Laguna Beach Real Estate

We have talked often about getting your financial ducks in order before hitting the pavement to find your Laguna Beach Dream Home for Sale. It’s always nice to look and dream about a life at the beach. But it’s even nicer to make that dream a reality.

I know that it’s hard to look past the forest of economic news that is in front of you and see the opportunities. But the fact remains that we are seeing prices of Laguna Beach Homes for Sale that were last seen in 2002! Plus, the interest rates remain at historically low levels.

Lenders are more cautious with some of their underwriting criteria for various reasons. Don’t let this keep you from doing what you can to position yourself to grab your dream home when the right opportunity and circumstances collide.

One of the entry level thresholds of obtaining a loan has always been your credit score. Understanding what is factored into this score will help you to create habits that will give you the best chance at the highest score available for you. Here are just a few tips:

• Bill payment history accounts for about 35% of your FICO Score. Paying your bills on time each month is important.
• Outstanding debt accounts for about 30% of your FICO Score. This is an interesting mix. The lenders want to see that you have other credit and you know how to use it wisely, but they don’t want you to use too much of it by maxing out your cards. Most experts advise to use less than 30% of the total credit limit. For example, if you have a credit card with a $5000 limit, then keep your balance at or below $1500. Unfortunately, if you have a card that you max out but pay off in full each month, it doesn’t always reflect in your favor on your report, even though paying the balance in full each month is a good practice. If you plan to apply for a loan in the near future, start getting your credit balances down to favorable levels.
• Credit history accounts for about 15% of your FICO Score. So if you are just starting out, you won’t get too many points here. However, it is a small percentage of the total score.
• The remaining 20%…well, that’s still a bit of a mystery!
• Don’t apply for too much credit in a short period of time since it may look as if you are desperate. If you are shopping for a loan, you get a little break since credit pulls from mortgage companies over a period of several days will count as a single credit inquiry.
• If you have been approved for a home loan, don’t make any major purchases, additional credit inquiries, or changes to your credit report. Lenders are pulling credit reports for approved borrowers right before they fund the loan (which could be after you have signed loan documents and think that it’s all over but the singing). Don’t get caught with your household belongings in the moving van and no place to go!

The good news is, wherever you are at right now in terms of your credit score, credit scores are salvageable. With the right information about what will give you the most bang for your buck, and a little determination, you can get your score to a level that the banks will approve.

Take action today with the following steps:

• Get a copy of your credit report. Call your lender and have them pull it for you or get a copy from the credit companies for free.
• Take the time to review the information to make sure that it is accurate.
• Correct any errors by writing to the credit bureaus and notifying them that there is an incorrect item on your report.
• Finally, make a list of steps that you will take to improve your score (i.e.…start paying bills on time, reduce the balances to less than 30% of the limit per company)
• Take action on the steps, little by little, consistently, each week.

Remember…nothing happens until something moves…so, get moving!

See you at the beach!

Until next time…

A few weeks back we wrote about one frustrating Laguna Beach home purchase where the buyer was inundated with last minute underwriting conditions resulting in what we called the “loan approval decathlon” and a delay in the closing of the home. What was made clear with lending in our current credit climate is…”it ain’t over ‘till it’s over!”

The situation was frustrating for all parties. Including, it seems, the lender.

Tips that we took away from that experience were to avoid, if possible, removing any contingencies relating to your loan from the purchase contract. For example:

• We know that lenders have ordered second appraisals, even after the first one has been approved. Therefore, try to keep your appraisal contingency on the purchase contract until the loan has funded;
• We know that they could pull a second credit report right before the loan funds; therefore, be certain that there are no changes to your credit. If they do pull a second report, you want the credit profile to look similar. No new accounts, no major increases in your loan or credit card balances, etc. Now, you will probably not be able to avoid removing this one since you do have control over your credit history…just keep it clean!
• We know that they may re-verify your down payment and reserves. Be sure that your paper trail is accurate, and that you keep the documentation proving these assets. Again, keep it clean – you have control over this.

Now, we have some additional information from our associate over at Bank of America. This information is very helpful. It is a lender’s perspective as to why loans seem so hard to get. Read on…

A Lender’s Perspective

Compliments of Kevin Budde, Bank of America

One of the most regular comments we hear from agents and borrowers is that they believe lenders don’t want to make loans. It has become common place for many last minute underwriting conditions to be added to loans. We are even hearing about lenders who have issued written loan approvals only to have the approval pulled back days later. Sometimes, even after the buyer has removed loan contingencies, the approval is rescinded. What is going on and why is it so hard to get loans through the system?

There is a war going on between the U.S. government and the lending industry. Due to the financial collapse of FNMA and FHLMC the government was required to step in and take over these two housing giants. FNMA just required an additional $11.8 billion dollars of new capital to keep them afloat. The U.S. government is trying to stem these losses by making all of the lenders buy back loans that were sold to these two agencies. If government auditors can find any discrepancy in the file they issue a repurchase agreement to the lender who in turn needs to use their capital to buy the loan back. In response to the increased buyback requests from the government lending institutions are pressuring their underwriters to make sure not one piece of documentation is missing from a loan file prior to the closing of the loan. This often results in conditions that don’t make any sense to the borrowers and agents and can cause major upset prior to closing not to mention closing delays.

In 2009 Bank of America was requested to buy back $425 billion of home loans from FNMA and FHLMC. In 2010 the number is supposed to double. In the first quarter of 2010 Wells Fargo set aside $2.6 billion in reserves just to pay the legal bill for fighting the government and their buyback requests. The pendulum has swung from lenders making practically every loan four years ago to the extreme opposite making getting a home loan a very harrowing experience for the buyers, to say the least.

Is there anything you as agents can do to help make the borrower’s experience less daunting? Absolutely there is. Have all of your clients be thoroughly pre-approved prior to putting them in your car. Unfortunately there are many versions of what a pre-approval entails. Every day we cross pre-approve borrowers for REO and short sale properties. We see regularly the poor job and lack of documentation that made up the pre-approval. We ask for supporting documentation from the buyer only to find out they don’t qualify at all. Had we not been asked to step in and cross qualify the client that escrow would have collapsed shortly.

So what can be done to make sure the very best of efforts is being put forth? One, call the lender that issued the pre-approval letter and ask, “Did you collect income and asset documentation and review it with an underwriter to determine the accuracy of the qualification?” Two, allow time for the lender to take these steps in order to better prepare everyone. We are still asked to write pre-approval letters by talking to the client on the phone when the purchase contract is being written as everyone is in a hurry. This process doesn’t cut it in today’s difficult lending environment. Remember, if the borrower did not submit income and asset documentation to the lender for review then the pre-approval letter in your hand isn’t worth the paper it is written on.

http://www.TheCoastalPropertyExperts.com

http://www.HillaryFlix.com

Hillary Caston is a tough negotiator…with a sense of humor. If you have seen her series of “Break-In” videos, you know what I’m talking about. But don’t be fooled by all the fun. When it comes to real estate, selling real estate in Orange County, and taking care of her clients – she is all business. Hillary is a true entrepreneur, with experience in building successful businesses.

Most often, when somebody is ready to sell their home Hillary is able to list, market and sell that home within 30 days. Maybe it’s luck…but when “luck” happens over and over again – it becomes skill. For example, her 2 most recent listings (see her 6th and 7th Break-In offenses) sold within 3 weeks of listing the home.

Hillary was most recently awarded the Chairman’s Circle Platinum Award. This is awarded to the Top 1% of Prudential agents nationwide. To be considered for this award, agents must have earned a minimum of $500,000 gross commission income.

In addition, Hillary is ranked as the 11th Top Agent in all of Orange County with Prudential California Realty, and #51 in all of Southern California and Central Coast Prudential Offices.

Congratulations Hillary!

But the question begs to be asked….will “speedy” short sales give Home Buyers the best deal? And, is buying a short sale the best way to purchase a home in our Orange County and Laguna Beach Real Estate Markets?

The government’s Home Affordable Foreclosure Alternatives (HAFA) program is scheduled to go into effect on April 5, 2010. Proponents believe that “Any structure is better than what we’ve had” as commented by Kathryn Bovard a broker of Prudential Americana Group in Las Vegas.

When a homeowner is able to short sale their property it is believed that their credit is impacted less than if that homeowner was to walk away from the home and allow it to go into foreclosure and be taken back by the bank. That is really the only benefit since regardless of how much money they have put into the home, the homeowner will get nothing when the home sells.

A short sale also works better for the bank. They are alleviated of the potential liability of an empty home and can mitigate their carrying costs of holding a portfolio of non-income producing investments on their books. They can also, at least in theory, have a say in the negotiation of the price and costs incurred by the sale as well as avoid the costly legal fees involved in a foreclosure.

So it seems that if a Loan Modification to the existing homeowner is not possible, which would allow them to restructure their current loan and stay in the home, then both parties have a pretty good motivation to seek a short sale for the home instead.

So…why, then is a government program necessary to encourage banks to clear their books of unwanted inventory in a more speedy manner than we have seen so far?

The Home Affordable Foreclosure Alternatives program is expected to improve the process by:

• Issuing pre-approved short-sale terms before listing the property so that sellers will know what the lenders will accept before they even list the property;
• Implementing a timeline to keep lenders and sellers on track;
• Allowing homeowners up to $1500 at closing to assist with moving costs;
• Providing Servicers of the loans up to $1000 compensation;
• Providing up to $3000 to distribute to subordinate lienholders so that they can, in theory, recover some of their costs. Some short sales have been held up when, for example, a 2^nd mortgage holder with a $100,000 loan is not willing to allow the short sale. Under this government program $3000 would be offered to that 2^nd mortgage holder to encourage them to allow the short sale.

Some believe that the banks are trying to put programs in place to facilitate more short sales in a shorter period of time.

As reported in our earlier post, there is also money being given to the banks by the Treasury to lessen the gap between the price of the home and the amount due the lender by the seller of the home.

So, are the banks finally “on board” with allowing short sales…or is the government Treasury “on board” with lessening the financial impacts to the banks?

This new program for short sales brings several questions to mind when a home buyer in today’s market is looking for an opportunity to take advantage of well-priced homes, low interest rates and a good inventory of homes for sale:

• In a short sale, if the bank is now telling potential buyers how much they will sell the home for, will that make buyers less inclined to make their own evaluation of what they believe the home is worth?
• Will it result in a shift of who is in control of the price paid for the property?
• Will it result in homes being purchased for more than they are worth?
• Will new buyers just pay the asking price – no questions asked?
• Will home buyers see more opportunities in purchasing a home that is a “regular” sale…in other words one where the seller is not the bank, but an actual person with equity in the property and the ability to negotiate based on what make sense?

By one set of statistics, short sales typically sell for 91% of their listing price. This could suggest that these homes are coming onto the market well-priced.

However, most will agree that the process of getting through a short sale purchase of a home has been, for most, a long and frustrating process. As in most real estate transactions, it is important to have an agent and team that are tenacious and persistent in the follow up with the lenders. With the massive amount of short sales that each lender representative handles, it is easy to get lost in the paper shuffle unless you have a “squeaky wheel” to keep grease on the wheels of progress.

Until next time…

For those investors and homeowners interested in purchasing a Fannie Mae-owned home, there are some financing and incentives to be aware of.

“Fannie Mae recently announced that people purchasing a Fannie Mae-owned HomePath® property will receive up to 3.5 percent of the final sales price to be used toward closing cost assistance or their choice of appliances. The offer is available to any owner-occupant who closes on the purchase of a property listed on HomePath.com before May 1.

Properties eligible for this incentive are listed on HomePath.com and most listings include detailed property descriptions; photographs; community and school information; and more. In addition, many Fannie Mae-owned properties are eligible for special HomePath Mortgage and HomePath Renovation Mortgage financing, which offers home buyers an opportunity to purchase with as little as 3 percent down.”

Real Estate investors as well as those purchasing with the intention of living in the property can buy a designated HomePath home; however, the financing options may only be available to those that intend to occupy the property. Be sure to ask your lender about details.

In addition, as noted on the Fannie Mae HomePath website, there is special financing available. This is, no doubt, offered as an incentive to clear their inventory of homes. Some of the benefits of the special financing are:

• Low Down Payments
• Flexible Loan Terms
• Less-than-perfect credit – OK
• 3% Down payment requirement can be a gift, grant or other source
• No mortgage insurance is required

In addition to this financing, there is also a plan for Renovation Mortgage Financing which includes:

• Funds for the purchase and renovation of the home;
• Low down payments
• Flexible Loan Terms
• No Mortgage Insurance

For more financing information, visit the HomePath Site

Currently, there are 156 Homes available with this program in Orange County Real Estate.

The Federal Reserve is scheduled to end their debt purchase program on April 1 – April Fool’s Day, partly as the result of a fear of negative perception worldwide that the U.S. government is simply printing money in order to solve the mortgage crisis. Analysts believe that the Feds want to avoid the possibility of a sell-off of U.S. government bonds that could result if that perception became widely believed.  

Boston Fed President, Eric Rosengren said that he believes mortgage rates will rise about three-quarters of a percent to about 6 percent as a result. Things may be a little “wobbly” at first; however, there is an acknowledgment by Fed Vice Chairman Donald Kohn that “We are still in unchartered waters…We will need to be flexible and adjust as we gain experience.”

It is anticipated that the Fed is unlikely to step in again unless a renewed crisis occurs, such as a sudden and destabilizing rise in mortgage rates. There seems to be an indication that the Feds would like to move away from their reliance on unconventional policy measures.

In a policy statement issued after the Fed’s December meeting, the central bank reiterated plans to finalize the program by the end of March and was planning to continue to close down other emergency measures as scheduled.

Said Torsten Slok, senior economist at Deutsche Bank,” That was a fairly strong signal that they will not continue the purchases later on”.

Read the full story…

So, let’s take a look at what options are still currently available for folks interested in purchasing a home in the Orange County Real Estate Market in the next few months:

• Home prices that have been adjusted lower from their market peaks
• Low interest rates
• Tax Credits for both first time home buyers and existing homeowners
• Buyer protection programs offered by some banks and some Real Estate Groups, such as California Association of Realtors
• A large inventory of homes from which to choose – with many custom homes in the Laguna Beach Real Estate Market

Everyone seems to be in agreement that we need to get the inventory of distressed homes off the market before we see overall market recovery in prices. The question is, are you ready to be one of those new homebuyers that will benefit from the current market and the government incentives?

Take the time to review your personal financial situation, talk to your lender, and be certain that you are not missing a rare opportunity. Don’t be concerned if you are not quite ready to make that purchase, find out what you need to correct, improve, or save, in order to get yourself ready to purchase that home you’ve had your eye on.

Until next time…

Aliso Viejo Short Sale-Home For Sale Orange County Real Estate

http://www.TheCoastalPropertyExperts.com

Located: 37 La Mirage Circle, Aliso Viejo, CA

Priced: Just reduced to $327,000

Condo-2BR/2BA, 1204 Square Feet

Short Sale Home for Sale in Aliso Viejo, Orange County, California

Listed by Candice J Burroughs, Prudential California Realty Treasure Island

For today’s pick I would like to highlight an Aliso Viejo home for sale that is in the short sale process.

You know, with all the talk of distressed properties, great deals, and the general hang wringing that goes on around purchasing Orange County real estate in our current market, it’s very easy to forget that at the very root of it, someone is purchasing a house to enjoy as their home or to enjoy as an investment, with an opportunity of added wealth for future generations.

This is why real estate is so fun and rewarding.

I hope that you have been enjoying the videos that our team has been putting out. Why don’t you take a minute to become a “subscriber” to our YouTube channel so that you don’t miss a single episode!

http://www.youtube.com/user/USHomeTours

For those that may not know, a short sale is simply a sale where the asking price is less than what the homeowner owes the bank. We are seeing many of these right now. Part of it has to do with supply and demand….there is a large quantity of homes on the market and demand has softened. And part of it has to do with various economic factors and consumer confidence.

For the homeowner of a property in a short sale, they are simply looking for an effective “exit strategy” that will salvage their credit as much as possible so they can go forth to live and buy again when their personal financial situation improves.

As in any real estate sale, both the buyer and seller get to move into a fresh, new phase of their life.

And, there is always an added satisfaction when you can purchase a home that is well priced, well located, and has been well cared for.

This week’s pick is such a home for sale in Orange County.

Located walking distance from Soka University in Aliso Viejo, this 2 bedroom condo is in an award winning complex for “Best Attached Residence”. It is also an end unit, so shared walls are minimal. The vaulted ceilings, various designer arches, single level living floor plan, and beautiful colors all work together to present someone with a lovely home.

Price…well, how does buying something at near 2002 prices sound to you?

Take a look at the video of this home, and visit our website to get more details. Then, if you or someone you know would like to get more information on the property or write up an offer…give me a call (Hillary: 949-922-8490). The banks may take a while with their approval on this short sale, but that doesn’t mean that you have to wait!

Until next time…

Hillary Caston

949-922-8490

According to the California Association of Realtors, the First-time Buyers Housing Affordability Index for California stood at 67 percent in the second quarter of 2009 compared with 49 percent (revised) in the second quarter of 2008. For California condos, that number is 70 percent. For the County of Orange, it is 53 percent.

So what does this mean? The higher the percentage; the more affordable for a first time home buyer to purchase a house. What these numbers are telling us is that 67 percent of households in California can now afford to purchase a home. And for Orange County, 53 percent of households are able to purchase an entry-level home.

The second quarter of 2009 brought in the following stats:

• The median price of an entry-level home in California was $224,180;
• The estimated monthly payment, including tax and insurance, was $1330. This assumes a 10 percent down payment and an interest rate of 4.92 percent; if your terms are different, the payment will vary;
• The minimum household income needed to purchase an entry-level home in this price range was $39,930.

What is interesting to note is that the minimum qualifying income was lower than last year when it was reported that a person needed a household income of $60,460 to qualify for a loan on an entry-level home. Interest rates are still low, as they were last year; however, with the decrease in home prices in Orange County overall, first time homebuyers are still able to buy a home now at good terms and great prices. The median income for the State of California is $61,030.

You may be wondering how this relates to Aliso Viejo Homes, Laguna Niguel Homes and Dana Point Homes. These are the areas that we have seen a lot of activity in first time home sales with people buying a home, getting great deals. For the beginning of November, 2009 there are 23 homes actively listed for sale in these cities with a maximum price of $225,000. Most of these are condos; however, there are a couple of single family residences as well.

This is incredible!

Add to this the just announced extension of the tax credit and you should start to wonder why you are waiting to buy a house in Orange County! First time homebuyers and investors alike should be able to see some interesting opportunities.

Hey there!

It’s the end of another great week here in beautiful Laguna Beach! 

It seems that I continue to get the same question from my clients and friends, and that is: Should I Buy a House Now or Wait?

 While I don’t claim to hold a crystal ball, and cannot see the future of the economy,

I can give you the Top 5 reasons to buy a California home right now.  Consider

this as you enjoy your weekend and as always, feel free to call me with any of your

real estate questions!

The National Association of Realtors is running advertising right now asking the question, “Why are you sitting on the fence?” For the cynical out there, you may be thinking that this is a shameless way for the Real Estate industry to drum up business. After a few lean years real estate agents are hungry for a sale, you may think.

Well, while it may be true that some agents have dropped a few pounds and have had to tighten their belts just like everyone else, the good agents are keenly aware of the great deals that are out there. They are on the phone, sending emails, and educating their clients about what is happening in the industry and in the real estate market.

There are fantastic deals available, and the smart money is investing in these deals as a way to expand their wealth base and take advantage of the opportunities right now, while others are still sitting on the fence.

Is this the bottom of the real estate market? Well, nobody knows for certain, and pundits on both sides of the issue make a strong case for whether or not we have seen the bottom. While it’s interesting to hear what “they” have to say, at the end of the day it is your family’s financial well being and quality of life that should determine if you are ready to buy a home. Most often, the bottoms are not recognized until we are well on our way back up and many opportunities are missed.

Affordability: Across the nation for various reasons, prices have declined.  The counties that experienced the greatest increases in prices are now experiencing drops in prices which are starting to look like great buying opportunities.

Low Interest Rates: True, lending standards have tightened up; however, there are still loans to be made. Buyers are taking advantage of conforming and FHA loans where rates can still be found in the 5% interest range. With FHA financing available in the Orange County area, the increased loan limit of $729,750 is looking especially attractive. Even borrowers with a credit score as low as 580 can consider a home purchase in today’s market. It is best to talk to your lender or mortgage broker to get the most recent information on the loans available to you.

Government Incentives:  Don’t miss out on this one. Many homeowners have claimed that it is the $8000 tax credit offered for 2009 that prompted them to take the step into home ownership. This tax credit expires December 1, 2009 so don’t wait if you want to qualify for this benefit.

Mortgage Protection Programs: For those that may be concerned with the viability of their employment, there could be a program to assist with your mortgage payment if you become unemployed. The California Association of Realtors (C.A.R.) offers the Housing Affordability Fund Mortgage Protection Program for first time home buyers who lose their jobs due to layoffs. There has also been mention of some lenders that are offering similar programs so be sure to ask your loan specialist about this option. Also, another insurance program that has always been available is through disability insurance which applies if you become disabled. Be sure to check out all your insurance and “safety net” options so that you can weather out the storm of any unforeseen event.

Choosing to live the life you want in an area you choose: Do you love your neighborhood, your school district, your commute, your view, your community, the size and “feel” of your house? If you cannot answer with a strong “Yes!” to any of these questions, then now may be the perfect time to step up and live the life you’ve always dreamed of. For the coastal communities of Orange County and Laguna Beach, that means waking up to the smell of the ocean and cool ocean breezes; a year-long temperate climate; great restaurants, entertainment and schools; a short drive or walk to the beach to surf or sun. It’s a lifestyle choice…is it yours?

As always, feel free to request a Market Snapshot of the areas that interest you most!