It seems to be the only positive thing going on financially in our country right now. You’ve heard it on the news, read it in the paper, and you can’t miss all of the advertisements for low mortgage rates. So, is it for real? Are mortgage rates at record lows? Should you quit reading this article and start refinancing right this second? As a matter of fact, that might be a good idea.

Currently I am writing 15-year fixed loans at 3.250% with no closing costs. 30-year fixed rates are at 3.875% with no points, and 5/1 ARMS can be locked at 2.500%. Rates fluctuate constantly, but for the right borrower who acts fast, even for someone who has a great rate now, this can mean several hundreds a month in savings.

Last year about this time we saw 30-year mortgage rates hit record lows. The mortgage industry had been in a transition period: the heyday of the early 2000’s was long gone, banks had failed, rates had gone up, the tax incentives had expired, even the massive institutional lenders were still trying to recover from the TARP hangover. I knew a lot of people who had left the business altogether.

Suddenly the media declared that rates were at an all-time low and the entire world wanted to refinance. A frenzy ensued. Within weeks lenders were so backed up with applications, many of them raised rates just to try and get caught up. Appraisers that were knocking out full appraisals in 3 days were quoting 3 week turn times. Lenders took away 30 day rate locks and replaced them with a minimum 45 day lock, then they bumped it to 60 day locks, at the borrower’s expense. I have a friend who was a recruiter for one of the large banks and she blasted out an e-mail “URGENT: 500 experienced underwriters needed immediately.”

Then it all went away as fast as it came. In November we saw rates jump half a percent in a couple days. Borrowers who had taken too long to submit their required paperwork or had not locked in hopes of even lower rates were out of luck.

Many lenders learned from what happened last year and they have implemented procedures to handle sudden influxes of loan applications, but huge increases in volume are still going to create delays. If you missed the opportunity last year and are thinking about refinancing, even if you are just curious about what rates you qualify for, you need to start the process today. A good mortgage banker can let you know in a very short time if a refinance is right for your situation. If rates stay this low, and especially if they drop even more, the first borrowers in line with a complete file will be the only ones guaranteed to close before it all disappears.

Mark Chrisman is a Mortgage Banker with West Coast Mortgage, specializing in purchase, refinance, and equity loans including Conventional, FHA, VA, and Jumbo loans.

West Coast Mortgage
Mark Chrisman
(619)  795-6517
mark@markchrisman.com
MarkChrisman.com and WestCoastMortgage.biz

MORTGAGE LENDING 2011: WHERE WE WERE, ARE, AND ARE HEADED

THE BUYING FRENZY

I left the practice of law in 2002 to enter the real estate mortgage-lending world. Learning a whole new vocabulary and implementing that into the real-life workings of a mortgage broker, was tough at first, but the knowledge came pretty quickly and within about six months or so, I was pretty self-sufficient. Loan programs were well defined. Demand was brisk. People bought homes as quickly as they could in order to secure a price now ahead of what would sure to be a never-ending trend of upwardly moving values. As the buying frenzy increased, so did home values. They increased so much that buyers could no longer afford the 10% or 20% down payment, to say nothing of those hefty 30 year fixed payments on the ever-increasing loan amounts.

Rather than be OK with having people wait until they could afford to buy a home, banks and investor groups created loan programs that allowed for smaller down payments ($0 down and in some cases financing closing costs on top of the 100% loan amount), smaller monthly payments (interest only payment and in too many cases, payments that weren’t even covering the interest accruing on the loan each month), and smaller piles of documentation necessary to prove the borrower’s income (in many cases no documentation at all was required). The borrowers, having these new options available to them, snapped them up with all the self-control of a piranha in an Amazonian feeding frenzy.

We all, of course, know the end of that story. Since the start of the housing crash in 2006, banks that based their whole business platforms on these “creative” loans have vanished while others quickly eliminated these risky loans from their lineup.

By 2008, the risky type of loans were gone and the industry seemed to be making loans that were really clean: down payments were being made of at least 10%, borrowers income was required and provided, and appraisals were being scrutinized closely. The industry seemed to have corrected the problem.

Unfortunately, as most people now know, the finance world since has undergone several rounds of legislation that has made getting a loan one of the most exhausting and frustrating processes one can endure.

However, remembering a few things will help get you through escrow.

1. HAVE YOUR FINANCIAL DOCUMENTATION READY

What does this mean? Well, a borrower must prove 3 things: 1. ) You make enough income to qualify for the monthly payment; 2.) You have enough in the bank to cover their down payment and closing costs; and 3.) Whether you are going to live there, vacation there, or rent it out?

PROOF OF INCOME

To prove your income, you must provide complete copies of your federal tax returns, including any and all schedules. For W-2/employee borrowers, two most recent paystubs and the two most recent W-2’s are also required. In cases where one earns bonus, hourly wage with varying hours per week, commission income, or any other type of pay that yields inconsistent earnings paycheck to paycheck, the lender will require documentation of two years of those earnings from that employer in order to use to help qualify for a mortgage.

PROOF OF ASSETS

For the down payment and closing cost requirement, you must provide the two most recent bank statements from each bank account or retirement account that you have. These are not Internet printouts. These are the copies of the actual statements that you receive in the mail or e-statement PDF’s from the bank’s online website. Additionally, any unidentified deposits that appear on the bank statement must be explained and paper trailed. If you are one of the few lucky borrowers that have relatives that will be helping you with a down payment, the gift amount must be paper trailed from their account into your account.

BUYER’S OCCUPANCY

Finally, the occupancy must be “determined.” I use the word “determined” loosely. Loans are submitted as an “owner-occupied loan” or as an “investor home” or a “vacation home.” The borrower and loan originator “determine” the occupancy. However, the underwriter during their analysis of the file, will be on the lookout for anything that does not make sense on paper with the occupancy stated. Why does this matter? Because owner-occupied loans (loans where the borrower intends to live in the property being purchased) are less-risky and therefore have a lower interest rate than loans for homes that will be rented out. Additionally, the guidelines are more flexible for owner-occupied loans than for vacation or investor loans, each of which require either 20-25% as a minimum down payment.

An example of a scenario where occupancy is questioned is for a buyer who lives out of state currently but is relocating here. The buyer wants to find a home now and buy an owner-occupied residence. What are the problems? Well, first, one cannot occupy a home in San Diego when one is working in Michigan. Secondly, if we explain to the underwriter that the buyer will be leaving the current job to relocate here, then the income being used to qualify cannot be used at all since the borrower will soon be leaving that job. It is a lending “catch-22.” The solution for that would be that the buyer either 1.) buys the new home as a “vacation home” and brings in 20% down payment and must be able to qualify with that house payment plus their primary residence house payment or rental payment they are currently making, or 2.) wait until the borrower has secured a new job. At that point you can submit a loan based upon that new income and can close the loan once you are on the job and have received a month’s worth of paychecks.

Another example of this is where a buyer may own a large home and wants to buy a condo in the same area as an “owner-occupied” home. This doesn’t make sense to banks. A buyer must be “moving up” in order to be able to buy an owner-occupied residence, or have no other homes owned in the area where the new home is being purchased. In this situation, a bank would approve the loan but “counteroffer” it to an investor purchase.

2. NEW TIMELINE CONSTRAINTS AREN’T OPTIONAL

I mentioned briefly the cluster of new laws and regulations governing lending, but didn’t go into detail on what each is and the resulting effects. The long and short of it is that these laws combine and overlap in ways that limit when, and in what order, things can be done during the loan process.

In the past, we used to be able to order an appraisal at any time. In a situation where the buyer wanted to buy the house but was unsure if it would even appraise for value, we were able to order that appraisal at that time to see what the value would be. Then once the appraisal came back with whatever result and the buyer determined that it was possible to move forward with the purchase, we could then submit the file and that appraisal to a bank. It wasn’t “value shopping,” which implies we were trying to coerce a certain value. But rather, sometimes the buyer needs to know if the asking price is reasonable based upon current value before moving forward with the offer and all of the expensive inspections, etc of the home as part of the escrow process.

But no more. Now we can no longer order appraisals directly. Only the bank can order an appraisal through a neutral Appraisal Management Company that then in turn places the appraisal order directly with the appraiser. So, essentially, a buyer must be first placed with a lender and have that file submitted in order to have an appraisal ordered. And with the new restrictions on the mobility of appraisals between lenders, we generally discourage ordering the appraisal this early because it limits our ability to obtain the best rate for the buyer if their loan is limited to that one bank. Otherwise, if Bank B has a lower rate, the buyer would have to pay for a brand new appraisal at Bank B in order to take advantage of the lower rate.

Other restrictions occur when any subsequent change of circumstance happens during escrow that results in a fee. An example would be the short sale lender has taken over a week to sign a document required for closing escrow, thereby delaying the closing, necessitating the buyer’s ratelock be extended to protect the interest rate. This fee would be charged to the buyer and would be a “change of circumstance.” This can generally mean a new disclosure is required and varying amounts of time must elapse (depending on the rule and where you are in the transaction) before loan docs can be drawn.

The best thing to remember is that these timelines cannot be argued away (unless you are making a plea to Congress that they should go away), but are a part of our landscape and they are defined and statutory. Most experienced loan originators will make every effort to foresee the unexpected, but there will always be something unexpected that arises. One way that we “expect the unexpected” is to over-disclose a bit on the Good Faith Estimate. This gives a little bit of monetary cushion should a random fee come up that was unexpected. However over disclosing fees too much makes one look more expensive than competitors, so there is a limit to a lender’s ability here.

3. BANK UNDERWRITERS ARE NOT QUESTIONING “YOU”

Underwriters are looking at so much these days and because of the volume of documentation in each file, there are more items in each file to scrutinize and therefore, more questions will arise. What a buyer should not do is to take these questions personally.

Take the following example: a buyer has provided a “bank statement” that is really just an internet printout of the transaction history. The printout doesn’t have the borrower’s name or address on it. It does however contain the last 4 digits of the account number. The underwriter lists as a condition on the loan approval that “Borrower must provide actual bank statement for the account ending -4145,” essentially meaning that we need to prove that the account belongs to the borrower. The borrower insists that the account is his. The borrower points to the fact that he is only putting down $40,000 and there is over $200,000 in the account and that therefore, there should be no problem. The borrower is angry that the underwriter doesn’t trust or believe him and wants me to pull the loan and send it elsewhere.

Here is what a buyer should remember: First of all, chances are, most underwriter’s will be requiring the same thing. Secondly, the underwriter is not thinking about who the buyer is or whether the borrower is trustworthy. In fact, the buyer really doesn’t play a part in the underwriter’s analysis at all. The primary goal of the underwriter is to ensure the loan complies with the investor guidelines that have been determined and dictated (and will eventually be audited) by the Wall Street investors that created the loan program. The underwriter looks at each piece of required documentation and asks himself or herself: “Is there any way that an auditor will look at this paystub and be able to calculate the income any other way that would render this approval invalid?” Or “Is there any way that an auditor can look at this bank statement and question whether this is truly the borrower’s money?” If the underwriter can answer those questions satisfactorily, then the documentation is satisfactory.

Once a borrower can get past the feeling that they are being picked on and can recognize that it is really the underwriter trying to protect themselves (and their jobs) from a costly forced “loan buyback,” it will eliminate a lot of the anxiety and anger associated with lending. It will never eliminate all of the frustration, and that is where your expectations just need to be managed. A loan in 2011 is much different that a loan was in 2006, or even 2009. But with rates that continue to be near the all-time lows we have ever seen, and home prices that are quite a bit lower than they were at their peak in 2006, it does make it worthwhile to play the game, jump through the bank’s hoops and close escrow on your new home.

THINGS ARE IMPROVING

All this being said, we are starting to see some expansion of loan programs and loan products for the first time in many years. The biggest changes are happening in the “jumbo loan” market. From 2006 through the end of 2010, we saw most true jumbo loans, also called non-conforming loans, come with interest rates in the high 6%’s to high 7%’s for a 30 year fixed. Now, we are seeing them in the mid to higher 5%’s and 3, 5, or 7 year ARM’s (“Adjustable Rate Mortgages”) in the mid 4%’s. The down payment restrictions are being relaxed as housing values stabilize, as well. Where we were seeing 25% minimum down payments have now been relaxed to 20% and even in a few cases, down payments of only 10% for loan amounts up to $950,000.

We are seeing expansion in “alternative income documentation” to help borrowers who may not be able to prove income on paper in the traditionally required way. These are available when the borrower has a significant amount of assets in his or her name.

We also are seeing some improving guidelines for condos where down payment requirements have been a bit relaxed there, down to as little as 5% down for loans up to $417,000.

FHA continues to be a good option for borrowers with family gift money or where a family co-signer is necessary, or where they otherwise need a bit more flexibility in underwriting standards.

But lest the more cynical readers think banks are going back onto the same track they were several years ago in allowing crazy loans, there are some things that are vastly different now than they were then: Borrowers are still having to prove a lot. They still must prove their income is sufficient and stable. They must still have “skin in the game,” meaning they are still required to have a down payment of a certain amount, at least 3.5% for FHA. And in the case of the “alternative income documentation,” in lieu of proving the borrower’s income, the borrower must instead show that he or she has such a large amount of assets that the income calculation, or lack or one, is outweighed by the borrower’s ability to pay the loan off entirely.

LOOKING TO THE FUTURE

Looking forward, I believe we will see continued flexibility of the loan programs to a point. I don’t believe we will ever see the “come one come all” lending from a few years ago and I don’t think we should ever see that again. But a healthy, responsible, and reasonable array of loan programs that allow for qualified buyers to buy and sell homes will help to further stabilize home prices, which will be the start of an improved financial outlook for all.

Please feel free to contact Matt directly:

Matt Young
MDC Financial Service Group
(619) 325-4101
matt@mdcgroup.net
www.mattyoungloans.com

Homeowners often find that their equity is locked up in their house when they need some cash, and home buyers often find that the best terms for  first mortgages require a 20% down payment. Second mortgages provide a way for homeowners to access their equity and for home buyers to bridge the equity gap for their down payment.

What are Second Mortgages?

A second mortgage is a loan secured by a property where there is already a loan, the first mortgage loan, in place. If the second loan were to go in to default, the lender would essentially have to pay off the first mortgage loan to gain access to their collateral. Lenders, therefore, consider seconds to be riskier loans.

Types of Second Mortgages

In general, there are two types of second loans: home equity lines of credit, and the more traditional home equity loan. Choosing between these types of mortgages depends on the needs of the homeowner or home buyer.

A home equity line of credit (HELOC) usually has a shorter term and can be drawn upon like a credit card. Checks can be written against a home equity line of credit as a way to pay for unexpected expenses. Interest payments are made monthly when there’s a balance outstanding. Second mortgage rates for home equity lines of credit are based on short-term rates, and are usually lower than the first mortgage rate. The risk with a home equity line of credit is that the entire balance is due at maturity. Running up the balance of a home equity line of credit increases the risk of higher rates at refinance, or the possibility that the line of credit may not be renewed at all. There is considerable competition among lenders for these mortgages, which minimizes this risk to some degree.

The more traditional second mortgage loan is the home equity loan. Home equity loans are fixed-rate loans over a longer term than home equity lines of credit. Because the rate is fixed, the interest rate is usually higher than that of a first mortgage. The benefit of the home equity loan is that it amortizes to a zero balance over the term of the loan. Therefore, there is no refinance risk.

Ways of Using Second Loans

There are many uses for second loans. A traditional home equity loan is often used for home improvement projects that can add value to a home. However, their use is often not restricted. Some homeowners use them to consolidate other debts because the interest rate, though higher than first mortgages, is often lower than higher-interest unsecured debt such as credit cards. Many home buyers with limited funds available for a down payment can use a second loan instead of mortgage insurance. This is often referred to as an 80/20 loan, because the first mortgage represents 80% of the purchase price with the second mortgage bridging the remainder of the purchase price.

Home equity lines of credit can also be used in many of the ways noted above. They also have the added benefit of being able to be used as an emergency line of credit. The interest rate is generally much cheaper than credit cards, making this a smart alternative.

Conclusion

Secondary financing can offer home owners financial flexibility. These types of loans can be added with a first mortgage in place for home improvement projects, bill consolidation, a line of credit, or even to provide some of the 20% of a loan than isn’t covered by a first mortgage in a home purchase.

Other Topics of Interest:

Equity Mortgage: A home equity mortgage loan is a mortgage that places the home as the collateral, and allows the homeowner to easily borrow against the value of equity in their home.

Bad Credit Home Mortgage Refinance:  Refinancing a mortgage can be a very daunting task for anyone. People with good credit can still find it scary, let alone those with bad credit, who may find it all but impossible. However, a bad credit home mortgage refinance is still possible.

Where to Look for Your San Diego Mortgage:  Various ways to go about finding a good lender who will take care of your mortgage needs.

No Cost Refinance Loan:  The idea of what’s called a “no cost refinance loan” seems to be a very enticing. No cost usually means no payment, or no fees, but while this might be true to some extent, it is very important to know what no cost refinance loans really are.

Know the Real Estate Trends
You can glean a lot of useful information by examining the recent trends in real estate sales, and using the patterns to guide your decisions. Of course no one can predict the future, so you shouldn’t worry yourself about trying to time your real estate transaction perfectly. Simply take note of the trends, and if it seems likely that they will continue in the same direction, then factor that information into your decision.

Comparison Shopping
Mortgages are consumer products, just like cars and toasters. Like everything else, it pays to shop around. The problem is that toasters are very simple products compared to mortgages. With mortgages there are so many variables to consider that you can easily become overwhelmed and give up, simply choosing the first mortgage lender that says yes. This is where a mortgage advisor can help you. Advisors are trained professionals that know the mortgage market very well and can help you to locate the best mortgage deals out there.

Have Patience
The process of buying a house certainly does not happen overnight. Again, unlike a toaster, it takes a lot of time to go through the shopping, preparation, comparison, application, and purchase phases of a real estate transaction. Whether you’re out there shopping for primary mortgages, second mortgages, or complete refinancing packages, you should expect the approval and closing process to last from 6 to 8 weeks.

There are many individuals who don’t like paying their taxes – to be more specific, real estate or property taxes. The holder is entitled to certain guarantees when they purchase a tax lien certificate. First of all, there will be a rate of interest on the lien’s outstanding balance. The delinquent taxpayer will pay the interest rate on the taxes as well as the taxes due. The interest rate refers to the money which is owed to the holder of the certificate. Second, the holder of the tax lien certificate is entitled to the deed on the property if the taxpayer doesn’t pay the outstanding taxes within a pre-determined time frame.

Because of this, a lot of investors are interested in tax lien certificates. They have the options of either buying a home at a fraction of its market value or they can earn a high rate of interest on their investments (as high as 20-50%).

But tax lien investing is not without risks. Like everything that’s good, there’s always a catch. One such risk of investing in tax lien certificates is purchasing a worthless property. There are a lot of investors who make the mistake of purchasing certificates without first inspecting the property.

It’s possible that the person can’t afford to maintain their property if they can’t afford to pay their taxes. The tax lien holder might be facing costly repairs before the home can be sold, if they home is neglected for too long.

So what have you learned? Before you purchase tax lien certificates and invest in tax liens, you need to do your homework first, particularly on the property. Specializing in distressed property sales are several online auction websites such as eBay. As a buyer, it’s essential that you understand what you are purchasing. To see what types of properties are typically available in an auction, you can track foreclosures in your region.

Tell us something fun about yourself and your business:

I love what I do for a living.  It’s challenging, exciting, rewarding and there is never a dull moment.  I feel like I was made for this business. And I am darn good at it!  In fact, there is kind of a joke in my office and I’m occasionally teased by my co-workers and managers because they know that I believe that I am the best mortgage loan originator in the business.  But it’s true, I can’t help the way I feel, now can I?

I love hiking, photography and listening to music.   I enjoy studying languages and am currently studying Spanish and German.

How would you describe the current San Diego real estate market?

We are at an all-time high for home affordability in San Diego.  That means that my clients range anywhere from grocery store checkers to union workers, county and city employees to the active military. San Diego real estate is on sale and that, combined with such low interest rates, is why it is an incredible time to buy here.

Are there any particular obstacles that are challenging consumers of San Diego mortgage loans?

Yes! Anyone that is looking to purchase a condo with either an FHA, VA or conventional loan may face some obstacles this year.  Investors are going to have the most difficult time obtaining financing for condos.  In my opinion, Fannie Mae’s HomePath® financing loan is going to be the easiest way to get an owner occupant or an investor into condos this year.

What are currently the most popular San Diego home mortgage products?

Without a doubt Fannie Mae’s HomePath® financing loan and FHA’s 203K Renovation Loan are San Diego’s most popular mortgage options right now. Fannie Mae HomePath® financing is great because it offers a low down payment of 3% for owners that are going to occupy, plus no mortgage insurance, and no appraisal.  We can get investors into a property with only10% down!  This is a phenomenal option that even my REALTOR® partners are using to build their own portfolios.

The FHA 203K Renovation loan is not a new loan but it is becoming a very popular option especially on those bank-owned properties that need a little or a lot of work.

Another favorite of mine is CalHFA’s CHADAP loan. Did you know that a first time home buyer may be able to get into a home with only 1% down? Yeah, incredible isn’t it?

Why would someone choose to work with you?

Buyers want to work with me because I am honest and trustworthy.  I will not put someone in something that is bad for them.  I am a great communicator and information gatherer.  I take the time to fully understand (coupled with a background of knowledge to ask the right questions) my client’s needs.  My pricing is fair and equitable.  It is neither too cheap or too much.  The service is exceptional.  I am very attentive.  I stay incredibly calm through all the bumps that are inherent with the business.  And when I do call my buyers and REALTOR® partners with a problem or issue, I have already done the research to present them with solutions.  I am very educated on the market, the programs, what’s available and what is possible. My REALTOR® partners do not worry that their clients have missed out on something because I, along with my company, are on top of what is available.   I look at the client’s needs and the whole process as a whole and understand completely the needs and requirements of everyone involved in a transaction.  For instance, I understand the timelines and the importance of meeting the closing date on time.  That’s a really big deal.  And finally, most importantly, it’s never about me.  It is always about the client.

Please feel free to leave a comment below, and contact Felisa Schlosser directly:

felisa schlosser
mortgage loan originator
nmls license #255612
prospect mortgage–a direct lender
4275 executive square  | suite 700 | la jolla | california | 92037
e: felisa.schlosser@prospectmtg.com
d: 858.550.2528 | f: 877.371.1698 | www.felisaloans.com

Any opinions are those of the loan officer and may not reflect the opinion of Prospect Mortgage.

Let’s face it, credit is often taken lightly. That is, until it is too late. There is nothing worse than trying to gain some much needed cash for various reasons, only to find out that, according to the banks and lenders, you have bad credit! And despite common belief, hiring a credit repair company, which leads to more spending, is not the only way to improve one’s credit. All the things these companies do, you can do as well, just by knowing the necessary steps and tips.

The first step to repair your credit is to know exactly what it is that needs to be repaired. This can be found out by reviewing your credit report. It’s not difficult to get credit reports that contain all the information you’ll need to start fixing your credit. This is because each person is actually entitled to get free credit reports from each of the three major credit agencies per year. You can order credit reports for a fee at any time, but by getting one that’s free, you get to save more money.

Be sure to get all three when you begin repairing your credit. Why? This is because in some cases, lenders and creditors might only report to one of the three credit bureaus. And because these bureaus don’t often share their information with one another, one credit report might appear different from the other. Therefore, by having all three, you are more likely to get your complete credit history.

But having these reports is useless if you don’t read them. So, read them as soon as you get them and be familiar with the information written within. Then, make notes of anything in the reports that raises your suspicion. Be on the lookout for incorrect information, like accounts or payments that weren’t yours to begin with, payments that were reported as late when they actually were not, maxed out accounts that are in fact not, and more.

Any mistakes or inconsistencies can be disputed, and you should do so, in order to correct any errors that may harm your credit. This is done by sending a letter to the credit bureau detailing the incorrect information, and by sending a copy of the report.

Next, settle past due accounts, because these also have a negative effect on your score. This can be done a number of ways, the best of which is by simply paying the charge-offs. Once that’s done, focus on bringing maxed-out cards below the limit, by paying them down, or by settling for a deal with the credit card company. Once these steps have been taken, you can now apply for a new line of credit, but ideally only one, and only to add positive information to the credit report.

Once you have done this, you are on the road to setting your finances straight. Remember, bad credit is not a dead end. Follow these steps and get your credit fixed!

Bad Credit Home Mortgage Refinance

Back in 2009, statistics showed that only 3% of the home loans then were ARMs. It is a number that is set to change, according to mortgage giant Freddie Mac, who, after a survey of 112 lenders, projected that ARMs will compose around 10% of this year’s home loans, a number that may even be bigger in the jumbo and super-jumbo areas, according to Frank Nothaft, chief economist of Freddie Mac.

It’s somewhat mind boggling, considering that it has been commonly thought for a long time that, in this economy, getting a low fixed San Diego mortgage rate for as long as possible is much safer, and more beneficial than a loan whose rate may increase at any moment. But even this common idea did not deter the popularity of the ARM, due in part to the fact that upon further study, the ARM actually surpasses the more conventional options by significant margins in certain scenarios.

Another reason is that the old ARM models are now gone. Those made during the boom-era have been replaced with better options. For example, there are now no 2-year ARMs that, back in 2003 and 2004, got a lot of customers, using unattractive rates that turned out to need heavy refinancing in just 2 years. The “pick-a-pay, or Option ARMs that were heavily marketed to the public before were also phased out.

What replaced them are what’s called “hybrid” ARMs. This is, in fact, the reason why ARMs are making a comeback. Hybrid ARMs work by combining both a fixed, and adjustable rate. For example, the most popular today, the “5-1” hybrid, refers to having a rate that is fixed for the first 5 years, and then yearly, adjusts accordingly. But what makes this hybrid 5-1 ARM special is that there are now protective limits installed to prevent “shocks” that may occur when rates suddenly increase.

In addition to this, the price points of ARMs are very attractive these days. Studies have shown that compared to the traditional fixed 30-year alternatives, the ARMs’ are much lower. And the best hybrid ARMs do not have any teaser terms that are often misleading, nor negative amortization that can cause further problems down the road.

My primary focus is residential purchase, refinance and equity loans. In regards to residential financing, purchase loan applications slowed down a bit after the tax rebate expired in April of 2010, but they have steadily increased for the past 9 months. With interest rates hitting record lows last year, I did a large amount of no-cost refinances until the rates started creeping up in November. Rates are still very good and we are seeing a large number of people who were waiting for the right time to buy putting in offers. There are still a lot of short sales and REOs (bank-owned homes) on the market. I would say that distressed properties make up about 60% of the purchases we are doing right now. Although we did see large declines in value in some parts of the county, San Diego held up pretty well in comparison to other parts of California and the nation. People love San Diego and want to live here. I doubt that will change.

What are some current trends?

Fortunately REALTORS and lenders have gained a lot of experience in the short-sale market, which is helping qualified buyers to close these transactions in a more reasonable time frame. FHA purchases have increased significantly and we are seeing those loans tighten up a little bit as FHA is dealing with their rising defaults. I’m not sure if it qualifies as a “trend”, or just an adjustment to the lending and finance markets, but buyers now need better credit scores, qualifying income, and more money towards a down payment. The good news is that most people realize this and are preparing better and buying in more reasonable price ranges for their income, which will help the market recover and reduce the amount of future defaults.

Are there any particular obstacles that are challenging consumers of San Diego mortgage loans?

Yes! The biggest obstacles I am seeing are condominium purchases and self-employed borrowers.

Conventional loan rates are low and a lot of people don’t understand what a conventional loan is. Conventional loans are loans that meet the requirements to sell to Fannie Mae and Freddie Mac. There are specific condominium guidelines that must be met in order to be considered eligible for conventional financing, and due to the downturn in the market and the high rate of default on condominium financing, many complexes are unable to qualify for conventional or FHA financing. HOA (Home Owner’s Association) delinquencies are a huge problem right now, and many condominium complexes are being turned down for high HOA delinquencies or high investor concentration.

Self employed borrowers must qualify on their adjusted income after write-offs. An accountant’s job is to find as many legitimate write-offs as possible to reduce the taxable income of the client. Unfortunately this reduces the buying power of self-employed borrowers as well. If you are self-employed and considering a purchase or refinance, the very first step is to have a mortgage professional review your past 2 years’ tax returns.

What are currently the most popular San Diego home mortgage products?

The 30 year fixed conventional and FHA loans are by far the most popular products. There are still adjustable rate loans and even interest-only loans, but people want the security of a 30 year fixed rate.

What should buyers know?

Buyers need to know what they can qualify for. Before you look at properties, online or with an agent, you should consult a mortgage professional and get a pre-approval. There are unforeseeable circumstances that can affect a purchase loan, but 95% of the issues that can arise in regards to qualifying should be recognized with a loan approval by a qualified and experienced mortgage professional. There are a lot of great loan officers and there are a lot of bad loan officers. Get a referral from a friend or ask for references. Just because someone works in a bank does not mean they know the ins and outs of lending guidelines. Be prepared for the added monthly costs of property taxes and insurance as well. Punching your loan amount into a mortgage calculator will only give you half the story.

What should sellers know?

One huge mistake I see from sellers is the inability to be flexible when selling their home. I’m not suggesting you take any offer that comes in, but I often see houses that have been on the market for a long time, and when an offer comes in that they feel is low, they take offense to it. If you haven’t had any offers, then the home is priced too high. At least an offer means you have someone to negotiate with. There are ways to structure the financing so both parties achieve their goals. Often, using seller concessions to buy down the rate and costs for the buyer can result in a higher net profit for the seller on the transaction, and an affordable payment for the buyer. Way too many people refuse to consider working together to get the house purchased.

What should people who are looking to refinance know?

It is fairly quick and easy to see what rates and terms you qualify for in a refinance. You will need to be prepared to provide income documentation and some information about your existing loan. You also need to be upfront with your goals for the refinance. Lowering your rate is great, but if you have paid into a mortgage for 10 years, starting over on a 30 year loan may reduce your rate and payments but cost you much more in the long run. You need to work with someone who can provide you a true cost/benefit analysis, not just quote rates.

Also, many people don’t realize that there are some loan programs available that don’t require any equity in the home. I can help determine if you qualify for those programs quickly and easily.

What did we forget to ask you?

You never asked why someone should consider using me as their mortgage professional!

“Service with Integrity” is our mission statement at West Coast Mortgage. My main concern is educating my clients and giving them the best loan terms available for their situation. I am very “hands on” throughout the loan process and I get a lot of praise from my clients for being thorough, accessible, and honest. Ninety percent of my business is from repeat customers and referrals.

Tell us something fun about yourself!

Let’s see. My idea of fun has changed some, as I have a son who will be two years old soon. I really enjoy spending time with him and my wife, and watching him experience new things is very rewarding for us. I also spend a lot of time snowboarding in Big Bear, like to surf all over San Diego, and try to golf when I can find the time. I can hold my own on a ping pong table (with amateurs!), and it’s very hard for me to pass up a poker game. I enjoy attending almost any sporting event. It has been a great year in sports for my alma mater, San Diego State University. I really do love San Diego. I think it is the greatest place to live, work and raise a family, so helping people buy houses here is rewarding.

Please feel free to leave a comment below and contact Mark Chrisman directly:

West Coast Mortgage
Mark Chrisman
(619)  795-6517
mark@markchrisman.com
MarkChrisman.com and WestCoastMortgage.biz

Classified as one of the safest US cities in which to reside, San Diego has become home to more than a million people of various ethnicities and cultural influences. The city derives its name from St. Didacus of Alcala, a Spanish lay brother from Spain who died in 1463 among Franciscan friars. To date, San Diego is the second largest city in the state of California, and the eighth largest in the country. Ranked among the wealthiest American cities, the people of San Diego share a distinctive way of living as well as a rich historical background that dates back to the 16th century – around the time that the Spaniards began its exploration of the Californian territory.

San Diego originally served as a settlement for Native American Kumeyaay or Kumiai, a tribe that likewise resided in the northwestern Mexican region. They formed an agricultural community which European explorers discovered in the mid-1500s. The annual Cabrillo Festival commemorates the historical event when Juan Rodriguez Cabrillo discovered the San Diego Bay. It was not until the 1700s that the first Franciscan mission was formed and was met with resistance by the natives who were against Spanish rule in the area.

The city formed part of what was then called the territory of Alta California, which became a Mexican province in 1821. Sovereignty of Alta was handed over to the United States when it won the Mexican-American war with the signing of the Treaty of Guadalupe Hidalgo, which also led to the surrender of New Mexico and Arizona. With the admission of California to the United States in 1850, San Diego was appointed the seat of the new San Diego County. This was a great day in San Diego history. City status was given to San Diego City in the same year, but it would take 39 years before the first city charter would be adopted.

At first, the town of San Diego was just at the foot of Presidio Hill. This historic origin of the city is now part of the current Old Town San Diego Historic Park, which is a perfect place to start when looking to take a glimpse back into San Diego’s past. This location back then, however, was not perfect, because during that time it was miles away from any navigable water, making it hard to reach. Late into the 1860s Alonzo Horton proposed a move to what was known as “New Town”, which is a few miles south of the first settlement, near San Diego Bay. It is this area that would eventually become known as Downtown San Diego. Due to its proximity to the bay, Downtown San Diego became the economic and business center within a short period of time, transforming Old Town instead into a cultural and historic center where many people visit to learn about San Diego.

Many decades would pass, and San Diego would continue to develop, eventually hosting two world’s fairs, the Panama-California Exposition in 1915 as well as the California Pacific International Exposition in 1935. Tourists and visitors today will find Balboa Park peppered with many Spanish/Baroque style buildings, many of which were actually built for these expos.

The onset of the first World War prompted a significant U.S. Naval presence to appear in the city, starting in 1901when Point Loma became the home of the Navy Coaling Station, continuing its expansion and development well into the 1920s. This would continue with the arrival of the 2nd World War, after which the military also had a powerful role in improving the local economy.

Besides the military, biotechnology has become a major industry in San Diego, due in part to the city’s love for nature, as evidenced by many attractions like SeaWorld, the San Diego Zoo and Balboa Park. Communications technology has also found a home in San Diego, an example of which is Qualcomm.

Today, San Diego is a thriving city that is an ideal place to live. It is deemed the fifth wealthiest city in the country, the 9th safest city in the country, and one of the best places to live in the world. Additionally, it is also one of the most ideal place to visit for tourists, with many cultural, economic, historic, and commercial attractions to choose from, in addition to its many pristine beaches and oceanic venues.