emergency calls and repairs.

Myth #3: I can buy something for less in Florida (Texas, Arizona, Nevada, etc.)!

Truth: You can, but with lower rental rates, they will not generate the same long term returns that something in the Southern California area will. Also, we have almost no vacancy here in CA – whereas other states sometimes have 30% vacancy.

Myth #4: It’s hard to find a tenant!

Truth: With a sample ad on Craigslist – you’ll get a ton of responses. We have a housing shortage – there are more tenants than properties.

Myth #5: All HOAs are bad!

Truth: Let’s face it, HOAs have a bad rap, and for good reason. But on the flip side, HOAs minimize your risk as a landlord and provide some management for you. They also provide landscaping, insurance, repairs, and amenities that are desirable to tenants. This means can mean less work and less headaches for the property owner!

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4 Tips Before Buying A Home

When buying a home, one of the most important things you can do is to plan ahead. Failing to plan for small daily tasks is one thing, but failing to plan for one of the biggest purchases in your life can lead to severe problems. It is arguably the worst thing you could do before buying a home. You owe it to yourself and your family to get ready in advance for the home buying process. Here are four tips that can help you do this:

tips before buying a home1. Educate Yourself

It’s important for first-time buyers to become familiar with the basic home buying process. Even if it isn’t your first time, it’s still a good idea. The lending and real estate markets have changed quite a bit from even just a few years ago.

Here are four things you should look into:

  • What type of mortgage loan best suits your needs: Conventional, FHA, or VA?
  • Should you get a fixed-rate or adjustable-rate mortgage (ARM)? 
  • What’s the real estate market like in your local area? Are homes selling quickly with multiple offers on the first day, or are they sitting on the market?
  • What is the maximum monthly payment you can make comfortably? This is something your lender can help with.

This is also a good time to check your credit score and reports (you can get free annual copies). You should see what your credit situation is, and come up with a plan to improve it, if needed. You can see 2 of your credit scores every month on

You can avoid many surprises by determining the answer to these questions before starting your new home search.

2. Select a Lender & Real Estate Agent

You will be working with your loan officer and real estate agent throughout the entire home buying process. You will spend many hours with them in person and on the phone. Search through reviews and talk with several agents and lenders to find the ones that will provide you the best customer service and a quality buying experience.

When interviewing lenders, keep these questions in mind:

  • Who will be your point of contact throughout the process?
  • What is their average closing time for a loan?
  • Do they have a good Better Business Bureau (BBB) rating?
  • If you are obtaining a specialty loan such as a VA mortgage, are they familiar with its requirements and how it works?

When interviewing real estate agents, keep these questions in mind:

  • What’s their overall availability? Does it match yours?
  • How long have they been working in your particular market?
  • Do they have experience working with specialized loan products such as FHA financing?
  • Do they understand what homes will or will not meet these requirements?
  • Will you be able to put your full faith and trust in them?

3. List Your Wants & Needs

Going into the home buying process knowing your needs and wants will benefit you in many ways. Doing so will help you identify and prioritize features and help you eliminate homes that simply don’t meet your needs.

As you begin shopping for a home, it may be necessary to re-evaluate your list based on the local market and what is available in your price range.

Lean on your real estate agent for advice when you’re unsure of whether your list meshes with your budget.

4. Save!

Your out-of-pocket costs will vary depending on a number of factors, including the type of mortgage and your contract negotiations. These fees typically include a down payment and closing costs.

Closing costs can vary greatly depending on your lender and the amount of your mortgage. In California, 2% can be a general guideline to start. Ask your lender and real estate agent for estimates on closing costs.

Down payments are calculated by taking a percentage of the loan amount. They require that the borrower/buyer put a designated percentage in cash toward the home purchase. These percentages vary by loan type. Conventional loans require 5 – 20% down on a home. FHA loans require 3.5% down. VA  loans don’t normally have a down payment requirement.

Calculate the estimated out-of-pocket costs. Start saving toward this goal, if you haven’t already. It will be due upon closing. You shouldn’t be emptying your savings to come up with your closing costs and down payment. Some lenders will even prohibit this practice. You’ll want these savings as a safety net as a new homeowner. Leave yourself a comfortable amount of cushion in savings for emergencies and upcoming household expenses.

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No-Cost Mortgage Loans…What’s the Catch?

Isn’t a no-cost mortgage better than a low-cost mortgage? In theory, it sounds good, right? No-cost mortgages have gotten quite a bit of exposure lately, and I will explain how the two differ. First, we must understand what an interest rate is, compared with the APR (annual percentage rate). The APR blends the closing costs (where the straight interest rate does not) with the loan amount and re-amortizing that figure over the term of the loan. On traditional loan financing, the APR is usually within .125% of the actual note rate tied to the amount borrowed.

When comparing loans, the APR is the best comparative tool, not the interest rate. The APR has no bearing on your principal and interest payment amount nor the note rate. APR is a barometer of loan cost solely. The interest rate determines the monthly mortgage payment.

A No-Cost Mortgage is truly a “no-cost” loan — no appraisal fee, no lender fees and no closing costs. These fees are assessed by virtue of taking out the loan. The mortgage lender provides a credit at the close of escrow equal to the amount of the closing costs, thereby creating a “no fees” loan. So what’s the catch? No-cost mortgages will contain a higher interest rate and APR, so you’re in essence amortizing the closing costs over the life of the loan (i.e. 360 months representing a 30-year fixed rate mortgage). So yes, you are still paying the closing costs, but just in a different way.

A Low-Cost Mortgage is a traditional mortgage all lenders offer that is considered the norm. You take out a loan while paying any applicable fees associated with doing so, excluding discount points, which are usually optional. Low-cost mortgages will contain lower rates than their no-cost mortgage counterparts. Here the lender does not have to inflate the rate for generating overage to pay the borrower’s closing costs. Thus you will get better pricing when it comes to the interest rate and terms. Thus, in general, the interest rate and APR are lower on low-cost mortgages than on no-cost mortgages.

So what is better for you?
The benefits you would gain from either choice depend on how long you plan to hold the loan and your financial goals. For example, because the future for many is unknown in terms of how long the loan will be held for and/or how long the property will be held for, a low-cost mortgage is a more appropriate long-term strategy as the realized benefits of the lower cost mortgage materialize over time — i.e., lower interest savings over the life of the loan. But if the property hold time or the loan payoff is going to be dramatically shorter, such as within the next 12 months, a no-cost mortgage is more appropriate (despite the higher interest rate.).


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Can I Buy An Investment Property With Less Than 20% Down?

buying an investment property with 20% down paymentIf you’re thinking about adding a passive income stream by purchasing investment or rental property, one of the first questions you might have is what down payment you’ll be required to put down. Many federally-backed home loan programs like FHA and VA loans require very little to no down payment for owner occupied homes. But what about one of those loan programs for investment property? The short answer is that you must you have 20% to put down in order to buy a home you’ll rent out and use to generate income.

Can you buy investment or rental property with an FHA or VA loan?

Generally,  no. Federally backed and insured loan programs like FHA and VA loans are not available for the purchase of investment or rental properties which you, the owner, won’t occupy. There are a few exceptions to this general rule, including refinancing an existing FHA loan on a home which you have used as your primary residence, but now intend to move out of and use as a rental property. If you used an FHA loan to purchase the property initially, even if you move out and begin to rent out the property, you will likely still be able to refinance into another FHA or VA loan. The good news about this exception is the FHA streamline refinances are usually some of the quickest and most straight forward refinance programs available.

Another exception to the FHA and VA “no investment property” rule is buy buying a duplex or multi-unit property where you will live in one (or more) of the units. As long as the property is owner-occupied, you will likely be able to qualify for an FHA loan for your income property. VA loans may be used to purchase properties with up to 4 units, meaning that you could take advantage of all your VA mortgage loan has to offer (including the NO down payment feature!), live in one unit and rent out the others to create additional income every month.

What other down payment options are there?

If you already own a home with established equity, you may be able to use your home’s existing equity as a down payment on a second, investment property. You can leverage your home’s equity as a down payment through a cash-out refiance of your existing mortgage loan, or through a home equity loan or line of credit.

Many lenders will extend loans for an investment property with less than a 20% down payment, but will require the addition PMI (private mortgage insurance). PMI for investment mortgages is generally more costly each month than on an owner-occupied home, so if you are putting down less than 20% and taking on PMI as part of your purchase you’ll want to remember to factor PMI into your cash flow projections.

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