Down Payments and PMI: Get the Facts

If you're in the market to buy a home, your down payment is likely top of mind. And no doubt you've heard the rule of thumb that you shouldn't buy a home unless you can put 20% down. Before accepting this myth, it's important to do your homework, weigh the pros and cons regarding your down payment options and get the facts, such as:

• A growing number of borrowers are putting down between 5 and 10%.
• Today, you can put down as little as 3% through mortgage options like the Freddie Mac Home Possible AdvantageSM mortgage.

It's a fact that the more you put down, the lower your monthly mortgage payment will be and the less you'll owe the bank. It's also a fact that homebuyers who put at least 20% down don't have to pay Primary Mortgage Insurance (PMI), an added insurance policy that protects the lender if you are unable to pay your mortgage. However, if putting 20% down is not an option or will deplete all of your savings and leave you with no financial cushion, it's probably not in your best interest.

While you'll have to pay PMI for a conventional loan with a down payment of less than 20%, you'll still be able to take advantage of today's low mortgage rates – especially the 30-year fixed rate mortgage that can offer you security and peace of mind throughout the life of your loan.

Plus, once you've built equity of 20% in your home, you can cancel your PMI and remove that expense from your monthly payment.

THE MATH: $200,000 HOME – 5% Down vs. 20% Down

	5% DOWN PAYMENT	20% DOWN PAYMENT
Down Payment	$10,000	$40,000
Loan Amount	$190,000	$160,000
Mortgage Type	30-year fixed-rate	30-year fixed-rate
Interest Rate	4.5%	4.5%
Monthly Mortgage Payment (Principal and Interest)	$962.70	$810.70
PMI	$80.75*	$0
	$1,043.45**	$810.70**

*Assuming an insurance rate of 0.51%; this cost can be cancelled from your payment once you reach 20% equity in your home for conventional loans.
**Does not include property tax and homeowners insurance payments

Carefully evaluate your finances to determine how much you can afford and talk with your lender or housing professional about down payment options that make best sense for you.

Starting in 2016, Delinquent HOA Fees May Be A Part of Your Credit Score

Consumers' financial obligations for mortgages, auto payments and credit card payments have long been part of their credit profile. However, HOA dues payments have not. Although non-payment of HOA dues, in California, can eventually even trigger foreclosure by the Board of Directors, these payments have not been in included in credit reporting agencies. Now, Sperlonga, a credit data aggregator, is the first company to provide HOA payment and account status data to Equifax, which is one of the three major credit-reporting agencies. "A full rollout of the new HOA reporting to Equifax will go live in October 2016. And property owners who do pay on time will see a similar reflection on their credit scores. " 

According to the Community Association Institute, homeowner associations and property management companies collect approximately $70 billion in HOA payments each year through at least 333,000 community associations." Owners with a history of delinquent payments and/or non-payment can cause a great deal of financial problems for an association, especially smaller associations fewer than 10 units where there is a smaller risk pool. An HOA's operating budget and reserve funds may not be able to keep up with needed maintenance and infrastructure replacements without timely payments by all members, and those associations with more available funds will be stuck with fees and costs of pursuing delinquent owners, an eventual cost to all owners.

If you're contemplating buying a condominium or other property within a homeowner association, you are also agreeing to pay for your share of the common area upkeep, including insurance and maintenance costs. This is one of the reasons why your lender must order certain documents from the association during escrow to make sure you are well qualified to cover the fees and costs, as well as including that information in your upfront loan qualifying process. For people who may have reasons for temporarily falling behind in payments, a board may well be negotiable in setting up a payment plan--it would pay to approach the Board or your property manager for a discussion before becoming a delinquent owner.

Beautiful Signal Hill Home in Skyline Estates Waiting for a Buyer!

Home on Sea Ridge

This desirable highly sought after home is still on the market.

It is located in the beautiful Signal Hill development of Skyline Estates. Situated on a unique promontory in the highly coveted “Sea Ridge” with sweeping and explosive views from Palos Verdes to the Pacific Ocean to Newport Beach. The views from this home are unparalleled. The three-level floor plan features a formal dining room, formal living room, spectacular ‘Chef’s’ kitchen with GE Monogram appliances, double ovens, center island and breakfast bar that opens up into the family room with expansive windows offering impressive views of downtown Long Beach. 

View towards San Pedro

Three bedrooms are located on the first floor with one being a second master en-suite. The spacious master retreat features lounge, massive walk-in closet. master bath with dual vanities and spectacular tub featuring city views. Wonderful backyard with fireplace and BBQ is perfect for entertaining year round. 

Excellent location close to the community walking trails, and pool. Just minutes to Belmont Shore, Downtown Long Beach and freeway access.
Association dues include community pool and paved road.
Information per MLS#  PW16034526.

View of downtown Long Beach

See the video and/or find out more about this home, please contact me at 562-896-2609.

Sales Volume in Los Angeles County is Down, Prices Continue Upward in 2016

Long Beach, a great city to live in.

The median price of an existing, single-family detached Los Angeles County home rose in March to $545,000 from $535,250 in February. The March 2015 median price was $510,000.  All data comes from Realist. The median sales price is the point at which half of homes sold for more and half sold for less; it is influenced by the types of homes selling as well as a general change in values.

But while prices are going up in the County as a whole, sales volume has decreased dramatically:
the number of single family homes sold in March 2016 was 1,853; in February, 2016 it was 3,924; in March 2015 homes sold was 6,380 and in February, 2015 it was 5,109.  This is a sales volume decrease of 50% and greater compared to the same time last year.

The 2016 sales volume for Orange County is a similar picture, but with lower numbers: total SFR sales are 1432 and 1407 for February and January, respectively.

Less inventory means much more competition for buyers in Long Beach, especially in the lower prices range under $500,000 which sell in 40-60 days on average (or less), while properties in the $1,000,000-plus range are on the market for well over 90 days on average.

While housing prices continue upward, housing affordability in California is increasingly a topic of concern.  Another indication of housing prices is that investors are buying fewer single family and multi-family properties.  California Association of Realtors's 2016 California Investor Survey found 10 percent of real estate investors purchased more of the other types of properties, such as commercial, land, and mobile homes, in the past year compared to previous years.

Lack of inventory, especially in Southern California, can be an issue for sellers who want to move on--but for those moving out of the area, or for those who have all cash for a purchase, the ability to move on may be much easier, and would bring more housing inventory onto the local market for sale. From that standpoint, it's a good time to sell while interest rates are still so low.  Please contact me for a customized report on home value for your property!

Some Homeowners May Be Helped by New Principal Reduction Plan

Grow a new start

While the number of distressed properties on the market has declined greatly, there are those homeowners who are still suffering through with high mortgage payments.  While the Los Angeles/Southern California home market has risen greatly and lifted many "underwater" mortgages out of the pits, some may still find help in this new loan principal reduction program by the Federal Housing Finance Agency.

Nationwide, this program is expected to help approximately 33,000 borrowers, not a large number overall compared to the housing crisis at its peak, a fact the program's critics like to point out: too little too late.  The unpaid principal balance must be no more than $250,000, borrowers must be 90 days delinquent prior to March 1, 2016, and the loan-to-value must be 115% of fair market value. This program is considered a final effort to avoid foreclosure for borrowers who cannot afford to pay their mortgage.  (Just a reminder: a complete assessment of an applicant's financial status with all documentation to be submitted, will most certainly be required in order to apply and be approved.)

FHFA will be sending out solicitation letters by October 15, 2016.  Requirements are outlined at this link.

For another program, California Housing Finance Agency (CalHFA) offers Keep Your Home California, a program that over 62,000 Californians have qualified for so far.  This program offers four different kinds of assistance, including mortgage principal reduction assistance.   By following their online series of questions, you can find out if you qualify.

California Retrofits for Earthquake May Save A Lot of Grief

Foundation

For 1000 owners living in certain Southern and Northern California zip codes including Los Angeles, Pasadena, South Pasadena, Santa Monica, West Hollywood, and elsewhere, money was available as of January 1 for grants up to $3,000 for earthquake retrofit. 

Although those owners have probably all been selected by now, basic retrofits are not costly overall and can be done by following the idea in the illustrations.  By doing simple bolting and bracing, a lot of damage can be prevented and may even cost less than $3000 depending on who performs the work or the construction issues of the foundation and walls.  Cripple walls are not present in all homes, but if they are, and the house is not bolted to the foundation (pre-1933 homes were not required to be), then a retrofit ought to be of special interest.

Crawl Space view

Since Long Beach is a larger city than Pasadena, and was developed in the same eras, it seems quite an oversight that it was not included in this program.


Earthquake Brace and Bolt, site for the California Residential Mitigation Program, explains more, and also provides FAQs and a search engine for licensed contractors.

Why should this be of so much importance? "California has two-thirds of the nation's earthquake risk. Some 2,000 known faults crisscross the state, producing an average of 102 earthquakes a day – more than 37,000 a year. Certain structures that lack adequate bolting and bracing are more vulnerable to earthquake damage. Older houses are often not bolted to their foundations and lack bracing on the wood framed exterior walls enclosing the crawl space. Houses without adequate bolting and bracing are prone to sliding or toppling off their foundation during an earthquake. This type of serious damage can be prevented with proper seismic retrofit of the crawl space."

What can you expect if you buy a pre-1933 home in Southern California?  You may very well find that no retrofit has been done, and it's not something that is ordinarily asked of the seller during escrow because it's not a "repair".  Such work is usually up to the new owner of the property, and is well worth the expense.   Why didn't the previous owner do that work? That's the topic of another post.

See http://www.latimes.com/local/lanow/la-me-ln-quake-retrofit-grants-expanding-to-more-california-single-family-homes-20151118-story.html

February Home Prices in the Long Beach Area for February 2016

February 2016 Los Angeles County Sales

Why the sluggishness in sales?  The ripple down from the top tier of sales is being felt:  "In markets like Oakland, Portland and Washington, the prices for high-end homes are rapidly rising — the rungs of the ladder are moving further apart — and that makes it harder for people who own mid-tier homes to trade up. And when they get stuck, people who own starter homes have a harder time trading up, too."  http://preview.tinyurl.com/gpdc3lj  San Francisco could easily be mentioned too.

It's always speculated in an election year that sales are affected, but it is more likely due to higher prices and lower affordability overall.  

In Los Angeles County, the median priced home in February, 2016 was $530,000 (up from $457,870 in January, 2016), and condos were at $450,000, (up from $409,000 in January, 2016). However, the February sales volume for each type was less than half of the prior year volume, and well below January sales numbers.

Below are average prices for Cerritos, Long Beach, Lakewood , and Seal Beach single family homes.  The four cities have changed between -1.8% to 14% from January.  Current average price - Long Beach $637,112; Cerritos - $682,431; Lakewood $4501,775; Seal Beach $1,066,938.

Average condominium prices increased only in Long Beach, by 22.8%, and are ranging from $237,666 (Cerritos) to $289,667 (Seal Beach), $292,500 (Lakewood) and $379,522 (Long Beach).

While there is an increase in Long Beach average home price, it has the advantage of offering greater types and prices in the housing market compared to surrounding cities.  Still a good time to buy with lower interest rates!

New California Disclosure to be Made by Condo Associations per AB 596

Is your HOA FHA-approved?

This was actually signed into law last August 12th by Gov. Jerry Brown, requiring condominium associations to disclose to their members whether their developments have been approved for FHA or VA financing. This is an annual disclosure along with the other HOA disclosures submitted 30-90 days prior to the end of the fiscal year.  AB 596 adds the requirement that, on a separate piece of paper in at least 10-point font, there will be statements saying whether or not the development has been certified by FHA or the Department of Veterans Affairs.

I believe I have posted before about the declining number of FHA (or VA) approved homeowner associations.  Why is this important?  Because the available number of buyers for a condominium increases accordingly.  There was a time when "spot" I believe I have posted before about the declining number of FHA (or VA) approved homeowner associations.  Why is this important?  Because the available number of buyers for a condominium increases accordingly.  There was a time when "spot" loans could be done, but no more.  The entire complex must be approved for FHA loan, that also applies for VA loans too.  But when a complex is approved for FHA, the VA requirements are similar.

To give an idea of how extreme the problem is, out of 228 complexes listed in Long Beach on Hud.gov, all of which were once FHA approved, 17 out of the first 25 on the list are expired; 20 out of 25 on the second set are expired.  That's 37 out of  50 complexes listed are unable to sell units to an FHA buyer. And so on.

One-quarter of the state's housing stock is located in common interest developments, and according to Bob Hunt, a California Association of Realtors director, fewer than 30% are approved for FHA financing, and even fewer for VA financing.  This situation does not have to exist.

Many association members are unaware of the status of their HOA, and many think it may be FHA approved because it was in the past.  The guidelines changed:  spot loans (per unit approval) was eliminated, and associations are required to renew their FHA status every 2 years.

If your association has a property manager, they should be able to help.  If not, there are lenders who are familiar with the application process and may readily give their assistance.  Please contact me for more information if you need it.

The important thing to realize is that many qualified buyers can buy with an FHA loan on 3.5 percent down payment, and obtaining a ready, willing and qualified buyer for a property can go much faster with FHA approved associations.

Selling Prices as of February, 2016 for Long Beach/Lakewood Single Family Homes

Here are the median closing prices for several zip codes covering

The far west area of Long Beach (90810);
Belmont Heights/Shore and Naples areas (90803);
Carson Park-Long Beach and Lakewood (90808);
and Lakewood Mutuals (90712).

Prices are current as of the last day of February, 2016, from one year prior.

Median Selling Prices

90810  $379,900 | +17.2%

90803  $992,500 | +13.8%

90808  $644,500 | +17.2%

90712  $495,000 | +6.5%

   The Average Selling Prices* are a little different :

 90810  $362,000 | +11.8%

   90803  $1,162,165 | +24.6% 

90808  $648,131 | +7.9%

90712  $498,489 | -1.6%

*(median=midpoint price of all selling prices; average=sum of all selling prices divided by total number of properties sold)

Law Enforcement Cracking Down on Online Home Rental Scams

Don't get fooled by a fraudulent "rental"

The rental housing landscape has been the target of fraudsters.

For instance, a legitimate "for sale" listing which shows up not only on the local REALTOR multiple listing service (MLS), and then (according to licenses) automatically fanned out to such sites as Realtor.com, Trulia, Zillow, etc., and also possibly manually entered by the listing agent into other sites such as Craig's List, is hijacked.

Actual listing agent information is deleted by person(s) attempting to misrepresent the listing, but the rest of the listing information, including photos, is resubmitted as a rental property with a new rental price, often one which does not support local neighborhood values, but gets the fraudster plenty of emails or phone calls.  The purpose of this is to get an unsuspecting renter to wire money to the "agent", before agreeing to see the property.  Of course, after they obtain money, there is no showing of the property--the fraudster may live on the other side of the country, or in another country.  This has personally happened to me, and to other area agents as well.  To get the false information and listing deleted online takes time and phone calls, including phone calls from renters who went to my listing to verify its existence, and then called me from the "for sale" sign.  Of course, it's not for rent, it's for sale.  Moral of the story:  Do not send money or personal information to see a rental.

Another local scenario in the 562 area code is where another rental company with a different area code goes to vacant properties and puts up their own rental sign so that they will get phone calls off someone else's property for which they have no contract to lease or to sell.  Yes, they've been reported so they quit for a while, but after a while, the signs pop up again. 

This is a nationwide problem.  If you are a landlord, you should also take notice of this issue.
Always try to first verify the actual agent or owner of a listing, because this is happening just often enough to cause headaches for all concerned.

Below is an online article for the Freddie Mac Blog published today about this very issue, worthwhile reading for everyone on how to recognize and protect yourself from these schemes. 
Law Enforcement Cracking Down on Online Home Rental Scams: Law enforcement started the year by cracking down on fraudsters using phony online real estate ads to fleece would-be renters.