San Diego Homes

San Diego is one of the hardest hit markets during the sub-prime meltdown, resulting in a large number of foreclosed properties.  The consumers purchasing these homes in many instances have received up to a 30 percent discount from the peak of the market in 2004.  With the high cost of housing in San Diego the sub-prime loan with stated income was commonly used to buy homes with 100% financing.  By stating their income the buyer didn’t have to validate their income with pay-stubs and W-2s many of these consumers elected to take riskier two or three year adjustable rate mortgages for the lower initial payment, with hopes of refinancing before the time of the adjustment.  These sub-prime borrowers found themselves unable to refinance and trapped with declining market values and the disappearance of almost all of the sub-prime loan products.  Most of the borrowers were advised by the media to ask their banks to extend out their notes with the same rate until the market conditions improved and they could refinance.  As is evident by the number of foreclosed homes, very few homeowners were successful in renegotiating the terms of their loan.  In many cases the homeowner was faced with a payment increase of up to $1000 a month which left only one option, walking away from their home.
 

Article after article has been written describing the record number of foreclosures and further declines in value that will be taking place in 2008.  These numbers have all been based on one fact.  President Bush felt that the sub-prime mortgage problem was an individual homeowner’s problem and that the federal government was not there to bail them out.  After realizing the sub-prime meltdown has shaken financial markets throughout the world government intervention was needed. With President Bush’s new plan in place, it will allow the borrower to fix their initial interest rate for a five-year term as long as the consumer is current on their mortgage.  An evaluation will be done to determine a borrower’s ability to handle the higher payment if their loan adjusts.  I suspect that most homeowners will qualify for the freeze of their interest-rate.  In San Diego estimates show over 10,000 homeowners could be saved from foreclosure in 2008 and allowed to keep their homes.
 

After the existing inventory of foreclosures disappears the consumers that are waiting for the bottom of the market will be in for a big surprise.  Already local agents are experiencing multiple offer situations on the bank owned properties that are offered for the best prices.  In many cases the sales prices on these properties are going above the initial prices they were listed at.  A combination of declining prices and 100% financing readily available to consumers through FNMA at conforming loan limits of up to $417,000 is creating a buyer’s paradise.  Additionally appraisers are starting to see values leveling off throughout Southern California.  It is looking like this window of opportunity to purchase a bank owned a home will be short-lived.
 

Unfortunately for many consumers fear will drive them to sit on the sidelines of the market until the media starts to report that we have a recovering market.  A recovering market for the consumer means higher prices, the loss of many seller concessions like having their closing costs paid, many competing homebuyers, and a lower level of inventory available.  With the federal government lowering the discount rate and mortgages that are below 6%, now is the window of opportunity to buy a below-market home.  When the news about the market is at its worst the opportunity for profit is at its best, but not for long.
 

Co-written by Randy Nathan and James Dedolph, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate .

2007 has been labeled the year of the sub-prime meltdown and the exploding ARM.  With the high cost of housing in Southern California many homebuyers elected to take on mortgages with a two or three year fixed terms would later turn into an adjustable mortgage.  For many households this adjustment could mean increases as much as $1000 for even entry-level borrowers, hence the term exploding arm.  Many articles have been written advocating that the borrower contact their bank and attempt to renegotiate extension on their introductory interest rate, which would allow the sub-prime borrower to continue paying a payment that was affordable.  Very few homeowners were successful with this strategy, which is exemplified by the number of foreclosures in today’s real estate market.
 

Normally real estate markets have slumps when the underlying economic picture of an area has slipped, causing higher unemployment.  This has certainly not been the case in the 2007 real estate market.  After one year of shock waves throughout the financial communities around the world, the Bush administration has finally awoken.  The shock waves were large enough to close most mortgage banks including the 10th largest bank in the United States.  For the most part that be of B of A’s, Wells Fargo, Washington Mutual, Chase, and Citigroup are some of the remaining banks while others like New Century, First Magnus, and Fremont are examples of those that failed.
 

With many communities dealing with bank foreclosures on their streets and falling real estate prices, which in some neighborhoods have seen declines of as much as 30% in value.  Something needed to be done.  Initially the Bush administration’s attitude toward the problem was that it was up to the individual homeowner to solve their problem and the government wasn’t going to bail out individual homeowners.  But Banks took a hard line on allowing for extensions on the initial start rates of the adjustable loans.  This created a situation with a large number of people walking away from their now unaffordable homes, and declining values which led to the current credit crisis in the financial markets.  With a huge number of sub-prime ARM’s adjusting in 2008, the Bush administration has finally taken action.  A plan is being negotiated with most major banks to allow for borrowers to extend their mortgage at the rate they have, which will give them motivation to continue making payments on their homes rather than walking away.  The plan calls for an evaluation on the borrower’s ability to make a higher payment.  With California’s high cost of housing most families could barely afford the payments at the time when they purchased their homes two or three years ago.  It is very likely that most families can qualify for this kind of extension.
 

With this type of plan in place there is a high probability we could see a major shift in the number of foreclosures in the real estate market and possibly a rebound in home values as fewer and fewer bank owned homes are available.  Unfortunately for many homeowners who lost their homes, the banks and the Bush administration were slow in responding to this crisis which has been felt around the world.
 

Co-written by James Dedolph and Randy Nathan, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate .

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In the last seven years sub-prime lending has become very popular in southern California.  With the high cost of housing in California was a temporary fix for many home buyers have a more affordable house payment.  This group of loans was made very attractive by offering options such as interest-only payments, lower initial start rates, and 100% financing.  For many consumers qualifying was not as tricky as a Fannie Mae product allowing the borrower to just state their income compared to the Fannie Mae conventional loan which requires full documentation providing pay-stubs hands W-2s. 
                                                
The downside to these loan products is that after two or three years they would become adjustable-rate loans, which is how the term exploding ARM loan came about.  The borrower was told in two or three years that it would be a will to refinance their loan and this is very true until the mark in Southern California stopped appreciating.  Many homeowners were now faced with payment increases of as much as $1000 per month.  On top of the lack of equity that homeowners now faced, the sub-prime market collapsed leaving only Fannie Mae type products on the market.  This left many homeowners without any options for refinancing their home.
 

One way that borrowers attempted to deal with this crisis was to attempt to renegotiate with their lender to keep the payment the same for another year or two even if they owed more on their home than it was currently worth with declining values.  Very few homeowners were successful with this approach even though many articles have been written as though this was a great option available to anyone.  Another common way that borrowers have attempted to deal with this exploding ARM crisis is to do a short sale.  This is when a seller places their home on the market for sale at market price and as the lender to set less than a full payoff on the mortgage, which would possibly do less damage to their credit than a foreclosure.  In many instances the homeowner was not successful in completing a short sale and renegotiating the payoff of their mortgage.
 

Because for many homeowners just walking away from a home and a mortgage that they couldn’t afford was the only possible route, southern California now has more than its share of foreclosed homes.  Once the bank takes the home back it may be several months before it goes on the market with a realtor.  Then it may sit for several more months before the home sales and escrow closes.  In most cases electricity, water, and gas are turned off by the utility companies when the foreclosed homeowner no longer pays their bills or cancels the services.  In addition to the lack of utilities most of the banks are not keeping their properties up from a maintenance standpoint, but the most dangerous problem starts in a vacant home with a pool. 
 

 Pools are a very common amenity in Southern California homes and it only takes a couple weeks with no chlorine and no active filtration for a pool to become a green algae pit, the perfect breeding ground for mosquitoes.  For months now the health department has been telling everyone to make sure that all standing water is removed from their home.  Now it is very common to find bank owned properties with pools, hot tubs, and other standing water breeding mosquitoes.  While you may think that mosquitoes are only a nuisance, they are actually a transmitter of the deadly West Nile virus.
 

A mosquito becomes infected with West Nile by biting an infected bird and anyone with a compromised immune system has a very high risk of developing serious complications after being written by one of these infected mosquitoes.  About 1 in 150 people who are bitten develop serious complications.  While 80% of people in show no symptoms, the other 20% will have fevers, headaches, body aches, nausea, vomiting, swollen lymph glands, or a skin rash.  San Diego has had 16 cases reported to the department of health already and 102 dead birds have also been reported. The threat of the West Nile virus has now become such a significant threat to public health that officials are having any reported sources of breeding mosquitoes treated to prevent an epidemic of West Nile virus.  With no concern for public safety or the vast expense put on the backs of taxpayers the banks are allowing their foreclosed homes to become breeding grounds for this deadly disease. 
 

Unlike the firestorm of 2007 in California which has had a dramatic and visual impact on the state.  This type of problem is not visible to the general public and the magnitude of this deadly disease will not be apparent until the number of infected people starts hitting the news.  New laws at the state level need to go into effect prevent banks from allowing pools to remain un-maintained end becoming a breeding ground for the West Nile virus.  Legal action needs to be taken to save lives even when people’s homes could not be saved from foreclosure.  West Nile virus has not yet made the front page, but if this continues it will.
 

Co-written by Randy Nathan and James Dedolph, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate .
 

The reverse mortgage is a special type of home refinance for a person 62 years old or older.  This is a way that a person can pull money out of his home without having to make payments on the line of credit or lump sum that they receive.  With this type of program there is no payment or repayment of the loan and the money may be distributed in one lump sum payment, used to create a fixed income for the duration of life, or it may be used as a line of credit to be drawn upon as needed.  These options can also be combined depending upon the homeowner’s particular situation.
 

Down and out financially doesn’t need to be your situation in life to use this type of loan.  You may just want to pay off an existing loan balance and not have any more payments.  Freeing up the equity in your home can improve the quality of your life.  The money can be used for vacationing, paying medical bills, sending a grandchild to college, or just supplementing retirement income.  You have worked hard to build the equity in your home, why not enjoy it now!
 

Unlike a conventional loan, there are no credit standards or income qualifications.  The two most important factors are your age and the value of your home.  The reverse mortgage process usually will take about 30 days before you can receive your money.
 

When you use this type of program the title to the property will stay in your name, you are not transferring the ownership of the home.  If at some point you choose to sell your home and move to another residence, you can.  What goes to the bank would be the closing costs, principle borrowed and interest on the loan calculated daily.  The remaining equity in the home is all yours.  Another commonly asked question is, are there any negative tax consequences for using a reverse mortgage?  The answer is that it is just like any other type of refinance and is not taxable income.
 

When your heirs receive your home they will need to either refinance the house, if they choose to retain it, or they will need to sell it.  They will receive the remaining equity in the home, which would be the difference between the principal borrowed, the accrued interest, closing costs, and commissions.
 

One of the safeguards the federal government has put in place to make sure the consumer understands exactly how this type of product works is the requirement that you participate in a HUD-approved counseling session.  This can be done over the phone and there are several different agencies who can offer this service to you free of charge.  Once you have completed the counseling session, you will be mailed a certification to validate that you have met the federal government requirements to be counseled by an independent third party.
 

In conclusion, if you would like to use the equity in your home to more thoroughly enjoy your golden years, it is a fairly simple process to find out how much a reverse mortgage can benefit you.  All you need to know is the approximate value of your home and your age and you will be able to examine all different types of products with a range of options.
 

Co-written by Randy Nathan and James Dedolph, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate .

Your FICO score is the most important determining factor in saving money when you buy a home .  The FICO score you have will determine the loan-to-value ratio or percentage of the purchase price you may borrow.  The interest rate you pay on the life of the loan is dictated by your score; in other words, the impact can translate to hundreds of dollars a month more that you will pay on your mortgage.  The FICO score is an automated system designed to evaluate your payment history, derogatory marks (late payments, delinquencies, etc.), active accounts, types of credit used, and the percentage of used credit compared to available credit.  A computer software program will bring all this information down to a number to assist an underwriter in evaluating your credit report.  With this universal system in place for underwriting credit reports, subjectivity in the process of determining a borrower’s eligibility for credit is limited.
 

With the significant changes that have occurred in the sub-prime and even prime lending market, the demand for borrowers with high FICO scores has become greater today than ever before.  For a full documentation loan, in which case pay-stubs and W-2s are provided, the requirements have gone from a 600 FICO score to a score of 660.  For stated income loans where no income documentation is required, the required FICO score has gone from 620 all the way up to 700.  These numbers all pertain to 100% financing and coming in with a down payment will allow for slightly lower FICO scores.
 

The first thing you want to look at is the accuracy of the report.  Are all the accounts properly reflected?  If not, you’ll want to contact each of the major credit reporting agencies to correct any mistakes.  Paying down the balances on credit cards will produce the greatest improvement in your credit profile because the system calculates the ratio of used credit to available credit on the credit cards.  However, this does not apply to installment debt, like student and car loans.  If you cannot raise enough extra money to pay down your debt, the next best course of action is to increase the credit limits on your cards.  Again the system will calculate the ratio between available credit and used credit, therefore reflecting an improvement in your credit score.
 

Another technique that can work well is opening another card and transferring the balances.  This can free up additional credit and improve your FICO score.  When you have a husband and wife with substantially different credit scores an opportunity exists.  By adding the spouse with the lower scores on to the credit cards of the spouse with the higher scores, an increase in the lower FICO scores should occur.
 

It may seem like these changes will take a long time to occur; fortunately, however, when working with a mortgage broker, once the changes are in place the credit report can be rescored.  This process is called a rapid re-score and with letters from the credit card companies the changes can occur in one week.  Another tool available to mortgage brokers is called a what-if simulator.  This allows potential modification scenarios to be played on your credit report, to see what the end result will be before you spend the money and time to make those changes.
 

In conclusion, as you can see, much can be done to make improvements on your credit score and an experienced mortgage broker can be an extremely valuable asset to have while you are attempting to maximize or repair your credit report.
 

Co-written by Randy Nathan and James Dedolph, creators of HomeSniffer.com where you can find San Diego Homes for Sale and LoanSniffer.net where you can find the best rate and terms for First Time Home Buyer Programs in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate for Sale .

Most first-time buyers are now faced with a higher credit score requirement and tighter standards after the sub-prime market went through its shakeup.  For many, that has created an additional challenge above and beyond the high cost of housing in California.  The answer to this is a very much overlooked first-time home-buyer program that solves this problem for many entry-level buyers with low FICO scores.  The CALHFA (California Housing Finance Agency) program is sponsored by the state of California and has many features not available anymore through sub-prime lending.
 

To start, the program allows for 100% financing with only a 620 fico score.  In the current lending environment, most programs now require at least a 660 FICO score.  Aside from the low FICO score requirement, loan approval can be accomplished with the buyer’s debt to income ratio exceeding 50%.  CALHFA offers the buyer below market interest rates on a loan that has a fixed rate of 30, 35, and 40 year terms.  With this type of loan, the consumer will never have to worry about his loan changing because it is not an adjustable rate mortgage product.
 

Currently available is an interest only loan with a 6% rate fixed for 35 years.  This is a type of loan product in which the buyer gets a loan once and never has to think about refinancing the home.  This type of loan program does require PMI (Primary Mortgage Insurance), but once you have reached a 20% equity position in the home and two years have gone by, you can eliminate the mortgage insurance and lower your payments even more, which is truly a better option for most homebuyers.
 

CALHFA also has available their HICAP (High Cost Area Home Purchase Assistance) program with $7,500 of assistance for down payment and their CHDAP (California Homebuyer’s Down-payment Assistance Program), which offers an additional 3% of the purchase price for down payment or closing cost assistance.  Many other community silent (no payment) second, third, fourth, and fifth loans can also be added to the loan to further lower the payments, by reducing the amount of principal that the buyer is borrowing.  Another very unique feature of this loan program is the Mortgage Protection Program.  This program can make up to six months of mortgage payments if the borrower becomes involuntarily unemployed and is receiving state unemployment benefits.
 

After reading, this I hope you have come to the conclusion that although buying your first home can be challenging in the aftermath of the sub-prime lending shakeup, there is still hope and with the right guidance from a knowledgeable professional, first-time housing can still be affordable.
 

Co-written by Randy Nathan and James Dedolph, creators of HomeSniffer.com where you can find Homes for Sale in San Diego and LoanSniffer.net where you can find the best rate and terms for Homes Loans in San Diego .  Both of these sites are a good resource for information about San Diego Real Estate .

By now, I’m sure that almost everyone has heard of the sub-prime lending shakeup.  In case you haven’t heard, the sub-prime lending shakeup was the result of many lenders’ policy of making loans that were extremely aggressive and not necessarily good investments and that caused those loans to have a very high default rate, which has caused investors to stop purchasing the loans in the secondary market.  Now, you may ask, what does this have to do with my purchasing a home.  In many cases, sub-prime lending has not only to do with your FICO scores, but the structure of your loan and finances.  So, while you may have good credit scores, your financial situation might not look as appealing to a lender if you’re using one hundred percent financing. 
                           
In most cases, what this means is that if you’re planning on using 100% financing, you need to make sure that your income is sufficient in qualifying you to make your payments and that your FICO scores are truly exceptional.  If you are unable to meet these requirements, you’ll need to plan on putting at least 5% of the purchase price as a down payment.  Otherwise, your interest rates and low terms will not be favorable.
 

Another effect of this shakeup has been that lenders are now constantly tightening their lending guidelines, and in many cases these changes are occurring daily.  So while one day you may have a loan approval, on the next day it’s withdrawn because the guidelines have changed.  Thus, when you are writing your contract to purchase a home, you need to be very conscious of how long your contingency periods are for your loan and appraisal.  If you are involved in a transaction where your contingency period for your loan does not remain in effect until the loan funds, you should definitely have some concerns that you may lose your deposit.  Another important factor in protecting yourself is making sure that you have a loan officer whom you fully trust to be completely frank about your abilities and limitations for financing.
 

Notwithstanding all these cautionary notes, while the sub-prime lending shakeup will have an effect on the real estate market place, I do not believe that it will be as dire as the media is predicting.  There will be no tsunami of foreclosures, no collapsing markets, and no bubbles bursting.  Of course, there will be adjustments in the real estate market, but this is purely a natural phenomenon in the economy.  Many reputable sources are predicting that the real estate market will not crash and that over the next year or two, homes will continue to slowly increase in value.
 

In conclusion, while the sub-prime lending shakeup will affect your purchase of a home and the overall market, as long as you are aware of it and take the next necessary steps to protect yourself, the effects should not be dramatic.