Real Estate Education

Jumbo Loans Offer Competative Rates

You'll pay more for a big home nowadays, but a big mortgage should be less of a reach.

For the first time in over 20 years, rates on jumbo mortgages -- loans of more than $417,000, or $625,500 in pricier areas -- are at or below rates on conventional mortgages. Jumbo rates usually run one-quarter to one-half of a percentage point higher, but lenders eager for wealthier customers are making deals.

In 2013, Wells Fargo and Bank of America cut minimum down payments to 15% from 20%; some competitors did too.

"It's a good time to be a jumbo borrower," says Guy Cecala, CEO of Inside Mortgage Finance.

Want a large loan? Big banks have the best rates; you'll need a 740 credit score or higher to snag them, says Keith Gumbinger of mortgage data provider HSH.
~Courtesy MONEY Magazine

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First Time Home Buyers

Up Close and Personal with John and Angela Teller, New Homeowners

This past week I had the privilege of representing a first time home buyer. What made it exciting for me, is that they were friends of my children.  There has been quite a few of my kids friends that have moved away from Mammoth Lakes upon graduating from high school.  Many of them have obtained their college degrees, and then out of their choice they have moved back to the Eastern Sierras.

The couple I am referring to is John Teller and Angela Dessert Teller.  John was born and raised in Mammoth, and Angela has lived in Mammoth from the tender age of 1.  John’s folks and even grandparents own businesses in Mammoth.  Angela’s folks and now her Dad manage Snowcreek I and III.

Angela graduated from UCSB with a major in Communications and a minor in Exercise health and sciences.  That makes her a perfect match for John, who stayed in Mammoth to hone his skiing career.  He was an avid Alpine racer, took a break for a few years, and then about 5 years ago feel in love with SkierCross.  He has been very successful in this event earning a Gold Medal at the X games in 2010, ending up in 4th place in the World Cup standings in 2010 and 2011.  He has also had several World Cup 1st place finishes.  He was the 2013 US Men’s National Champion.

This next season, assuming he gets 2 top 12 finishes or 1 podium place finish, he will qualify for the Winter Olympics 2014 Skiercross competition.

John and Angela are committed to staying in the Eastern Sierras and had been saving for their down payment for 5 years.  They had been watching the market and saving their money until this past August when they decided they had found their “gem” and ended up purchasing a home in Crowley.

While they were renting, they made some sacrifices, with the end goal of saving money to purchase their own home so that they can raise their family here and continue the tradition of parents and grandparents all staying in our small community.

As with all big decisions, it was initially an emotional roller coaster (to say the least) for Angela.  In fact, the first weekend after their offer had been accepted, John went deer hunting, and Angela got so nervous she called me to ask me to withdraw their offer.  With all the traveling that John does in the winter for his Skiercross competitions, she was concerned that they wouldn’t have enough money due to his traveling expenses.  When he got back from his hunting weekend, he calmed her down and said, “no matter what you do in life, hard work always pays off.”  He has come from a family that has modeled that his whole life.  His Dad is part owner of Mammoth Chevron and his Grandparents own Alpine Garage.  John works as a mechanic when he isn’t training or competing.

So after talking about the purchase again, and realizing that they wanted the dream of home ownership, they made the decision to move forward, knowing it might mean some sacrifice.    John has been excited and supportive of their decision to buy, while Angela is the one that actually does all the paperwork.  That is the part that isn’t so much fun, but certainly necessary.

By deciding to purchase in Crowley, after looking in both Mammoth and Crowley, they were able to find a  3 Bedroom/2.5 Bath home a 2+car garage, plenty of parking for their camper, snowmobiles, boat, a fenced in yard with a pond, garden area, fruit trees and views!  Even their dog Rusty, a Jack Russell, feels he has come home!

John now has a place to keep his skis tuned and with a half bath in the garage, he can stay down there for hours.

Once we got into escrow, the process went smoothly.  Part of the small town feel of a purchase became evident as their friends were able to help them through the inspection process.  The inspection process is an important part of the buying process and should not be overlooked.   The seller even brought pears from their pear tree to Angela during the escrow

With Angela working for Union Bank in the loan department, she now knows firsthand what is required when purchasing a home.  Union Bank is being more aggressive about getting into the mortgage business and has several home loan programs.  They have an Economic Opportunity Mortgage loan which is similar to an FHA where the buyer can get in with just 3% down.

Angela’s job at Union Bank includes assisting others with their lines of credit, and mortgages.  Now she knows firsthand the process from beginning to end.

Please feel free to call Angela if you are looking for a mortgage.  She can be reached at Union Bank, 760 934-2547 and would be happy to help you make your dream come true too.

As locals who had a close and constant look at our market, they knew that now was a great time to get into Mammoth or the surrounding area.  Prices and interest rates are still low.

I will keep everyone updated on John’s Skiercross progress this season and am looking forward to having another Olympic Athlete make their home in the Eastern Sierras.

As John believes, “No matter what you do in life, hard word always pays off”

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The 5 Factors of Your Credit Score

5 Factors that Determine Your Credit Score

The higher FICO score you have, the better interest rate you'll get on your mortgage. Your FICO credit score is calculated based on these five categories. For some groups, the importance of these categories may vary; for example, people who have not been using credit long will be factored differently than those with a longer credit history. The three companies that report credit scores to lenders are Equifax, Experion and Transunion.

Your FICO Score only looks at information in your credit report
Your credit score is calculated from your credit report. However, lenders look at many things when making a credit decision including your income, how long you have worked at your present job and the kind of credit you are requesting.

1. Payment History (35%)

The first thing any lender wants to know is whether you've paid past credit accounts on time.      This is one of the most important factors in a FICO® Score.

2. Amounts Owed (30%)

Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO® Score.

3. Length of Credit History (15%)

In general, a longer credit history will increase your FICO® Score.      However, even people who haven't been using credit long may have a high FICO Score, depending on how the rest of the credit report looks.

Your FICO Score takes into account:

  • how long your credit accounts have been established, including  the age of  your oldest account, the age of your newest account and an average age of all your accounts
  • how long specific credit accounts have been established
  • how long it has been since you used certain accounts

4. Types of Credit in Use (10%)

The score will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans.

5. New Credit (10%)

Research shows that opening several credit accounts in a short period of time represents a greater risk - especially for people who don't have a long credit history.

FICO scores can range from 300-850. Typically, a credit score over 720 is often considered an excellent score.  A score of 680-719 is considered good. A score that falls beween 620-679 will ususally make the lender heavily analayze the file. Having a score that falls between 585-619 will usually disqualify you from getting the best rates. A score below 584 will deter lenders from working with you.

Tips to Increase Your Credit Score:
         - Pay off your bills on time every month.
          -Pay off all of your existing debt.
          -Unused credit cards should not be closed. This can sometimes lower your credit score.
          -Open credit only as needed. Do not open a bunch of new credit card accounts in a short period of time.

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Contract Contingencies - What do they cover and who do they protect? Part 2

Use a Mammoth realtor or broker when making a decision to purchase in Mammoth Lakes. I happen to be one and want to share some of my experience and expertise with you.

Residential Real Estate Purchase Agreement and Joint Escrow Instructions
Buyer’s and Seller’s are asked to sign a Residential Purchase Agreement and Joint Escrow Instructions when making an offer to purchase real property.

Contract  Contingencies:  What do they cover and who do they protect?    Part 2

Typical contingencies for a buyer are:
1.  Loan 
2. Appraisal
3. Title
4. Physical inspection
5. HOA documents
6. Short sale advisory
7. Selling an existing property

Typical contingencies for a seller are:
1. Receiving from the buyer the preapproval letter. 
2. Receiving from the buyer verification of funds for either the down payment or the cash required to close the escrow.   
3. Finding replacement property 
4 . Cooperation from the buyer for a 1031 Tax Deferred exchange.

There are time frames involved in these various contingencies.  The number in the contract unless changed by the agent completing the documents is typically 7 days for proving ability to complete transaction, (preapproval letter and verification of funds) 17 days for the physical inspection and approval of HOA documents 17 days for the loan and appraisal.

In my last blog I covered the first 4 contingencies for a buyer and the first  2 contingencies for a seller.

Buyer Contingencies
5.  HOA Documents  This information typically comes through escrow.  The seller has to sign the HOA Request, which gives his permission to provide to the buyer all the documents associated with the running of the condo complex he is selling.  Typically, those documents are kept by a CPA.  There is a charge to the seller for providing this information to the buyer.  The packet is comprised of the C.C.&R.’s, Articles of Incorporation, By-Laws, Architectural guidelines.  It also includes Board minutes, which shows the discussions that the Board is having regarding maintenance, special projects, budget, reserves, etc.  Most projects have 1 to 2 Board meetings a year, which might include one where all the homeowners are invited to attend. Some of the projects will have an annual work party, so that the owners get to meet and do some maintenance items around the project, that save money, get the work done, and provide an opportunity to meet other owners.  These types of meetings are typically held in the summer months and often over a holiday weekend.  A projected budget as well as an actual budget is also provided to the buyer along with a reserve study.  The reserve study shows the anticipated maintenance to the project, when it will need to be completed and how much money is being set aside monthly to pay for this.   Things that are in the reserve study would include, roofing, siding, painting, landscape projects, new water lines, etc.  This is very helpful to a buyer to see if the monthly HOA’s are adequate or if they can anticipate a special assessment.  Special assessments always need to be voted on, where an increase in the monthly dues can be passed without a majority approval.

6. Short Sale Advisory  This is only used if the seller is upside down in the property, meaning he owes more than the market value.  The seller can accept an offer, but it isn’t binding until the bank accepts the price.  The Short Sale Advisory tells the buyer that the acceptance of this offer, is contingent up on bank accepting the purchase price.  The bank will be receiving less than the current pay-off balance on the note, so they must order their own BPO (appraisal) to be sure that they are selling the property at a reasonable price since they will be writing off the unpaid portion of the debt.  This Short Sale Advisory and also a Short Sale Addendum is a contingency for both buyer and seller.  If the bank doesn’t accept the offer, the seller is not obligated legally to sell the property for that price.  If the bank doesn’t accept the price, the buyer is not obligated to move forward.

7. Selling an Existing Property  Item 13 on the Residential Purchase Agreement indicates that the buyer is making an offer to purchase, but can only close the escrow when the existing property also closes escrow.  This is not an ideal contingency for a buyer to use in their offer as the seller doesn’t really know when the escrow will close.  Most sellers are looking for a clean offer without the added contingency of another property.

Seller Contingencies
3.  Finding Replacement Property
Some sellers will list their property because they have an idea of what they want to replace their current property with.   They know that if they make an offer to a buyer, without their property being in escrow, which is the scenario I just covered, they will most likely not get a favorable response.  So, they will list their property, contingent upon finding a replacement property.  This type of contingency means the buyer may have a delay in closing an escrow. If they are obtaining a loan, it means they may not be able to lock into a loan because lenders only give you so much time on an “interest rate lock”.  For a cash buyer, this delay is not as much of an issue, depending of course on the buyer’s need to close an escrow.

4.  Cooperation from the Buyer for 1031 Tax Deferred Exchange  This contingency does not really affect the buyer, unless the seller also requests additional time to find their exchange property.  This is for the benefit of the seller’s tax situation.  By executing a 1031 Tax Deferred Exchange, any gain avoids capital gains, until the seller takes the cash from the property.  By reinvesting the proceeds directly into another escrow through a third party accommodator, the seller avoids the capital gains tax.  This tells the IRS that the seller’s intent has always been to reinvest the proceeds, the buyer signs acknowledgement of this, but the buyer is not affected financially.

If you have any other questions on typical contract contingencies, please call me at 760 934-3078 or email me at chris@christinegalbreath.com

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