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Mortgage Update for the San Francisco Real Estate Market

With all of the bad news about the housing market, there are at least three pieces of very good news to report (from the Daily Real Estate News).

    • Mortgage rates are at historic lows. Long-term mortgage rates last Thursday were reported at the lowest in the 50 years they’ve been recorded – 4.96 percent.
    • Households are growing. The Echo boomers – children of the baby boomers — are getting ready to buy homes, ready to make up a big demographic of buyers, which will lead to a higher number of households.
    • Housing prices have fallen and affordability is at its best levels since the 1970s, Berson said.

There’s NO doubt.  It is more difficult to get a loan these days.  But you can do it.  There are, in fact, lots of options. 

Conforming Loans – Ideally, you have a 20% down payment, a good credit score, qualified underwriting, and a conforming loan balance (which in San Francisco and the surrounding areas means a loan amount of $625,500 with a purchase price $781,875 if you have 20% down).  This is the simplest option with the least creative strategizing to get you into a home.  And frankly, there’s a good selection of homes out there that would cost you less than $781,875 right about now.

Some typical rates for this basic scenario are:

30 Year FIXED @ 5.000%
20 Year FIXED @ 5.250%, *Agency High Balance @ 5.625%
(*Agency High is the gray area between the national conforming loan limit of $417,000 and $625,500, the conforming loan limit for San Francisco)
15 Year FIXED @ 4.875%
5 Year ARM @ 4.750%

Jumbo Loans – If you have more expensive needs, more expensive tastes or just find that the home you want will cost you $781,875.01 or more, , but less than $1.25M, then you need a different loan package.  These days, you’re looking at 25% down payment, a good credit score, qualified underwriting, and a 1 point charge (a point is one percent of the mortgage loan. Lenders will give borrowers a lower interest rate on the loan in exchange for points up front) and if you can handle all that, then some rates for this scenario are:

30 Year FIXED @ 6.550% 
5 Year ARM @ 5.800%
7 Year ARM @ 5.900%
10 Year ARM @ 6.150%

(With the particular lender that shared this info with me, If the home is a condo, then add .30 to the rate.)

FHA & VA Loans – If you have steady income, but little money to put down, then one of these two loans might work for you.  For FHA loans, you’ll need to have at least 3% to use as a down payment, and another 3% or so (ballpark estimate) to pay for your closing costs.  There are, of course, other restrictions on the type of property, etc.  VA loans have other restrictions too.  You need to have a Certificate of Eligibility from the Veterans Administration.  But in many cases, there is NO down payment required, though a loan amount fee between 2% and 2.75% will be applied (that can, however, be wrapped up into your loan).  Oh, and if the Veteran can make a 5% down payment, the loan fee will be reduced.

Some rates this this scenario (for loan amounts of $100,000 to $625,500) are:

30 Year FIXED @ 5.000% *FHA HIGH BALANCE @ 5.500%* (*Again, this is that gray area between $417,000 and $625,500.)
15 Year FIXED @ 5.000%

Fractional TIC Loans – Tenancy in Common loans come in many shapes and sizes.  In some cases, several parties will each pay their individual share of one large loan.  But there is another option and it’s known as a Fractional TIC Loan (sometimes referred to as individual TIC financing.)  There are only a handful of banks that offer these loans, and the rates are high in comparison to any of the loan options mentioned above.  But, in some cases, you can put just 10% down, which is a definite bonus for many homebuyers.

Some rates for this scenario are:

25% Down payment
3 Year ARM @ 7.250%
5 Year ARM @ 7.000%

20% Down payment
3 Year ARM @ 7.500%
5 Year ARM @ 7.250%

10% Downpayment
3 Year ARM @ 7.750%
5 Year ARM @ 7.500%

(With the particular lender that shared this info with me, add .50 to the rates for loan amounts over $650,000 and add 1 point to the loan amount for all of these loans.)

Of course, you might not fit into any of these categories.  (At the time of this writing for instance, I hadn’t had a lender respond with various options for loans over $1.25M, though they are available.)

If you don’t fit into the above categories, but you still want to buy a home, contact me and I’ll try to put you in touch with the right lender for your particular situation.  And, there is, no doubt, a possibility that your financial situation won’t permit you to buy a house with the current lending guidelines that are in place today. 

And if you find that you’re not financially fit enough to buy a home in today’s real estate market, don’t take that as the end all to your dreams.  Get fit. 

Take the information you get after talking with a lender and put a plan in place to eventually purchase your home.  That may mean tightening the belt to increase your down payment, it may mean increasing your credit score, or it may mean readjusted your vision of your dream home to accommodate your financial reality.