Category Archives: Loans

Lenders Ratchet Up Requirements During Corona

Lenders are tightening their loan requirements in light of the corona chaos. Prospective home buyers are flocking to lenders in pursuit of those low interest rates, but lenders are not making it easy to qualify for loans, especially in higher-cost regions like The Bay Area.

It’s not difficult to understand lenders’ concerns amidst job losses and general economic instability. However, if you were preapproved for a loan in pre-corona times, it’s likely your lender has slapped some new requirements on that approval. Continue Reading

Why You Should Work With A Local Lender On Your SF Home Purchase

If your goal for 2020 is to purchase a home in San Francisco, make sure you seek the services of a local lender.

The San Francisco market and its housing stock are not cookie-cutter by any stretch. Out-of-area lenders and their underwriting teams—the folks who ultimately give the green light on financing—are sometimes not familiar with certain building attributes or what our competitive market requires in order to “win” a property. Continue Reading

Don’t Push Back on Pulling Credit

If you’re interested in figuring out what you can afford in the San Francisco real estate market, the first step is getting fully preapproved for a loan. And part of that process involves a lender pulling your credit so it can verify the type of loan for which you’ll qualify.

I’ve heard prospective buyers question why it’s necessary to have a lender run their credit score as part of the loan process.

Lenders are interested in a borrower’s “depth.” For example, a lender wants to see that a buyer has used credit in the past 24 months, and believe that if the buyer doesn’t have debt, the credit score may be compromised. As a result, the lender may not be getting an accurate read on the borrower’s ability to pay. Continue Reading

Government Shutdown Hits Purchase Loans

The government shutdown is indeed having an impact on San Francisco purchase loans and transactions.  Several of my colleagues around town are reporting that lenders are unable to verify tax returns via the IRS (typically required for jumbo and some conventional loans). Additionally, lenders may not be able to get Social Security Administration verification for the purposes of proving buyer identity and reducing potential fraud.

There are definitely reports of open transactions are in holding patterns. As a result, buyers aren’t able to confidently remove financing contingencies—or receive and sign loan documents. In one instance, a seller has a back-up offer for all cash on the table and is seriously considering cancelling the buyer contract with the loan and moving to the back-up offer.  Continue Reading

Close With Cash, Then Take Out a Loan

A quarter of all San Francisco sales in San Francisco are financed with cash, and I’ve represented my share of cash buyers this year. But it may be a sound financial strategy to take out a mortgage on the property after you close escrow. The process is called “delayed purchase financing.” Continue Reading

Budget for HOA Dues During Loan Preapproval

You’re thinking about buying a condo in San Francisco, and the first thing on your checklist is loan preapproval. Along with mortgage payments and property taxes, your lender tells you that you need a rough idea of how much your homeowners association dues (HOA) will be. But you don’t know what you’ll be buying, so how are you supposed to know how much the dues will be? Continue Reading

Know TIC Loan Guidelines Before You Start Your Search

Tenancy-in-common (TIC) interests require what’s called fractional financing. You essentially have a loan on your interest in the property instead of sharing one loan with all the other TIC owners.

Many buyers seriously consider TICs because they know they’ll typically get better space in a more central location than they would from a condo.

But the loan guidelines for fractional financing are different from the ones for condo loans. So before you hit the open house circuit, check out these guidelines courtesy of TIC loan expert Gordon Friedman at Guarantee Mortgage:

– 1% origination fee: All TIC loans require an upfront fee equal to 1% of the loan amount borrowed Continue Reading

Give Yourself a Competitive Advantage with Up Front Loan Preapproval

One thing is for certain if you expect to write a competitive offer in the San Francisco market: Get fully preapproved for a loan before you start hitting the open house circuit.

Prospective buyers would traditionally chat with a lender rep, get an idea as to what they could afford based on basic financial details and then submit all the financials after getting into contract.

However, that won’t fly in San Francisco—or most of The Bay Area—these days. Limited inventory and high-buyer demand translate into routinely competitive, multiple-offer situations that require short (or no) loan contingency timeframes. Winning offers rarely happen for buyers who need a loan contingency timeframe that accommodates underwriting review of their financials after they go into contract. Continue Reading

FHA Loans Lay Low in San Francisco

Buyers making purchases with FHA loans are a rarity these days in San Francisco. In the past two years, FHA loans were used by only 54 single-family home and six condo buyers, as per the SF MLS.

An FHA-insured loan is backed by the U.S. Federal Housing Administration, which insures a loan made by a private lender. Buyers can make a purchase with a very low down payment. FHA loans are a bit more complex than regular loans, and typically take longer to process.

The San Francisco market moves quickly, and many sellers don’t want to wait any more than 21 or 30 days to complete their transaction. Many buyers also have large down payments these days and make offers that frequently omit loan contingencies. So it’s no wonder that in a competitive offer situation (nine times out of ten), a seller will go with the buyer that presents the most direct and efficient path to closing. And that typically will not involve an FHA loan. Continue Reading

What You Need To Know About Gift Funds

It’s no secret that the cost of real estate in San Francisco is high. Many first-time home buyers are turning to family—specifically, to their parents—for a little extra help. If you’re considering making a purchase that will partially rely on what are called “gift funds,” here’s what you need to know, courtesy of my colleague Gordon Friedman of Mortgage Service Professionals:

– The funds must be for a primary residence or second home (not for an investment property)
– The gift must be from a parent, relative, domestic partner, spouse or fiance
– A gift letter is required, which must state the gift amount, property address, date given/to be given, and donor address. The letter also must state that no repayment will be required
– Buyer must have 20% or more in down payment, though the entire down payment can be a gift
– If the buyer has less than 20% down, there will be a 5% borrower contribution required
– For a jumbo loan (more than $625,500), a 5% borrower contribution is required regardless of the down payment. Continue Reading

Why Your Appraisal Matters in a Home Purchase

It’s important to understand the major contingencies in a purchase agreement, and one of the most important ones is the appraisal.

All lenders will require that a licensed appraiser determine the value of the property. This appraisal represents an unbiased and objective value opinion. The appraiser studies recent comparable sales in the neighborhood, making adjustments for various attributes such as number of bedrooms, bathrooms, parking, remodeling and the like. In the end, he or she arrives at a value for the property, which will hopefully be at least what you’re paying. (The appraisal can sometimes end up being more than you’re paying, which is great for you but doesn’t affect the loan.) Continue Reading

Don’t Let Your Loan Get Shut Down, Too

The current government shutdown is certainly having its effect on the real estate industry. The main issue seems to be lenders’ individual policies on verifying borrowers’ tax return information—and how that verification can potentially shut down your loan during a home purchase.

The loan process typically requires buyers to complete a 4506-T tax verification transcript. However, the IRS is closed. And that means lenders are deciding how to handle this requirement. Continue Reading

Interest Rates Rise, Time to Update Your Loan Preapproval

There will be plenty of buyers attending open houses this weekend, despite a predicted lack of new inventory as we head into a holiday week. Some of you may have been recently preapproved for a loan. Others may have completed the process a month or two ago.

The big news this past week is that interest rates have increased significantly. If you’re about to write an offer, I recommend you contact your lender to revisit what your monthly payments will look like in conjunction with the latest interest rates. You may have been quoted 3.5% for a 30-year fixed loan a while back, but now you may be looking at upwards of 5% in today’s market. Continue Reading

Update: ICON’s Floor Plans, VIP Loan Preapproval

One of the more anticipated Market Street condo developments at 2299 Market, ICON, is now welcoming loan preapprovals for its units. Though the sales office is not yet open and the project is still under construction, you can complete a preapproval with the development’s in-house lender. This will certainly launch you to the top of the VIP list when it comes to purchasing one of the 18 one- and two-bedroom condos that will be available. Continue Reading

Mortgage Debt Relief Act Extended Through 2013

For homeowners considering a short sale or loan modification in 2013, most of last year was a nail biter. That’s because many loan industry insiders believed there was a strong chance that the Mortgage Debt Relief Act of 2007 would simply expire on December 31, 2012. Would these homeowners then be on the hook for paying taxes on their forgiven debt in 2013?

Last summer, I blogged about the perils of the tax relief act expiring. I had been talking with a few individuals who were considering short sales, and there was a very real chance that they ultimately could be responsible for paying a very large tax bill in the process—one they couldn’t afford.

The good news is that the “fiscal cliff bill” passed by Congress last week included a provision for extending the tax relief through 2013.

Bottom line for sellers thinking about pursuing a short sale this year: It’s best to start that process as soon as possible. Short sales require key prep work and lenders take time to approve the sales. Additionally, buyers in contract on short sales sometimes walk away in the middle of the transaction, which can significantly lengthen and complicate the sale process.

Contact Eileen for Real Estate Help

Eileen Bermingham

Corcoran Global Living

415.823.4656

eileen@insidesfre.com

DRE# 01352627

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