Tag Archive for: lower rates

Want a Lower Payment and a Lower Rate Below Market…A 2-1 Buydown May be the Trick!

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Want a Lower Payment and a Lower Rate Below Market…A 2-1 Buydown May be the Trick!…(Read Below for More Info)

 

What is a 2-1 Buydown?

A Buydown temporarily reduces the mortgage payment for the borrower. This happens because the seller offers a credit that pays the difference between the full P&I payment and the reduced P&I payment. The seller only needs to provide the credit and the lender handles supplementing the payment. So, it’s a seller credit used in a different way!

Why would a seller want to give this credit to the buyer?

A Buydown is paid for by the seller instead of the traditional lowering of the sales price when a listing doesn’t sell.  This potentially attracts more buyers because they get a much lower rate and payment for the first 2 years.  It also provides a lower payment helps buyers ease into their new home given all the new expenses they may have.  It also allows them to refinance when rates drop.

This also allows the seller to maybe not have to lower the list price.  This keeps home values as high as possible!  Since this is also a cost to sell the property then the sellers potentially get a tax break by lowering any capital gains (of course sellers should always contact their tax advisor on this).

You can also have a situation where the list price is fine and the sellers don’t need to lower it or give a credit to the buyers.  So then the buyers can counter to increase the sales price to cover the buydown subsidy and then have the sellers give that buydown subsidy!  Sellers get the same net sales price and of course the buyers are getting a much lower payment on their first 2 years!  Of course to do this the property has to appraise for the higher purchase price.  The buyers have to have the extra couple thousand for the down payment because of the slightly higher purchase price in order for this scenario to work.

Basically this is the borrower “financing” their buydown with the higher purchase price in order to get the seller to give the credit to fund the buydown!

Here Is an Example for Educational Purposes Only:

Interest Rate is 6.50%       Loan Amount is $715,000

P&I at $715,000 with a rate of 6.50% is equal to $4519.29/month

If a Seller credits the buyer with a subsidy, this amount can be applied to the buydown and reduce the 1st, 2nd or 3rd year payment, depending on the subsidy amount.

Let’s say a seller agrees to supplement the payment difference for years one and two.

The first-year payment for the borrower would be a rate of 4.50%.  The second-year payment for the borrower would be a rate of 5.50%.  Years 3-30 would be the normal rate of 6.50%.

Year One@ 4.50% = $3622.80 – P&I/Month

Year Two@ 5.50% = $4059.69 – P&I/Month

  • Keep in mind that the borrower still has to qualify at the NOTE RATE and not the buydown rate so in this scenario the borrower qualifies at the note rate of 6.50%
  • In this scenario with the 1st year rate being 4.50% and the 2nd year rate at 5.50% then this means their average rate for the first 2 years is at 5.00% which is still 1.50% LOWER than the current market rate!!

Seller Subsidy:

The difference between the Normal Payment of $4519.29 and Yr. One of $3622.80 is $896.49/Month.

The difference between the Normal Payment of $4519.29 and Yr. Two of $4059.69 is $459.60/Month.

If the Seller offers a subsidy of $896.49 x 12 = $10,757.88 (for 1st year) plus $459.60 x 12 = $5515.20 (for 2nd year) they would offer the borrower a total subsidy of $16,273.08 which would pay for the payment difference the first two years.

This strategy helps a homebuyer ease into their house payment and frees up funds for other things that would have normally gone to a house payment. NOTE: Seller credit cannot exceed maximum seller contribution for program selected.

 

For More Info, please contact me.

Best Regards,

Rob McCarthy

Senior Mortgage Advisor

www.101Loan.com

408-377-4123 o  650-465-8957 c   408-608-1921 f

101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014

CA DRE #01165697  NMLS #121019

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 50 banks with over 200 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

Note: Interest rates and loan programs quoted are subject to change without notice or until locked and approved by lender.

Unemployment Down in Bay Area and Real Estate Staying Strong…

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A Very Interesting Week for Real Estate, Unemployment and the Dow Jones!

This week, see why the economy is coming back strong. For more info, see https://youtu.be/7DaDcWhDUdg.

Home Values

Real Estate values continue to stay strong, with multiple offers as Shelter in Place has been modified.

Just this week, we pre-approved over twice as many borrowers as with previous weeks.  Many of my Realtors are reporting buyers coming off the fence and writing offers.  Housing inventory is finally up with Shelter in Place in Phase 2 allowing Realtors the ability to list property.  Inventory is now at 2.8 months but with over 7 Million people residing in the bay area, that isn’t much!  This is great news for sellers, but not so much for buyers where supply and demand are not equal.

Unemployment

Bay Area unemployment wasn’t as high, as some expected, compared to other areas throughout California.  Marin County came in at 11.1.  San Francisco County at 12.6, San Mateo County at 11.4 and Santa Clara County at 11.7.  What is also interesting is national unemployment dropped from 15.3 to 13.3%.  In just one month, over 2.5m people went back to work which is great news for the economy!

Local, National and Global Markets

The Dow closed today at 27,110 due to the following:

  1. Economic Optimism
  2. Overwhelming Policy Response
  3. Corona Virus Uncertainty Abating
  4. Global Yields Increasing

For more info on these, see my weekly report which can be found at www.101Loan.com under Rob’s Corner.

In Closing…Noah Manning with Perspective Realty in the North Bay and myself provided a summary on the above (and more) at https://youtu.be/7DaDcWhDUdg.   (I hope you enjoy it and if you like it, please leave your comments on the channel)

I hope you have a great weekend!

All the Best,

Rob McCarthy

Senior Mortgage Advisor

408-377-4123 o  650-465-8957 c   rob@101loan.com

101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014

CA DRE #01165697  NMLS #121019

Products/Services/Accolades:

  1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
  2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
  3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
  4. Access to over 50 banks with over 200 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

Cash Out Refi’s Might Go Away?

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 First and Foremost…
I just read an interesting report on how lenders may eliminate cash out refinances on conforming and jumbo loans. We have seen the “add” for cash-out refinances get super expensive lately.  It appears the Federal Reserve doesn’t want borrowers pulling equity out of their homes.  They feel home values may go down due to the negative impact of Shelter in Place and Covid-19.
For more info, see quote and link below:
 
“Many lenders have eliminated or restricted cash-out refinances, financing for investment properties and some for second homes as well,” Cohn says. “Jumbo lenders have also tightened their guidelines.”
 
https://www.cnet.com/personal-finance/6-things-to-know-about-refinancing-right-now/ 
 
Next…
A listing agent in the east bay recently posted a great Yelp review on the service we provided her. I just love when we can help Realtors and their clients successfully & smoothly close on purchases. 
To view the review, click here: https://www.yelp.com/biz/101-loan-mortgage-san-jose-2  (See Testimonial from Bette dtd. 4/28/2020)
If you’d like the same care, please contact me.
 
Best Regards,
Rob McCarthy
Senior Mortgage Advisor
www.101Loan.com
408-377-4123 o 650-465-8957 c 408-608-1921 f
101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014
CA DRE #01165697 NMLS #121019
Products/Services/Accolades:
1. Residential Financing for Purchases and Refinances on 1 to 4 unit properties.
2. Reverse Mortgage Financing to include Conforming, Jumbo, HELOC Jumbo’s.
3. Commercial & SBA Financing to include Multifamily, Office, Retail and Light Industrial.
4. Access to over 50 banks with over 200 “Five Star” Reviews on Yelp, Google, Facebook and Linkedin.

Opportunity May Be Knocking – 1st Time Buyers May Finally Have a Leg Up!

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In the Bay Area, we have been in Shelter in Place for over 30 days. Unfortunately the flattening of the COVID 19 has not reduced the curve as much as officials have hoped.  Meanwhile consumers are wondering when they will be able to go back to some normalcy in life.

In terms of Real Estate… it continues to be in demand.  Predictions state that this may not be the case in the future, unless officials come up with a plan for consumers to stay healthy but still productive.  Real Estate continues to stay high in value since inventory is so low but with consumer confidence being low and because Shelter in Place is still in affect, properties may sit on the market for longer periods.

This is creating opportunities for first time home buyers.  Because of the stock market correction, 1st Time Buyers,  don’t have to compete with buyers that were using stocks to purchase a property or that had large down payments, putting 1st Time Home Buyers into competitive position.  In addition, sellers are getting antsy, wondering why their homes are not selling or when they may sell.

For more info on the above, about the Bay Area Real Estate Market and Current rates, please tune into my You Tube channel at 101 Loan or at https://youtu.be/-3DSUCsKQVg.

For more info on the above, about the Real Estate Market locally and about current interest rates, tune into my You Tube channel..  If you would like to get pre-approved, please contact us at www.101loan.com or complete the following questionnaire at https://101loan.com/purchasing-start/.

Any questions, please contact me at https://101loan.com/contact-us/.

All The Best,

Rob McCarthy

Owner and Senior Mortgage Planner

101 Loan LLC

“A Stock Market Loss is Only a Loss if You Sell”

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A Stock Market Loss is Only a Loss if You Sell or so Financial Planners tell us!

For those in their 30’s, 40’s or 50’s, those age groups, should have time for the stock market to recover. However, for those much closer to retirement or retired, they may not be as fortunate!

As companies take huge losses with “Shelter in Place” and consumers are pulling back their purchases, analysts feel MORE stock losses are imminent.  The Federal Government stimulus will help in the short term, but longer-term, we are facing a new economic reality and one that we will not like.

If you’re in your 60’s, 70’s or 80’s, making back the market’s losses may only be a hope, and unfortunately not reality. The question to ask is…What are my options now that my fixed costs are the same, but my assets have taken a big hit?

We may have an answer for you. To learn more, please contact me or review the information on my site at https://101loan.com/reverse-mortgage-start/ .

Thank you.

Best Regards,

Rob McCarthy

Senior Mortgage Advisor

www.101Loan.com

408-377-4123 o 650-465-8957 c

101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014

CA DRE #01165697 NMLS #121019

“Over 200 “5 Star Reviews on Yelp and Over 30 years of Experience in Lending”

Market Update and What Should Retired Homeowners Due in a Declining Stock Market…

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As for Mortgage Rates and the Stock Market…The dust has not settled.  Analysts say this week or next may be similar to the last few weeks with volatility in the market. For now, only loans of $510k or less are low in rate. Loans above $510k are expensive, “rate wise” when looking at refi options. Purchase loans are still low in rate as banks subsidize them. In regards to market volatility for this week, please see the following at https://seekingalpha.com/article/4335928-markets-are-setting-up-for-another-move-down-technically-speaking-for-week-of-3-30minus-4-3.

In Addition…Wells Fargo has announced they will only do jumbo loans for clients with $250k deposited with them and will not be doing conforming loans or government type loans (such as FHA and VA) going forward. We are glad we have access to more than one jumbo lender and access to everything else! Being a broker in this type of market does have its perks with access to multiple lenders, many of which are portfolio lenders and lenders that sell to Fannie Mae and Freddie Mac, giving our clients more loan options!

In Closing…with market devaluations, many of your retired clients may be feeling the pain or fear of seeing their portfolio or monthly income from those assets go lower. As a solution, we have access to Reverse Mortgage Financing that can help them Age in Place and eliminate stress and anxiety with the changing times. For more info, please contact me.  Any questions, please contact us.

With the Federal Reserve Lowering Rates, Why Have Mortgage Rates Gone Higher?

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As you know the Federal Reserve lowered rates, specifically the Fed Fund was lowered to 0.  This means the bank lending rate has dropped, lowering rates at the street level at tad, but no-where near where they were weeks ago when rates were lower.

Rates are still up because of the following…

  1. Lenders are slammed with so much business. Their turn times are much slower now.  This has caused them all to increase their rates to handle the volume they currently have locked.  By lenders increasing rates, their incoming business slows down allowing them to catch up.  Once they catch up, they typically will lower rates again.
  2. The Corona Virus has forced employees at banks to work from home, slowing down the virus.  Working remotely unless completely set up for this, has caused a slow down of work efficiency causing work delays.
  3. See my response from a few weeks ago below on what a Fed Drop really does*
  4. Lastly, unrelated to rates, County Offices have closed and many appraisers are staying home and not taking on new business.  This will cause further back-ups for lenders and consumers.  We know this is short term (hopefully only a week or so) but this will delay “most” refinances and purchases from closing in the near term.

Update on Rates from a Few Weeks Ago…

Clients are Asking…Why Have Rates Not Gone Down Today?

As you may know the Federal Reserve lowered the Fed Fund by .5% today.  You may be wondering how this will affect interest rates you are seeing for your home mortgage.

I hope the following sheds some light on the subject:

Typically, a Fed cut has no direct effect on mortgage rates.  The Fed Fund (which they lowered) is the overnight lending rate.  Banks charge this to each other when they have a surplus of reserves (deposits) required by the Federal Reserve.  Banks have to keep a certain amount of reserves in relation to their deposits and so when they get more than what they need, they lend out the surplus to other banks that are short in reserves using the Fed Fund Rate.  So what does this mean to you the home owner?

A fed cut like today’s, lowers rates on bank products like car loans, business loans, credit card rates, home equity rates.  Mortgage loans, however are influenced by Fannie Mae and Freddie Mac, Portfolio Lenders and of course Mortgage Backed Securities and Bonds.  In short, when the Dow or Nasdaq starts falling, investors put their money into MBS’s and Bonds causing mortgage rates to go lower.  When the stock market corrects and starts going back up, these investors quickly move their money back over to equities and mortgage rates we see, typically go up.

Now, the reason we have seen rates drop in the past week or so is due to market uncertainty.  The Corona Virus and its impacts local, national and international markets.  Example, if Apple can’t manufacture cell phones in China due to impact of the Corona Virus, their sales and revenue will significantly drop negatively.  This will affect their stock price and stock market as seen in the last week or so.  The Federal Reserve is worried that this will happen to other industries such as travel, manufacturing, tech, etc so they are being proactive in lowering the Federal Fund Rate.  Eventually this move will filter down to interest rates for home loans, but in the near term it will not as seen last year with 3 Fed Fund drops (last year) only resulting a slight reduction of mortgage rates.

Conclusion…

Rates will definitely go lower, but unfortunately it will take some time to do so based on the factors above.  When rates do drop, we will update you so you can take advantage of the rate and payment savings.  If you would like to get in ready position so you can act quickly when rates do drop, please contact us.

Best Regards,

Rob McCarthy

Senior Mortgage Advisor

www.101Loan.com

rob@101loan.com

408-377-4123 o  650-465-8957 c   408-608-1921 f

101 Loan – 1601 S De Anza Blvd, Suite 260, Cupertino, CA 95014

CA DRE #01165697  NMLS #121019

PRESSURE ON RATES AND HOME VALUES…

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Rates dipped a few weeks ago however rates went up for the following reasons:

  • Lack of Real Estate Inventory for Sale (1 month or less inventory in some areas)
  • Low Unemployment (at 3.6%)
  • Lenders took to much business in.
  • Government offices are closed delaying purchases and refinances.
  • Market Volatility – Lenders don’t know how to price themselves.

See this week’s report below.  If you need anything, please contact me.

http://www.mmgweekly.com/m/index.html?SID=a2186aa7c086b46ad4e8bf81e2a3a19b

Remember, I provide 3 different types of financing:

  • Residential Financing (1 to 4 Units)
  • Commercial Financing (5+ Units, Office, Retail and Light Industrial)
  • Reverse Mortgage Financing (Conforming and Jumbo and the New Jumbo Heloc)