Here’s an update on today’s mortgage rates from San Francisco mortgage broker Monica Di Perna.
| 30 Yr Fixed Conforming to $417K | 6.375% | |||||
| “0.00″ POINTS | ||||||
| APR = | 6.481% | |||||
| 30 YEAR FIXED AGENCY JUMBO | 6.500% | |||||
| “0.000″ POINTS | ||||||
| APR = | 6.611% | |||||
| 5 YEAR FIXED JUMBO | 5.625% | |||||
| “1.250″ POINTS | ||||||
| APR = | 5.991% | |||||
| 7 YR FIXED JUMBO TO 1 MILLION | 6.000% | |||||
| “1.25″ POINTS | ||||||
| APR = | 6.062% | |||||
So you want to take advantage of the whole mortgage meltdown that’s been going on. Who can blame you? You want a deal! Deals are good! We all like saving money.
But buying property during the foreclosure process is challenging. Ask most people that have seen both good and bad real estate market and everything in between and they’ll tell you that buying foreclosures takes nerves of steel, an acceptance that there is risk involved and a strong stomach. And of course, it takes being knowledgable about the foreclosure process.
Now I’m willing to give you a little lesson, but people teach entire multi-day seminars on foreclosures and the foreclosure process - so my little blog post here isn’t going to go too far in the way of your foreclosure education, but it should give you enough information to decide if your stomach is strong enough to attempt purchasing a property in some stage of foreclosure.
So read on to learn about the various stages of the foreclosure process and the potential pitfalls of each.
Short Sale - A short sale occurs when a property owner is upside down on their mortgage (they owe more than their home is worth) AND they can no longer afford the mortgage payments. ,
Some lenders, rather than foreclose on a property are willing to settle for less than they are owed. They aren’t really being kind or generous - it’s just that banks aren’t in the business of buying and selling real estate, but rather, buying and selling money. They have no desire to keep homes in their portfolios, and in most cases, lenders would rather settle for a portion of what is owed to them and forget the whole thing ever happened.
The Short Sale purchase process starts rather simply. You see a property that you like, you make an offer on it, and the seller accepts the offer. Well - you still have another major hurdle to jump through. The offer now must be submitted to the lender, or in some cases lenders, and this is where the meditation class you took in college pays off.
Once the lender receives your offer, they rarely accept it right away. Typically it takes weeks for them to approve it (or reject it) and I’ve even heard of it taking months! During this time, the lender is reviewing the seller’s hardship package, they are reviewing your offer, and they are waiting, hoping and praying that another offer better than yours will come in. Of course, you can add deadlines and such to your offer, but the reality is that the bank will decide only when it’s good and ready.
Now, if the bank accepts your offer, then it’s pretty much like any other sale. Unless of course, the seller had a 1st loan and a second loan that they can’t afford to pay off. In this case, things get rather complicated rather quickly, because now you have two separate banks that have to agree to forgive part or all the seller’s debt rather than foreclosing on the property.
Sale Day (Courthouse Auction) - Let’s assume the bank rejected the short sale. Instead, they opted to file a notice of default followed by a notice of sale which led up to the Sale Day, where we are now. Sale Day occurs on the courthouse steps in the county where the trust deed was recorded. You can find out in advance which properties will be auctioned off on which day by looking in the local newspaper, going to the local courthouse, or contacting a REALTOR familiar with foreclosures.
The first thing to keep in mind is that your credit is no good on Sale Day. In fact, if you don’t have the money, either in cold hard cash, or in the form of a cashier’s check, you have no hope of winning the property on Sale Day.
In addition to the ALL CASH policy, you don’t have the opportunity to do any inspections, you don’t get title insurance, you don’t have disclosures from the lender, you don’t have crap. You may as well be throwing the dice. Why am I being so dramatic? Well - your property might come with LIENS ALREADY AGAINST IT - including various unpaid utilities or mechanic’s liens. If you buy the property, the liens come with it and it’s YOUR duty as the property owner to take care of them.
What about the price, you ask? Well - the lender is going to want to make back what they were owed by the former homeowner - so the starting bid will likely be the amount of the first note. Once again, you can get this information from a REALTOR.
Sale Day is frankly kinda scary. You might walk away with a ridiculous bargain, but you might walk away with a HUGE liability on your hands.
REO (Real Estate Owned) - So Sale Day often comes and goes with no offers on the courthouse steps. The bank is left with the property on their books - and as I’ve mentioned before, banks aren’t in the business of buying and selling real esate, so they want to get these properties off of their books rather quickly.
Now this is the time to find bargains! Banks usually unload these properties at a significant discount because they don’t want to hold on to them. The bank’s representatives usually respond to the offers rather quickly, and while you’re unlikely to find a property in pristine condition (former owners often take anything of value in the house from appliances to lightbulbs and doorknobs), you are likely to find a damn good deal.
But as with all things, there is a catch - you need to be ready to hustle! You have to move fast to grab one of these deals and you won’t have time to think long before you make an offer. However, if your offer is accepted, you often have the ability to do inspections (although in a competitive situation, you may not have that opportunity either.) Again, you should be working with a savvy REALTOR to make sure you don’t miss out on one of these deals.
I hope you found today’s foreclosure lesson helpful. If you want more information about Short Sales, Courthouse Auctions or REO’s, contact me. I’m always happy to help! 
So - I just heard the word from my favorite mortgage broker, Monica DiPerna about the new Government Sponsored 30 Year Fixed Mortgage Program. This will definitely open up more opportunities for first time homebuyers and those looking for a home that’s slightly below the range of median priced homes in San Francisco.
This is what Monica sent out yesterday:
The government has sponsored a program that allows homeowners with a loan amount above $417,000 and up to $729,000 to be able to refinance below market rates. Many of you have emailed me to ask me where these rates are currently. Today, you could refinance into a 30 Year Fixed Amortized Loan Program up to $729,000 and lock into a rate of 6.75% with no points and prepayment penalties. This may be a good opportunity for those that are thinking of remaining in their property for a longer period of time or those that have an interest only loan and want to start paying down the mortgage.The current rates for a Regular 30 Year Fixed Jumbo Loan are very high. They average 7.625% with all lenders. 6.75% is definitely a great rate for a Jumbo Loan these days.If you have any other questions, please don’t hesitate to contact me and we can put together a strategy that makes sense for your financial plan.
Sphere: Related ContentToday, the Government Sponsored rate has decreased to 6.375 if you have the following elements:720 FICO SCORE
Loan amount of $728,000 or under
20% Equity in the property
NO CASH OUT
Rate and Term Refinance
Single Family Residence ONLY
Amortized loan ONLY
Must have 6 months of reserves in the bank (Your retirement account is sufficient)
All of your monthly debt must be 40% of your gross monthly income
If you are interested in shifting to an Amortized 30 Year Fixed Jumbo please let me know and I will email you a to do list.Have a great day!
Homeownership can provide some amazing tax benefits! The IRS enables you to deduct the interest on a first-time home purchase or home equity loan in the year the loan is made. Another way to save is to consolidate debt via a home equity loan because interest from a home equity loan is tax deductible, but interest paid on credit card debt is not. You can also deduct the interest on any purchase or improvement for your first or second home from your tax return. The IRS allows you to deduct the interest paid on mortgage debt up to $1 million, provided that your home is the collateral used to secure the loan.
Property taxes are offer yet another upside at tax time - you can deduct state and local property taxes from your federal return in the year that they were paid. If you bought a home in California in 2006 at the-then median price of $556,650, your property taxes would be approximately $5,570 for the year, and are fully deductible. Property taxes are increased on an annual basis, and as your property tax goes up, so does the amount you can deduct each year.
The return on yOur investment when you sell is also protected. You are able to keep up to $250,000 for an individual or up to $500,000 for a couple in profit tax free when you sell your home. No other investment allows you that kind of tax shelter.
And keep in mind, one more bonus that isn’t tax related is that you are no longer paying rent to someone else! Instead, you are paying yourself! A home can allow you to build yourself up financially, and in San Francisco, your investment is safe from the fluctuations that have occurred as housing bubbles “burst” all over the country.
To learn more about how purchasing San Francisco Real Estate can provide you with great tax advantages, consult a tax professional. If you don’t have one you trust, call or email me, and I can refer you to a tax professional that can help.
Sphere: Related ContentThe beginning of the year brought us some declines on the mortgage scene - along with the addition of the strange new agency jumbo loan which covers the area between the traditional conforming loan of up to $417K but below a “real” jumbo loan which starts at $729K.
Interest rates are historically low and while they’re expected to stay that way through 2008, they are expected to creep upward as the year progresses.
From The Real Esate Daily News:
Mortgage Rates Hit Low Point The 30-year fixed rate mortgage currently sits at 5.88 percent, and analysts say they are unlikely to fall any further for the rest of the year. The rate on the fixed loans is only down a quarter of a point this year, as the credit markets have cut the link between it and yields on 10-year Treasuries; and while skittish investors have moved to Treasuries to trim the yields, mortgage lenders have not eased lending standards. Mortgage rates are likely to close 2008 at about 6 percent as investors in bonds focus on rising inflation, driving interest rates higher. Long-term rates will also increase due to the additional supply of Treasuries as Congress borrows to raise money for the growing federal budget deficit.
That’s great news for people that are ready to buy San Francisco real estate right now - the rates are slowly creeping up, and if you don’t wait too long to buy, you can still take advantage of the great rates out there.
That’s also not horrible news for people waiting a bit - yes, interest rates will be higher by the end of the year, but not drastically. If you can’t afford to buy just now, or aren’t able to for another reason - you will still likely be able to take advantage of historically low interest rates, they just won’t be as low as they are today.
If you need advice about whether the interest rates make “now” a good time for you to buy, contact me. I’m always happy to talk about SF real estate!
