SAN FRANCISCO BAY AREA REAL ESTATE NEWS

 Financial Advisors, CPAs, insurance agents, real estate agents, estate planning attorneys, and in-home care providers in California need to know that there is a reverse mortgage alternative available.

The reverse mortgage alternative is called Equity Access. Equity Access provides monthly income to homeowners above the age of 60 (the youngest homeowner must be at least 60) in return for a share of the future value of the home.

Here are some of the features:

• There are no closing costs to enter into an Equity Access Agreement
• No debt is incurred with an Equity Access Agreement
• The homeowner does not have to pay off their mortgage(s)
• The homeowner decides how long they want payments for (from 10 to 25 years)
• The homeowner decides how much equity they want to share
• An attorney is required to review the Equity Access offer to protect the homeowner
• There are no income requirements

1. The age of the youngest homeowner
2. The value of the home
3. The amount of mortgage balance(s)
4. The type of mortgage(s)
5. How long they want payments
6. How much equity they want to share

All of this information is placed into the Equity Access calculator. The calculator then determines the monthly payment.

If the payment is less than what the homeowner would like, there are ways to manipulate the calculation. For example, the homeowner could agree to share a larger percentage of the future equity. Or they could shorten the term of payments to be received. 

There are probably other professionals that could benefit from this information. If you know of a certain type I missed, I would love to know.

Which is better, a reverse mortgage or Equity Access Agreement? Like any financial tool, one product may be more suitable than the other. But it's nice to know that senior homeowners in California now have an alternative.

Spread The Word!

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Jumbo Loan Blog

Normally, homeowners in Atherton don't want a 15 year fixed rate because the payments are too high. Now there is a twist on a 15 year fixed rate that can keep your payment low!

This loan has a 40 year term. Initially it is a 15 year fixed rate. During the 15 year fixed rate term, the payments are interest-only. Because the payments are interest-only, the payment is a lot lower than an amortized 15 year fixed rate. 

Here's the neat part - if you pay principal during the 15 year fixed rate term, the payment decreases because the payment is based on the reduced balance!

After the 15 year fixed rate term expires, the rate adjusts once. The rate is determined by adding .5% to the Fannie May 60 day rate.

The new payment is based on the new rate, amortized over 25 years. Hopefully you have paid off enough of the principal during the 15 year fixed rate period so that the payment doesn't increase! The new rate can't be more than 5% higher than the initial rate.

As you know, homes in Atherton are very expensive. This program works well here because the maximum loan amount is $5 million.

This loan program is available to purchase or refinance expensive homes, such as those located in Atherton. One of the nice features is that there is no limit on the dollar amount of cash-out. Many loan programs are limiting the amount of cash-out to refinancing homeowners.

Another nice feature is that this program can be used to finance second homes at a slightly lower loan-to-value percentage. It is one of the few competitive jumbo loan programs that I am aware of that allows cash-out on second homes.

If you own a home in Atherton or in other expensive areas of California, and like the idea of a 15 year fixed rate with interest-only payments to keep the payment low, contact me to see if this program is a good fit for you.

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Jumbo Loan Blog

I have had real estate owners in San Mateo County ask me - what is a private money loan? A private money loan is a real estate loan funded by non-institutional sources.

Non-institutional sources of private money loans vary. The source could be an individual. Often it is a group of people who have pooled some funds together. 

There are companies that specialize in the placing and funding of private money loans. These companies serve at least two important functions.

The first function they serve is the marketing of the availability of private money loans. They often post ads on Craigslist, trade publications, and other marketing vehicles to let both the public and mortgage brokers know that they have funds to lend.

The second function they serve for the private money source is similar to a funnel. They receive loan scenarios and toss out the ones they know that the private money source will not be interested in. They package the files that fits the source's interests, present the file, and receive approval.

Why would someone become a private money lender? Generally speaking, a private money lender gets a generous percentage return that is secured by real estate. To the lending source, it is an investment of their money. It is an investment alternative, just like investing in the stock market is an investment alternative. 

Why would someone borrow private money funds? Well, that will be the subject of my next post that will tell the top ten reasons why someone would want or need a private money loan.

The terms of a private money loan are usually much different than the terms that banks offer. One major difference is the length of the term. Generally, private money loans are no longer than five years.

Another difference is the interest rate. Private money rates tend to be higher than the rates banks offer. Higher rates make sense because these loans are usually riskier.

The fees associated with a private money loan are usually higher than bank loans. It's not unusual to pay anywhere from three points to eight points to obtain a private money loan.

With the tightening of underwriting guidelines by banks, private money loans, I predict, will gain market share in the near future. 

If you need help with a private money loan in San Mateo county, or anywhere in California, you can contact me and I will try to help you.

Jumbo Loan Blog

Get Your Mortgage Phil

Many homeowners and home buyers in California have probably heard of a bridge loan but do not know what it is or who should obtain one.

A bridge loan is usually a short-term loan (usually written for three months to three years) that provides funds to buy real estate from a piece of real property that an owner has an intention of selling, but will not close before escrow closes on the new property. 

This transaction is called a bridge loan because these funds "bridge the gap" between the closing of two transactions. 

Let's look at an example of a bridge loan. Bill and Betty Buyer would like to purchase their California dream home for $800,000. The down payment required is 20%. They have enough money saved for the closing costs and cash reserves, but little else saved.

Their current home is worth $500,000. The existing balance on their mortgage is $50,000. They have $450,000 in equity.

Bill and Betty would like to make an offer on the new home non-contingent on the sale of their current home. How, they wonder, can they make this offer?

Enter Bob the Bridge Loan Guy. He tells Bob and Betty that he can help them obtain a $210,000 loan on their current home ($160,000 for the down payment plus $50,000 to pay off their current mortgage). Bob the Bridge Loan Guy has figured out that the Buyers can qualify for both the bridge loan and the purchase loan because their debts on both the current home with the bridge loan and the new purchase loan are less than the maximum amount of debts to qualify.

The Buyers successfully make their offer and close escrow 30 days later. Another 30 days later they close escrow on the home they listed for $500,000. They use $210,000 from the proceeds of the sale to pay off the bridge loan, and use the other $290,000 in proceeds to pay down the new mortgage.

A few important tips you should know if you are considering a bridge loan:

• You must be able to qualify for the bridge loan and the loan to purchase the new home.
• There is no guarantee that your current home will sell quickly. How long can you afford to pay mortgages on two homes?
• A bridge loan is usually more expensive than other types of loans. Consider other types of financing (do you have an equity line of credit available, for example?)
• A bridge loan may be available with stated income under the new Reg Z guidelines as of October 1, 2009.

I have found that many people that many people do not understand how mortgage rates get locked here in Burlingame, California, and in many other areas.

As a mortgage broker, I receive mortgage rates from our lending partners every day (sometimes more than once, but that is a story for another post). Each lender has the mortgage rates for each of their programs (30 year fixed, 15 year fixed, etc.) published on a ratesheet. 

Most people realize that there are many mortgage rates for each loan program. What they do not realize is that the points charged for the mortgage rates offered vary by the rate lock period.

Many lenders base the points charged in 15 day increments. Let's look at an example of mortgage rates for a 30 year fixed rate (these rates are for illustration purposes only, not truly a reflection of current mortgage rates).

Rate        15 Day     30 Day     45 Day     60 Day

8.00%        1.00      1.25          1.50        1.75

In this example, the 8% mortgage rate would cost a borrower 1 point for a 15 day lock, 1.25 points for a 30 day lock, 1.50 points for a 45 day lock, and 1.75 points for a 60 day lock.

This example raises two questions about mortgage rates for a homeowner or homebuyer: first, why would I lock for any longer than 15 days since the 15 day lock is cheaper than any of the other lock periods? Second, what needs to happen in order to get the 15 day rate lock?

Let's answer the first question - there are two reasons why mortgage rates should be locked in longer than 15 days. The first reason is because mortgage transactions typically take longer than 15 days. Refinances are harder to close faster than purchases because of the requirement that the borrower has three business days after signing the final loan documents to rescind the transaction. Purchases do not have this requirement. 

The second reason why mortgage rates should be locked in longer than 15 days is because it is protection for the homeowner or home buyer in a rising interest rate environment. Most of my clients are happy to pay a little bit more by locking in for 30 days or 45 days to guarantee they will get the mortgage rates they have been offered, provided their application is approved.

Let's answer the second question - what needs to happen to get a 15 day rate lock? The answer to this question is to work as a team with your mortgage broker.

Mortgage rates are volatile - we often have our lenders update their mortgage rates two or three times per day. Your mortgage broker should use a rate alert service in order to stay on top of the daily activity in the mortgage market. If there is a rate change he should be alerting you about the change. 

The mortgage applicant needs to do his part also in order to get the 15 day rate lock. Documentation needs to be completed in full. Most of our lending partners will not lock mortgage rates until the loan application has been approved, and all conditions for closing have been signed off by the underwriter. As you can see, speed, cooperation and teamwork is required by the applicant and mortgage broker.

Here is a strategy I advocate to get the 15 day rate lock in a declining rate environment. Let your mortgage broker know what mortgage rate and point structure you would like to target. When the mortgage rates are within .25% of your target, get your documentation submitted to your mortgage broker and try to get it approved ASAP. With an approval you can just wait until the rate targeted hits. Again, this takes great cooperation and communication

with the client and the mortgage broker. I have used this strategy with my clients here in Burlingame, California, with excellent success. 

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Are you thinking about getting a reverse mortgage in San Francisco, CA? Well, you should first learn about an alternative called the Nestworth agreement.

The Nestworth agreement is a no upfront cost, debt-free alternative to a reverse mortgage. You are able to get paid up to $10,000 per month in return for a share of the equity when the home is sold. Anyone who is looking for a reverse mortgage in San Francisco, Ca should consider the Nestworth agreement side by side with a reverse mortgage to see which program would be of greater benefit.

The Nestworth agreement is very flexible. You choose the term of the payments you want to receive. The term can be from ten years to twenty-five years. The shorter the term, the more income you can receive. A reverse mortgage in San Francisco, CA would be much more rigid in its payment term.

Another nice benefit of the Nestworth agreement is that you can stay in the home the rest of your life, even after the agreement is completed. If you obtain a reverse mortgage in San Francisco, CA, when you move out there are stipulations in the contract that requires the home to be sold in a certain period of time.

Is the Nestworth agreement always better than a reverse mortgage? No, like any financial tool, one may be a better fit than another. However, it is nice to have an alternative. So if you are considering a reverse mortgage in San Francisco, Ca, you might want to consider both options!

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