Proposition 60 and Proposition 90: What You Need to Know

For many CA seniors, moving into a new home later in life is often an option that feels impossible. Increased Real Estate taxes, when purchasing a new home, makes the switch incredibly costly. When you purchase a new Property; the base tax value is based on the current value of the new home, leaving you with a far higher property tax burden. Prop 60 can help. This Proposition allows seniors to maintain the base tax value of their old home when purchasing or building a new home within two years. Prop 90 allows seniors to use the benefit of Prop 60 in any county in California. These Propositions essentially allow individuals over the age of 55 to move into a new residence (of equal or lesser value), and pay less amounts in Property taxes than they would without the Propositions in effect. So who qualifies? Let’s go over a few of the requirements.

  1. You or your spouse must be at least 55 years of age when selling the original Property

Because these Propositions only apply to seniors, you must be a qualifying senior at the time you sell the Property. If you or your spouse turn 55 after selling your home, you won’t qualify. If you’re almost 55 and considering buying a new home, it’s in your best interest to wait.

  1. The original and new Property must be in the same county. Sometimes

This is where Prop 90 comes into effect. While Prop 60 only allows for the transfer of your base tax value from your old home to your new home within the same county, Prop 90 allows for this transfer to happen within any county in California. However, the decision is at the discretion of each individual county. Check with your current county and your prospective county to ensure that they allow inter-county transfers. Your real estate agent may be able to assist with obtaining this information on your behalf.

  1. The original Property has to have been eligible for the Homeowners’ or Disabled Veterans’ Exemption. Your new Property also has to be eligible for the exemption

Both your old and new Properties have to be eligible for the Homeowners’ or Disabled Veterans’ Exemption in order to qualify for the benefit. Your old and new properties also need to be your primary residences at the time, in order for you to qualify.

  1. The transfer is a once in a lifetime opportunity

You can legitimately only use this benefit once in your life, with one exception. If you are required to move again because of a disability after having used the transfer once, you may use the benefit once more. This is stated in Prop 110. However, you cannot use the benefit of Prop 110 first and then use Prop 60.

  1. Your new Property must be of equal or lesser value than your old Property

Once you sell your old home, you have two years in which you must purchase or build a new home in order to meet the requirement for the benefit. You might be wondering, what exactly qualifies as equal or lesser value? Well, if you purchase your new home before selling your old home, the new home must be 100% or less of the market value of your old Property. If you buy the new Property within a year after selling the old one, the new home must be 105% or less of the market value of your old Property. Finally, if you purchase a new home within 2 years of selling, the market value of your new home must be 100% or lower than the value of your old home.

So now you know a little bit about Prop 60 and Prop 90 and what they mean to you. If you qualify, moving to a new residence is a great idea. I can help you with the home loan that you need! Give me a call at (800) 645-1301 for more information.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

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Your Credit Score! Why It Matters And How It Will Affect You When Buying A Home

Having a good credit score is something that is incredibly important. The truth however is that most people don’t really know what their scores are. Lenders use the 3 major repositories, TransUnion, Experian and Equifax when considering the extension of mortgage financing.  More millennials each year are maxing out their credit cards and other such debts, and falling behind on payments simply because of a lack of knowledge of how these obligations work. In a recent survey by Experian, it was found that 30% of millennials didn’t know the spending limits on their cards, and 50% didn’t know what interest rates their cards had. These numbers are startling! If you plan on buying a home; maintaining a solid credit score is crucial for your success.

What Is a Credit Score?

A credit score, also known as a FICO score, is calculated by deriving information from five categories. The categories are listed and weighted as such: (35%) Payment History, (15%) Length of Credit History, (10%) Credit Mix, (10%) New Credit and (30%) Amounts Owed. The exact method that FICO uses to determine a credit score by the 3 major credit repositories – Trans Union, Equifax and Experian, remains undisclosed, however, we know that it is calculated using the above parameters. Looking at these categories, it’s easy to suggest the ways to maintain good credit. The number you receive on your credit report will be anywhere from 300-850 with 850 being considered a “Super-Prime” credit score. Different lenders have different takes on what a good credit score is, but to be safe, you want your credit score to be around 700 or above.

How Can Credit Scores Affect the Home Buying Process?

So now that we’ve gone over what credit scores are, let’s go over why they are important when buying a home. When you first make the decision to buy or refinance a home; the first step that you should take is going to a lender and applying for a home loan. Getting a loan before browsing for homes is a crucial first step, as it gives you a clear cut idea of what your budget is. However, when applying for a home loan, the interest rate that you will receive is largely based on your credit score. Let me give you an example of how strongly your credit score affects your interest rate on a home loan. In a recent article I read, author Lindsay Konsko did some experiments with her own credit score. She has a ‘middle’ FICO score of 773. Lindsay found an online tool that would let her calculate how her credit score would fluctuate if she didn’t pay her bills for a month. She calculated that if she let her bills go unpaid for even one month her credit score would drop from 773 to 690. She then spoke with a mortgage expert who told her that that drop in her credit score would lead her to a 0.5% increase in payments for a 30 year mortgage. This may not seem like a lot, but over the course of 30 years, she would have to pay nearly $30,000 more in interest because of one month of neglecting her bills.

This is just one example of how important it is to maintain a high credit score. Even one month of negligence can lead to a lifetime of debt. However, if you pay your bills on time every month, keep your credit cards at 50% or less of the maximum credit limit, and don’t open new credit (auto, credit cards, student loans etc.,) within several months of when you will be applying for financing, your credit scores will improve. If you’re looking for a lender who can work with your current credit scores, contact Claudia E. Manly at (800) 645-1301.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

Why Obtaining Home Financing from a Small-Sized Mortgage Lender May Be Better

People tend to spend a lot of time shopping around for their ideal home. Oftentimes, people begin to look at homes before they know how much financing they are eligible to obtain. This often leads to people falling in love with homes that they can’t afford, or settling for a lesser priced home when they could actually afford more. You can either get a loan from a large, nationwide mortgage lender such as: Bank of America, Chase, CitiMortgage, Well Fargo, or from a smaller mortgage lender such as The Mortgage House Inc. Today, we are going to go over a few of the advantages associated with getting your home loan from a small mortgage lender.

1. Smaller Mortgage Lenders Tend to Respond Faster

Because larger companies are better known, they tend to receive many home loan applications on a weekly basis. A loan officer from these large institutions assembles the basic paperwork, provides a pre-qualification letter to the potential client, and submits the initial paperwork to a loan processor; who in many cases, works at another location. Typically, the loan processor is selected by random. The same thing may occur when the file is moved from loan processing to loan underwriting. And, should something be missing or additional information is required, the process works in reverse, adding days to the final decision of ‘Approval’ or ‘Denial.’ At the end of the day, the person who reviewed the paperwork originally will not be the person who makes the final call on your application. Small or mid-size mortgage lenders on the other hand process and underwrite your file in a faster and more efficient way, and the final decision will most likely be made in the same office as the loan officer with whom you began the transaction. This loan officer knows what is happening to the file and what additional information may be needed at all points in time. The one-on-one service the loan officer can provide is invaluable to the potential homeowner. Working with a single loan officer personalizes the experience and allows you to get comfortable with your lender and develop a certain level of trust that you may not be able to experience when working with a large institution.

2. More Affordable Rates

Although big banks offer a variety of different mortgage loan options, rates are established at the corporate level, and at times, this could mean a higher interest rate than you might obtain from a smaller mortgage lender such as The Mortgage House Inc. When you stop and consider that you will be paying your mortgage for up to 30 years, a lower interest rate could save you thousands of dollars.

3. More Flexible Lending

Institutional lenders sometimes have much tougher guidelines than an independent direct lender. Less stringent guidelines may be available with an independent lender who sells directly to Secondary Market Lenders such as Fannie Mae, Freddie Mac, the Veterans Administration and the Federal Housing Administration. The FICO requirements may be lower; the amount of reserves may be less, and so on. While you may get your home loan application denied from a larger mortgage lender; local lenders and independent lenders can approve some applications even after the initial denial. If you’re credit isn’t great but you have enough income/assets for a mortgage, these lenders might be able to work with you to ultimately obtain an approval.

The home buying process can be difficult, but the trick is to be patient and find not only the lowest interest rate loan possible, but the best loan product for your individual needs. Independent direct lenders such as The Mortgage House, Inc. offer the lowest interest rate loans possible, while providing hands-on, one-on-one personalized service. If you’re in the market for buying or refinancing a home; consider The Mortgage House, Inc.    

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

Five Steps Future Homebuyers Should Take in Order to Purchase Their First Home

Buying a home can be a difficult process. Oftentimes, prospective buyers don’t even know where to start. There are so many things to do to prepare, and so many homes to choose from. We’ll breakdown the process a little bit, and give you some of our recommendations on where to begin, and how to handle this important purchase.

1. Decide what you are looking for in a home

Deciding what you want in a home is the first/most pivotal step. If you don’t properly plan, you could end up buying a home with things included that you will never need, or settling for a home that doesn’t have all of the accommodations that you would like. Let’s say you want a backyard pool and a kitchen with an island, for example. Tell your Realtor about these requirements, and he/she can more easily find a home specifically tailored to your desires. There are some things that can make or break a home for people. Identify what these things are for you. For example, if you don’t want a house on a busy street, write this down and let your Realtor know. This way, your Realtor won’t show you pictures of a house that you fall in love with, only to find out later that it’s located on a busy intersection. What features make up the ideal home for you and your family? How many bedrooms and baths do you want? Do you want a home with a big yard or a condo with a patio? One story or two stories? Conversely, what features would eliminate a property from your prospect list? Not enough windows or too many windows? Knowing what you want and don’t want will help you focus your search on homes that fit your needs.

2. Obtain a Lender’s Pre-Approval first

It’s important that you don’t delay this part of the process. Once you identify a lender, they will obtain certain information from you thus enabling them to issue a Pre-Approval Letter. This will identify how much money you have to spend. People oftentimes fall in love with homes that they cannot afford, or settle for homes that they don’t love, because they don’t know how much money they can actually spend. By being Pre-Approved first, you can make more informed decisions when browsing for homes.

3. Find a trustworthy Realtor

Take the recommendation of a family member or friend, or look at online reviews to find a reputable Realtor. Buying a home is an incredibly large purchase; it’s typically the largest purchase a person will make in their life. There are a lot of factors and specific paperwork that goes into buying a home and a Realtor will help guide you through the process.

4. Get the necessary inspections performed

The last thing you want is to purchase a house only to find out that there is serious structural damage. Get a home inspector to ensure that the house you’re interested in is up to code in all areas. The inspector will look at the quality of the plumbing, electrical, foundation, roof, and furnace to see if there are termites or chipping lead-based paint. If the seller doesn’t want to fix a certain problem and it is not a Health and Safety item, see if you can work with your Realtor to negotiate the price down respectfully and accordingly. Health and Safety items must always be repaired before financing will be extended.

5. Location. Location. Location!

This is something that we have all heard before, but it is incredibly important. Walk around the neighborhood of your house of interest, and see if it feels like a place that you would want to spend the next X amount of years living in. See if there are good local schools: figure out how much utilities cost in that area, and assess the general area to see what it has to offer. Another huge factor to consider in our current society is internet speeds. Usually there are only one or two companies that provide internet service to an area, so ask your Realtor what companies provide service, and see if the speeds offered match what you need. Choosing real estate is more than whether you want to live in the city, in the suburbs, or in a rural area. Your neighborhood matters! In fact, 59% of recent buyers said the quality of the neighborhood was the top factor influencing where they lived. Whether you want a home in a great school district or one that’s convenient to drive to work from, defining your ideal neighborhood will help narrow your search.

We hope that these tips have given you some confidence in how to walk through the home buying process. If you have any questions or would like to learn more, contact me at (800) 645-1301.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

Homebuyers Then And Now

Buying a home is one of the biggest decisions a person can make in their life. Owning a home gives people a sense of security, and it’s an important place to raise a family. But it seems that this decision keeps getting pushed back by newer generations. This trend is quite startling when compared to previous patterns of home-buying in America, so we will explore the changes in age, income, and cost of home-buying, and what this means for homebuyers today.

It sounds shocking, but in 1976 the average cost for a home in California was $48,630. That price is even more shocking in light of the fact that the average income during that time, when adjusted for inflation, was around $50,000. Not only were houses cheap, but people were able to afford them easily! But money wasn’t the only thing different with home-buying back then; the type of people buying their first home was different, too. On average, first-time homebuyers were 29-30 years old, married, and had some kids. Most of these homebuyers had families before buying home, they had the finances to purchase a house, and the average price of a home wasn’t that much greater than their annual income.

These homebuyers appear to have been more “settled down” in life than current homebuyers. Today, the average age of first-time homebuyers is 33, and more than half of these homebuyers are not married. Since many of these homebuyers are not yet married, it makes sense that they have delayed other major life decisions, like buying a house and having kids. The average income for first-time homebuyers today is over $54,000, which doesn’t seem like that much more than the homebuyers of the 1970’s. However, the price of homes has drastically changed. Homebuyers are now, on average, purchasing homes that cost over 2 1/2 times their annual income! In 2015, the average cost of a house in the Los Angeles area was over $530,000. Even with high-paying jobs, many of these houses are far more expensive than some people can afford.

So besides the high cost of a home, what are some other things that are delaying first-time homebuyers? A very blatant cause of this delay is student loan debt. The average amount of debt from student loans in 2015 was over $35,000, which is more than double the amount of debt just two decades ago. And more students than ever before need loans to pay for college. With such a high amount of debt, college graduates need more time to save up for a down payment for their first home. But school debt isn’t the only thing holding people back from buying a house. Expensive down payments are also delaying first-time homebuyers. While programs exist to cut down the percentage of the down payment needed, competitive areas don’t favor these small down payments, since those who can afford larger down payments will typically get the house.

What does this mean for potential first-time homebuyers today? I think the first plan of action should be to attack your student loans as much as possible! Forego nights out with friends and expensive dates with your significant other, and use the money to pay off your debt. Downsizing your cost of living now will help you afford a down payment for a house later. Finding the right mortgage for your situation is also important for first-time homebuyers. So if you need help buying your first home, make sure to give me a call today!

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

TRID–Six Months Later

Change is a normal part of life, but serious growing pains can sometimes accompany change. That’s how many people in the mortgage industry feel six months after the TILA-RESPA Integrated Disclosure (TRID) Act went into effect in October 2015. Having a half-year vantage point, lenders have been expressing how TRID has impacted their business, and the cons seem to be outweighing the pros. We want to take a brief look at how the implementation of TRID has helped and harmed lenders and borrowers over the past six months.

Before we get into the impact of TRID on the money-lending industry, a short definition of TRID is in order. On October 3, 2015, The Consumer Financial Protection Bureau consolidated four already-existing disclosures required by the Truth-in-Lending-Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into two new forms: a Loan Estimate and a Closing Disclosure. The Loan Estimate combined the Good Faith Estimate and the Initial Truth-In-Lending Statement, and the Closing Disclosure combined the HUD-1 and the Final Truth-In-Lending Statement. This consolidation was meant to simplify the process of obtaining most closed-end mortgage loans, allowing borrowers to feel more confident with their loan decisions.

However, as recent surveys have shown, implementing these changes has been far from smooth sailing. Callahan & Associates conducted a survey in February and found that over 96% of credit union executives experienced mortgage closing delays over the past six months. The average number of days needed to close among the participants was 42 days, up from the ideal goal of 31 days. Many other surveys have been conducted to examine the outcome of TRID, and the majority of the results are all saying the same thing: overall, the implementation of TRID has slowed down mortgage closings.

Several reasons have been given to explain these delays. Many bankers have explained that TRID has added costs and decreased productivity on their end. The loan origination systems of lenders needed to be updated in order to handle the new implementation, and many lenders are waiting for their software vendors to update their systems. A survey by the American Bankers Association found that over three-fourths of the respondents were in this situation, and 83% of them are forced to use manual workarounds while they wait. TRID has also limited the number of mortgage products for many lenders, giving customers fewer choices and more delays. Several bankers have also needed to hire more people to handle the TRID compliance. Many lenders still feel unprepared since TRID went into effect, and many of them are losing money because of it.

Customers have also been impacted by the implementation of TRID. ClosingCorp conducted a survey of more than 1,000 repeat homebuyers, and 64% of the participants said that the whole process of obtaining a residential mortgage seems more complex now. Additionally, over 50% of the respondents said that there were more unexpected fees and costs in their most recent experiences of obtaining a mortgage. While TRID was supposed to make borrowers feel more confident, six months of the implementation has shown that TRID is doing the opposite.

Despite all the challenges presented by TRID, there are some silver linings. A report by Ellie Mae found that the rate of closings rose to 73%, which is the highest it’s been since 2011. And borrowers with a lower credit score have found it easier to obtain a loan thanks to the implementation of TRID. The growing pains are being felt in the mortgage industry, but with future updates and clarifications regarding TRID, borrowers and lenders should both benefit from this change.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660.  These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

HOW THE SRES® COUNCIL SERVES THE REAL ESTATE NEEDS OF SENIORS

The SRES® Council is a community of realtors and related professionals dedicated to serving the real estate needs of the senior consumer.

The mission of the SRES® Council is to promote member success by providing high quality training and tools necessary to position the SRES® designee as the trusted real estate resource for the senior market.

A Seniors Real Estate Specialist® is experienced and knowledgeable in meeting the senior’s specific needs and that can make all the difference in the works.

As we age, we demand specialists in our health needs, so why not in our housing and equity needs as well? A SRES® specialist brings:

  1. A customized approach to the senior’s situation, working to fit their living situation to your overall life plan
  2. Expertise and patience throughout the entire real estate transaction
  3. An awareness of options and a network of solid, reliable referrals to help you in the real estate process
  4. A variety of choices to reduce out of pocket expenses, gain cash, or create/defer income streams to either stay independent or obtain financial assistance

Seniors considering selling their home, either to down-size into a smaller home or to move into a senior facility or with family members should seriously consider utilizing a SRES® professional to assist along the way.

Please feel free to contact me for more information regarding this matter.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

A Reverse Mortgage May Be The Answer For Baby Boomers!

Mortgage debt among seniors is at an all-time high, but the FHA’s Reverse Mortgage program is working to address that. Officially known as the Home Equity Conversion Mortgage (HECM) and the brainchild of President Ronald Regan, the Reverse Mortgage may be the answer for many seniors.

The FHA’s HECM is designed to give seniors (62 years and older) the ability to use the equity in their homes to address financial and healthcare needs while remaining in their homes. The home equity that boomers—and seniors in general—have worked so hard to build up can now serve as a valuable financial management tool for years to come. And the strong gains in housing wealth among seniors are an encouraging economic indicator for the millions of boomers who weathered the recession on the cusp of their retirement years.

A Reverse Mortgage provides several benefits for seniors. More specifically, the HECM program enables seniors to: 

1) Improve their monthly cash flow by eliminating their current monthly mortgage payment.

2) Supplement their monthly pension and/or social security income—either for a specific period of time or for as long as the seniors can remain in the home.

3) Defer the need to draw social security benefits until age 70, when the senior is entitled to the maximum benefit amount.

4) Establish a line of credit for future, unforeseen expenses without having to worry about a monthly payment once funds are used.

5) Remain in their home for an extended time by offering a means to pay for needed in-home care.

6) Maintain ownership of their home until such time as they or their heirs elect to sell or refinance the home.

7) Downside into a new home with no monthly payments.

As you can see, a Reverse Mortgage provides many benefits for seniors. But a couple of stipulations must be met for a senior to be accepted into the HECM program. The youngest homeowner must be at least 62 years old, and the home must be their primary residence. Not every property type can have a Reverse Mortgage, but eligible property types include single family homes, FHA-approved condos, townhouses, and Planned Unit Developments (PUDs).

If you know a senior who wants to eliminate their monthly mortgage costs, improve their monthly cash flow, or just establish a line of credit in case of future/unforeseen expenses, give me a call. (818) 227-0922 Ext 116.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660. These materials are not from HUD or FHA and were not approved by HUD or a government agency. NMLS 252332

Why Low Interest Rates Matter

Buying a home is a big decision. Whether you are buying your very first home, upgrading to a new home, or considering buying a rental property, there are a variety of factors which impact how much financing you can obtain. One prime factor is the mortgage financing interest rate.

The lower the rate, the better! One obvious benefit of a lower interest rate is the amount of financing you can obtain. The lower the payment, the more you can afford. For example, a buyer seeking a $300,000, 30-year fixed mortgage with a 6% interest rate would have a monthly principal and interest payment of approximately $1,799. The same loan with a 4% interest rate would have a monthly principal and interest payment of approximately $1,432. Big difference! A buyer who is able to secure the 4% loan in our example would either 1) have more disposable income each month or 2) be able to qualify for a larger mortgage.

The Federal Reserve sets the ‘Fed Funds’ rate – this being the interest rate banks lend money to one another. This rate ‘plus’ something is then passed on the public when financing is being obtained. Traditionally, when inflation is low, the Fed tends to have a lower rate than when inflation is high. We have also witnessed a low Fed rate during and since the financial crisis of 2007–2008. The government intentionally has kept their rate low in hopes of stimulating the economy, thus aiding the recession recovery.

Another benefit to lower interest rates is what the consumer will pay in interest over the life of the loan. Using our example of $300,000 for a 30-year fixed rate loan at both 6% and 4%, the interest amount difference a consumer will pay is considerable. A homeowner will pay, in addition to the initial $300,000, interest of approximately $347,515 with a 6% interest rate as compared to an interest amount of $215,608 with the 4% interest rate. Huge difference!

The basic fact is that when interest rates are low and overall inflation is in check, the economy grows. Individuals buy more goods, spend more on leisure items, save more for retirement, and accumulate less non-mortgage (credit card) debt. Lower rates also tend to stimulate the buying and selling of real estate; which can add positive appreciation to property values in general.

Selecting a mortgage lender who can walk you through the financing process, provide various financing options, and help to provide you with information you need to be successful, is key.

I am a loan officer who always tries to meet the homeowner’s goals in the most positive and productive way.

Thinking of buying or refinancing a home?  Please give me a call. (800) 645-1301.

CalBRE License #01199120. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License #4130097, NMLS #37660.  These materials are not from HUD or FHA and were not approved by HUD or a government agency. (NMLS 252332)