Category Archives: Mortgage

Money Monday: California Housing Affordability

Higher wages and seasonal price declines affect California housing affordability.

housing market forecast

• “Thirty-one percent of California households could afford to purchase the $511,360 median-priced home in the fourth quarter, unchanged from third-quarter 2016 and up from 30 percent in fourth-quarter 2015.” (“4th Qtr 2016 Housing Affordability”. CAR.org. 9 Feb 2017)

• “A minimum annual income of $100,800 was needed to make monthly payments of $2,520, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.91 percent interest rate.”

Read all about 2016’s housing marketing in the fourth quarter, in the CALIFORNIA ASSOCIATION OF REALTORS’ article here: “4th Qtr 2016 Housing Affordability“.

 

Money Monday: Investing in real estate

As with all investments real estate investment has it own risks and the decision to invest should be carefully considered.

As a landlord there are certain costs that you will need to cover, potential vacancy problems that may strain your ability to pay your mortgages, and liability issues. It is important that you speak with an expert before putting yourself in a situation where you can potential over-extend yourself.

With that in mind, I have included some of the basic property types and benefits associated with real estate investment.

Single-family residence. First time real estate investors are usually advised to buy a single family detached home and rent it out as it’s market value appreciates. The reason for the popularity is that they are relatively easy. They are easy to buy, easy to finance, and they hold appeal to buyers and renters. Also, if you find that the real estate investment game was not the right choice for you they are relatively easy to turn over. Mortgage brokers know this-so these properties are also usually easier to finance and refinance.

Vacation property and second homes. Investment options in this category are myriad, from outright purchase to fractional-interest contracts and timeshares. Even if the property isn’t income producing, it can appreciate into a worthy investment, and mortgage interest is fully deductible. If you do rent the property when it’s not in use, realized income and tax obligations depend on what percentage of the year it’s kept for “personal use”-a tightly defined term you should discuss with a real estate attorney.

Apartment properties. Apartment properties require a long-term commitment, as well as a substantial investment of borrowed and equity capital, but due to the availability of professional managers they often don’t demand a lot of personal time. If you are the do-it yourself type then you might find yourself spending your weekends painting, advertising vacancies, and repairing faucets – though the higher return might be worth it for you. They can have mortgage loans of up to 100% of value, while other investment types may require all cash. Loans can be amortized or paid with the income generated by rents.

Condominiums. Condominium investments provide a bit of extra risk. Their market value appreciates more slowly than for detached single-family residences, and rental rates usually aren’t high enough to cover mortgage, property tax, and maintenance fees.

Vacant land. Vacant land is probably the least liquid and therefore usually the weakest choice for a profitable shorter-term investment. While undeveloped land is easy to maintain, it nearly always takes longer to appreciate and longer to sell.

Commercial property. To reduce personal liability and offset the greater expense of these properties, some investors form or join a limited liability company. Because of the extremely high risks involved with this type of agreement, consulting a real estate attorney is essential before taking this step. You probably shouldn’t consider this arrangement if you aren’t personally familiar with the other partners and their business expertise.

Money Monday: Mortgage rates decline for the third week

mortgage ratesMortgage rates dropped for the third week in a row after rising significantly after President-elect Donald Trump won the election, however, the 10-year Treasury did see an increase.

“After trending down for most of the week, the 10-year Treasury yield rose following the release of the CPI report,” Freddie Mac Chief Economist Sean Becketti said.

The 30-year fixed-rate mortgage decreased yet again to 4.09 percent for the week ending Jan. 19, 2017. This is down from last week’s 4.12 percent but still up from last year’s 3.81 percent.
The 15-year FRM decreased from last week’s 3.37 percent to 3.34 percent this week. This is still up from last year’s 3.1 percent.

Read the full story: www.housingwire.com/articles/38992-freddie-mac-mortgage-rates-hit-third-straight-week-ofdeclines

Money Monday: What does FICO have to do with my Home Loan?

Your FICO score is the yardstick by which most lenders measure your credit worthiness.

debt calculationThe major credit bureaus keep track of loans that you have taken out in the past and how well you managed this debt. A high FICO score indicates that you have been responsible with the credit extended to you and will reflect positively on applications that you submit, while a lower score indicates that you have had credit issues in the past. Continue reading

Improved Affordability in California

Compared to this time last year, homes are slightly more affordable in California

  • The median price for a single-family home in California in 2016’s Q3 was $515,940.
  • 31% of households could afford to purchase a median-priced home — compared to 29% of households a year ago.
  • Least-affordable counties include: San Francisco, San Mateo, and Marin.
  • Most-affordable counties include: San Bernardino, Kings, and Kern.

CAR improved real estate affordability in California

This infographic is from the CALIFORNIA ASSOCIATION OF REALTORS

Money Monday: Rising mortgage rates

While mortgage rates are still low, they have been rising lately — but many experts are worried.mortgage rates and property taxes

“The average rate for a 30-year fixed-rate mortgage rose to 4.16%, up from 4.13% last week, according to Freddie Mac. A year ago, rates were sitting around 3.97%.

“At the current interest rates, buyers will pay $21 more per month compared to a year ago, assuming a $241,000 price tag and 20% down payment.”

Read more of this article at Money.CNN.com.

Money Monday: Homeowners are twice as house rich as five years ago

After hitting bottom in 2012, home prices took off dramatically before leveling off a bit in mid-2014. In the last two months, though, they turned higher again. The amount of equity homeowners now have — the value outside their mortgage debt — has doubled in the last five years, according to CoreLogic.

money houseSeptember home prices showed a 6.3 percent annual gain, slightly more than in August and a clear sign that prices are heating up again after cooling through much of spring and summer. CoreLogic’s chief economist said that home equity wealth has doubled during the last five years to $13 trillion, large because of the recovery in home prices.

While homeowners today show more wealth on paper, they are not extracting it at nearly the rate they did during the last housing boom. Near-record-low mortgage rates have certainly prompted thousands of borrowers to refinance and lower their monthly payments, but a very small share have extracted cash in these refinances and home equity lines of credit (HELOC).

Full story: www.cnbc.com/2016/11/01/homeowners-twice-as-house-rich-as-five-years-ago

Money Monday: Money tips for homeowners

With homeownership, there are both benefits and costs involved (not just the down payment).

As the homeowner, your financial responsibilities extend beyond the down payment and monthly mortgage payments; there will be maintenance items to maintain and pay for, yearly tax bills, and the unexpected repairs to resolve. CNN Money does have a few money tips to help those would-be and already-are homeowners; read their article here.

Photo from Pictures of Money

Photo from Pictures of Money

1. Create a new budget

Instead of rent, you now have house expenditures. Besides the change in the monthly payment, there will likely be an increase in utility bills (it costs more to cool and heat and power a larger living space!), the potential watering and maintenance of a yard and garden, and other things such as a trash bill and your tax bills.

Estimate your monthly expenses initially, but then keep track of the actual monthly money going out for awhile, and then base your budget on that.

2. Plan on repairs

Even with a turn-key property, most likely you will have repairs to make pretty soon down the road. “Most homeowners spend 1% to 4% of their homes’ value each year on repairs and maintenance.” (CNN Money. “4 money tips for new homeowners”). And if you have an expensive repair coming up, like replacing the roof, try to save a little more each month in preparation.

3. Expect your property taxes to go up

Property taxes start out based on the assessed value of your home at the time of purchase. But,

Property taxes have a tendency to rise, even when home values drop. Back in 2000, localities across the U.S. collected an estimated $247 billion in property taxes, but by 2010, that number almost doubled to $476 billion despite the decline in home prices from the infamous housing bubble implosion. (CNN Money. “4 money tips for new homeowners”)

4. Expect big payments

Homeowner’s insurance and property taxes are some hefty bills, that you should plan for accordingly.

Read up on all of CNN Money’s tips here: “4 money tips for new homeowners”