Joe Capote

September 8, 2009 • 4:47 pm 0

8 Tips to Guide for Your Home Search

Here are 8 simple tips to guide your home search.

1. Research before you look. Decide what features you most want to have in a home, what neighborhoods you prefer, and how much you’d be willing to spend each month for housing.

2. Be realistic. It’s OK to be picky, but don’t be unrealistic with your expectations. There’s no such thing as a perfect home. Use your list of priorities as a guide to evaluate each property.

3. Get your finances in order. Review your credit report and be sure you have enough money to cover your down payment and closing costs. Then, talk to a lender and get prequalified for a mortgage. This will save you the heartache later of falling in love with a house you can’t afford.

4. Don’t ask too many people for opinions. It will drive you crazy. Select one or two people to turn to if you feel you need a second opinion, but be ready to make the final decision on your own.

5. Decide your moving timeline. When is your lease up? Are you allowed to sublet? How tight is the rental market in your area? All of these factors will help you determine when you should move.

6. Think long term. Are you looking for a starter house with plans to move up in a few years, or do you hope to stay in this home for a longer period? This decision may dictate what type of home you’ll buy as well as the type of mortgage terms that will best suit you.

7. Insist on a home inspection. If possible, get a warranty from the seller to cover defects for one year.

8. Get help from a REALTOR®. Hire a real estate professional who specializes in buyer representation. Unlike a listing agent, whose first duty is to the seller, a buyer’s representative is working only for you. Buyer’s reps are usually paid out of the seller’s commission payment.

I can’t stress the importance of #2 enough. I always advise my clients, especially first time homebuyers, that if they get 80% of what they want, they are lucky. Home buyers should posess the ability to compromise.

For more information on the home buying process, visit the buyer’s center on my website at www.JosephCapote.com

Filed under: Buyer's Blog, , ,

September 4, 2009 • 12:08 am 0

5 Factors that Decide Your Credit Score

I get asked this question a lot, and I thought it would be cool to post this. This is taken from my website, www.JosephCapote.com.

5 Factors that Decide Your Credit Score

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe.  If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more information, check out www.myfico.com.

Filed under: Buyer's Blog, , , , , ,

September 2, 2009 • 11:18 pm 0

Unique Investment Opportunities in S.F Mission District

Check out the links below for new price reductions on investment opportunities in San Francisco. Unfortunately, I can’t embed the postlet minis for this.

116 San Carlos SF
A unique 4 unit investment opportunity in the much sought after SF Mission District. Offered at $875,000.

160 San Carlos SF
A unique 6 unit investment opportunity in the much sought after SF Mission District. Offered at $925,000.

Please call for Details.
Joseph Capote
(650) 269-3000
CA DRE Lic# 01136328
Franco Real Estate Group

Filed under: Buyer's Blog, Seller's Blog, , , ,

August 15, 2009 • 12:31 am 2

Blowing Up the Myths of the Short Sale

Short Sales. Just the name along can drive fear into the spines of home buyers, sellers and realtors (not to mention the lenders who are taking a loss). For years, short sales have had a negative image in the real estate community. And, quite frankly, there are very good reasons why that is. Blown transactions, long turnaround times, little or no communication and frustrated buyers, sellers and agents have all contributed to the negative reputation that short sales currently carry. I even know some buyer’s agents who simply won’t show short sales and steer their clients away from them, they have been burned that badly in the past. While short sales have done much to earn the nasty reputation they currently carry, the tide is turning for the short sale and their reputation may be slowly changing.

What is a short sale? A short sale is a sale whereby the lender, insurer or beneficiary agrees to take a loss on a loan in order to sell a property. (whimsically known as being “upside down”). To make matters worse, the borrower/owner has suffered a financial hardship and is either behind in payments (in default) or in the midst of a full blown foreclosure. In an effort to bypass the expensive, time consuming and detrimental nature of a foreclosure, lenders will agree to a short sale; that is, they accept a sale that is less than the loan amount(s) owed, and take a loss on the remaining balance. There are many advantages for both the lender and borrower in a short sale. Unfortunately, the lenders, and to some degree inexperienced agents, have not handled these short sales very well. This is where the negative perception of the short sale is made. The banks requirements have resulted in an excruciatingly painful experience for all parties involved, and in the worst case scenarios, have lost money, time, effort and energy for the potential buyers.

So why do a short sale? There are many advantages for both lender and borrower in a short sale situation. From the owners perspective, he/she gets to avoid a foreclosure and the messy eviction process. The main advantage here is that the borrower can salvage their credit rating. Recent studies show that missing 2-5 mortgage payments affects a borrower’s credit score by an estimated 30-60 points. If a borrower suffers a foreclosure, it can affect their credit score by 140-200 points. Another advantage to the borrower is that they can continue to live in the property and not make payments throughout the short sale process. This is good for the borrower in that he/she can save money for the transition, and enjoy the peace of mind knowing they will not being hassled by the lender over late payments. Lastly, some borrowers truly feel this is the ‘right thing to do’ and that walking away from the house is unfair to the lender. A short sale offers a respectable option. From the lender’s point of view, a short sale has some clear advantages. The lender avoids having another ‘bad debt’ on the books. The lender does not have to complete an expensive foreclosure process. Some banks estimate a savings of $25-30k when doing a short sale over a full blown foreclosure. Additonally, they do not have to rehab the property or pay an additonal commission to the REO broker. Given all the advantages to both sides, a short sale can be a win/win situation.

Great! So why do short sales have such a bad reputation? The short answer here, is that they have been a pain to all parties involved. Buyers, sellers and agents have been burned trying to negotiate short sales. This is due to a number of factors. The first is the documentation requirements. Lenders require a multitude of documentation for a short sale, including tax returns, bank statements and other financial documents. Any missing documentation can result in an incomplete package, and the lender giggle like a smitten teenager with a crush at any incomplete packages. This results in the package sitting idly on the desk of the asset manager while the agents, buyers and sellers spin helplessly in the dark with no information regarding the status of the package. Secondly, the lenders have a bottom line requirement they are willing to accept for the property. Because of this, they may require the listing agents to do various monkey-like dance steps to satisfy them. These include ‘seasoning’ the property (listing it for a period of time at full price or more), requiring an initial offer to get the short sale ‘approved’ (this is why you see some short sales listed at incredibly low prices compared to others in the market. Chance are, they are just listed that way to get an offer so the agent may get the process rolling with the lender). Lastly, there may be junior liens, mechanics liens, unpaid taxes and association dues. All of these folks will have some say in the short sale, and may need to be paid off by the senior lenders or the transaction can fall apart. Lastly, and maybe most importantly, there must be enough time to do the short sale. If the borrower is in default by several months, there may not be enough time to complete a short sale before foreclosure. Given all of these variables, and there are more that I am not writing about, it is easy to see how a short sale can be precarious and that there reputations can be quite justified.

Can a short sale be completed? Yes, agents close short sales all the time. But it is hard work, and requires a lot of specific knowledge and skill to do so. A realtor, specifically a certified short sale pro (hint hint) has been trained on the requirements specfic to the success of a short sale. Knowledge of the documentation required, the foreclosure timelines and laws, the possible tax implications, the pricing and marketing strategies and escrow procedures are all key, since they all differ from a traditonal sale. Addtionally, a CSP can have an established relationship with lenders, and can use that relationship to their advantage in closing the transaction. In other words, short sales are not easy and are not for every agent. Sellers should be very wary of agents who have short sale experience and training. Agents who take short sales and attempt to learn ‘on the fly’ can cost the sellers time and money, and if they are not careful, their own commissions as well. My recommendation is to always seek out an agent who is knowledgeable in short sales before moving forward. Additonally, lenders are beginning to loosen their restrictive guidelines a little, but this varies from lender to lender.

Overall, a short sale requires effort. But, if done correctly, can offer advantages to both borrower and lender throughout the process and beyond. Each short sale differs, and can be taken on a case by case basis, but both buyers and sellers should know that a short sale does not necessarily mean they should run for the hills. As a potential short sale candidate, talk to a professional about your situation, and always be sure to discuss it with your CPA, tax and legal advisors. As a buyer, you should be aware that a short sale may be riskier, but may offer additonal awards. Have a discussion with your realtor about whether a short sale is right for you. As a certified short sale pro, I am happy to help educate both buyers and sellers regarding the short sale process. As always, knowledge of the facts should dispell the myth’s of the short sale. For more information, visit me at www.JosephCapote.com and take a look at my short sales library to learn more.

Filed under: Buyer's Blog, Seller's Blog, , , ,

August 4, 2009 • 6:26 pm 0

Federal Housing Administration Loan Guidelines

Over the past few years, qualifying for home  financing has become increasingly difficult. So when working with first time homebuyers, I often see that the desire to own is there, but the ability to qualify for financing is lacking. As a result, FHA (The Federal Housing Administration) loans have become increasingly popular for first time homebuyers. There seems to be a classic ‘disconnect’ regarding financing for conforming loan amounts. While the credit on jumbo loans has been tightened significantly, FHA loans under the conforming limits has been easier to qualify for. Additonally, low down payment options and flexibility in financing the closing costs has made these loans attractive for first time homebuyers with a limited amount of cash on hand. This is a breakdown of the top level FHA lending guidelines, straight from the FHA, or the horses mouth.

Who Should Consider FHA Loans. According to the FHA’s Web site, FHA-backed loans are especially attractive for first-time homebuyers who fit certain criteria.

Buyers attracted to FHA-backed loans
  • Have a little cash for a down payment and closing cost.
  • Have imperfect credit
  • Want to keep their monthly payments as low as possible.
  • Are concerned that they may not be able to qualify for a loan.
  • Are concern about the possibility of monthly payment increase.
What are the advantages of FHA-insured loans?

There are several advantages to obtaining a loan backed by the FHA.

  • Competitive interest rates.
  • Smaller down payment required as a percentage of the purchase price.
  • A gift from a family member, employer or charitable organization can be put toward the down payment.
  • Minimum credit score not required, though some lenders expect a score of at least 580.
  • Lender can consider payment of utility bills, rent, auto insurance premiums and other items if the borrower doesn’t have an established credit history.

 

FHA Loan Limits. In San Mateo county, Santa Clara county and San Francisco county are $729,750 for a single family residence. These limits increase accordingly for two, three and four unit properties.

FHA Closing Costs. Defined by the FHA as allowable costs to the buyer, these may vary from office to office. These fees include buy may not be limited to origination fees, transfer fees, credit reports, document preparation and cost of insurance and title examination. These are generally paid for by the buyer.

Mortgage Insurance. Mortgage insurance is protection for the lender against borrower default, and is required by the FHA for borrowers who are putting less than 20% down. It translates to an addtional monthly fee and is used by the lender to qualify the borrower. Mortgage insurance is charged to the homeowner each month at the rate of .5 percent per year of the total loan amount. FHA also charges an upfront mortgage insurance premium of 1.5 percent.

Debt. The FHA, like most lenders, has guidelines as to the amount of debt a borrower can incur in order to qualify for a loan. These guidelines are referred to as debt to income ratios, and are  calculated as a percentage of a borrowers gross monthly income. There are two ratios, the front end ratio (mortgage payment expense to effective income), and the back end ratio (total fixed payment to effective income). The front end ratio, which is calculated by taking the total house payment (PITI) and divided it by the borrower’s gross montly income, is limited to 29%. The back end ratio, which is calculated by taking the mortage payment from above plus all recurring monthly debt (credit cards, auto payments, student loans, etc) and dividing this buy the borrowers gross monthly income, is limited to 41%. See the full example HERE.

Credit Issues. Before approving the loan, the lender does a full analysis of the borrowers ability to repay, including a full past credit performance. Pretty straightforward stuff – good borrowers have a track record of repaying their debts in a timely manner. Potential borrower’s whose credit history is marred by slow payments, poor financial judgment and delinquent accounts is could be well out of luck. A minimum credit score is not required, though most lenders expect a score of 580 to qualify. It is important for the borrower to be honest and up front during the application process, as these issues will surface eventually. A list of items that can marr a borrowers credit and reduce the chances of approval are lack of credit history, bankruptcy, late payments, foreclosures and judgements/collections/federal debts.

FHA Loan Types. There are two popular types of loans offered by the FHA. The fixed rate mortgage, and the adjustable rate mortage. The fixed rate mortgage, known as loan 203b, is the most popular loan of the FHA. it allows individuals to finance up to 97 percent of their home loan which helps to keep down payments and closing costs at a minimum. The 203(b) home loan is also the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency. As mentioned above, mortage insurance will be required for a fixed rate loan with less than 20% down payment (80% of the appraised property value). The adjustable rate loan is good for borrowers when interest rates are high. Borrowers qualify for the loan at the lower initial rate, but the interest rate will adjust over the life of the loan. The maximum amount of fluctuation in your interest rate in any given year cannot exceed 1 percentage point. And over the life of your loan, the interest rate cannot increase more than 5 percent from your initial rate. Borrowers can qualify for a 3% down payment, as this loan will cover up to 97% of the appraised value. Mortgage insurance will be necessary as well.

An FHA loan is not acquired by borrowers directly through the FHA, but through an FHA approved lender. These lenders vary on turnaround times, underwriting guidelines and certain fees. There are many FHA approved lenders available, consult with your Realtor or mortgage professional.

For more information, visit the Federal Housing Adminstration HERE

FHA loans are good for first time homebuyers. Contrary to the popular belief that credit is tightened or unavailble  for first time homebuyers, the FHA can help provide borrowers with low amounts of cash a home loan with a lower down payment. Addtionally, lender programs may also be able to support transactions where the seller can help finance a portion of the closing costs. Contact your realtor or mortgage professional for more information.

Filed under: Buyer's Blog, , , , ,

August 2, 2009 • 10:46 pm 0

FREE First Time Home Buyer’s Webinar Scheduled This Week!

Learn Stuff!

First time home buyers you can rest easy. The first time home buyers webinar, presented by me, has been scheduled for August 6th, 2009 at noon. This is the first in what I hope to be a long line of webinars, aiming at presenting a general baseline of knowledge about the world of real estate. This webinar will cater you first time homebuyers (altough you don’t have to be a first time homebuyer to attend) and will cover a variety of topics relevant to the purchase process, including

  •  Home Buying
  • Process Finding a Home
  • Financing and Loan Programs
  • The Offer Process
  • Title and Escrow
  • Closing Costs and Taxes
  • First Time Homebuyers Programs

We will be discussing new FHA loan programs and the first time homebuyers tax credit as well. This is a webinar, so all participants need is a PC and some speakers, or they can call in if they need that option. By the end of the webinar, participants should have a better understanding of the home buying process overall. Register now at www.JosephCapote.net.

First time homebuyers, the tax credit is only available to you for a limited time, on purchases that close on or before December 1, 2009. So realistically, home buyers will need to have chosen a property and had an offer accepted by mid-october at the latest. Don’t delay, take advantage of the government’s generosity. Register now at www.JosephCapote.net.

Do I want to own a home? Boy do I!

Do I want to own a home? Boy do I!

Oh yeah, did I mention it’s FREE?

Do Stuff! Register Now!

Filed under: Buyer's Blog, , ,

August 1, 2009 • 3:50 am 1

New Federal Lending Regulations: What do They Mean to You?

Starting July 30th, 2009, the Mortgage Disclosure Improvement Act (MDIA) amendments to the Truth in Lending Act (TIL) — also known as Regulation Z — take effect.  These regulations, passed by our swell friends in congress as part of the Housing and Economic Recovery Act, are designed to allow homebuyers adequate time to review specific information related to their loan. Changes include:

  • Initial TIL disclosure. A seven-business-day waiting period is now required between the delivery of initial disclosures and the signing of closing documents. This will eliminate the possibility of closing in less than seven business days unless the borrower faces a bona fide personal financial emergency.
  • Up-front fee collection. Up-front fees cannot be charged until after the borrower receives the initial disclosures. If disclosures are mailed, the fee is charged the fourth business day after mailing. If disclosures are hand-delivered, the fee is charged the same day.
  • Redisclosed TIL. If the interest rate or fees change, causing the APR to increase by more than 0.125% then a revised TIL must be sent to the borrower so that the customer receives it no fewer than three business days prior to closing. Each time the TIL is redisclosed, the waiting period starts over and could affect the original closing date. If the rate is in float status, a redisclosed TIL will not be provided each time there is an APR increase. Redisclosure should be sent, if needed, eight business days before the estimated closing date.

Thanks Congress! This is just another awesome way you are looking out for the consumer. Really, and I mean that. In all seriousness, though, it really is an attempt to by congress to look our for the borrower, given that so many cried dumb during this mortgage crisis. Additonally, it aims to help protect many borrowers who can’t qualify for conventional loans, and are getting ripped by the high points and fees game of private money mortgage lending. (Predatory lending practices).

Heres the Skinny

Enough jibba-jabba! What does this mean to the Seller/Buyer? More time on the transaction if you are not careful, and potential transaction killers if this is messed up. Realtors and lenders will need to be diligent in understanding the changes, so that they can be accounted for during the offer and acceptance process. Lenders must be acutely aware of the timelines as well. There must be additonal coordination between the realtor, lender and escrow to ensure that all final TIL numbers are within a .125% (1/8) prior to issuance of docs or closing. Otherewise, the TIL must be redisclosed (ouch) and another six day waiting period will begin. (Yikes).

As a buyer or seller, you need to understand that the Realtor and the Lender must be tightly integrated (hah, tech jargon at last) during the entire process. Rate fluctation and specific timelines  must be closely monitored and communicated, for the consequences of a redisclosure could potentially shoot down a deal. Ask your Realtor TODAY about the new federal regulations, and take the time to understand how they can affect you.

Filed under: Buyer's Blog, Realtor Trends, Seller's Blog, , , ,

July 20, 2009 • 9:11 pm 0

San Bruno Weekly Real Estate Stats Roundup

San Bruno Weekly Real Estate Stats Roundup

  • New Listings                10
  • REO                            3
  • Condo/Townhome        2
  • Mean (SFR)                 $622687
  • Median (SFR)            $612000

Calculating the Absorption Rate

The definition of the real estate absorption rate is the number shows the rate at which the inventory of homes for sale are being sold (www.wikianswers.com). A declining figure indicates people the inventory is decreasing as more homes are being sold than are coming onto the market. A increasing number indicates that the inventory is increasing as less homes are being sold that are coming onto the market. Pretty basic information, all REALTORs are aware of this. What I find interesting is that there are a couple of ways to calculate an absorption rate from what I’ve seen. Instead of a debate, I will quote the formula used by Realtor Magazine (http://www.realtor.org/RMODaily.nsf/pages/News2007111404)

  • First, determine the number of homes closed in your market over a specific period — say, 12 months. You can get this data from the MLS.
  • Next, divide the number of homes by the number of months in the period — in this case, 12. This calculation gives a per month absorption rate.
  • Last, divide the rate into the number of current listings. This yields the months’ supply of homes.

By this calculation, the current absorption rate for San Bruno (I use a 30 day rolling window) is 9. Since I’m using a weekly number and not a monthly number as described above, this is the week’s supply of homes. 

I’ve also seen this number calculated this way:

  • Number of listings sold in a month (30 day rolling window)
  • Multiply this number by 12 for a monthly total.
  • Divide the product by 52 for a weekly average
  • Divide this number into the number of active listings on the market.

By this calculation, the current absorption rate for San Bruno is 9.4

  •  Sold Properties             24 x 12 = 288 / 52 = 5.5 per week
  • Current Active Listings 54 / 5.5 = 9.4

Let’s follow this rate over the next few weeks to determine the trend in the San Bruno Marketplace.

Filed under: Buyer's Blog, Market Data, Seller's Blog

July 16, 2009 • 1:46 pm 0

First Time Homebuyer Federal Tax Credit: Time is Running Out For Buyers

The Chicago Tribune reported this note that time is running shorter than we realize with regards to the first time homebuyer tax credit.

First-Time Buyers: Hurry for $8,000 Tax Credit
It’s time to remind first-time home buyers that in order to qualify for the government’s $8,000 gift in the form of a tax credit, the deal must close by Dec. 1.

Buyers should have a purchase contract signed by early October, so they have 45 to 60 days to arrange financing and safely close the deal.

“There’s not as much sand in the hourglass as we may think,” said Jim Merrion, regional director at RE/MAX Northern Illinois.

Source: Chicago Tribune, Mary Ellen Podmolik (07/11/2009)

It’s time to get those buyers off the fence and into homes! Time to incorporate a countdown on your website today, if you have not alread done so.  Drip marketing campaigns should work to incorporate this information as well.

Filed under: Buyer's Blog,

July 13, 2009 • 5:32 pm 0

The Facts on the First Time Homebuyers Tax Credit

Introduction

Did you know that right now is a great time for first time homebuyers to enter the Real Estate market? The competitive prices of existing homes coupled with the first time homebuyers tax credit, up to eighteen thousand dollars (state and federal) for those who qualify, makes it a really attractive for first time homebuyers to own their own home. But remember, the first time homebuyers tax credits will only be available to properties that close before December 1, 2009, so the time is now. To find out if you qualify for the first time homebuyers tax credit, or if you would like to discuss your options as a first time homebuyer in today’s real estate market, schedule a FREE no obligation consultation.

The Basics

First-time home buyers who purchase a home to be used as a primary residence before December 1, 2009 are eligible for a tax credit equal to 10 percent of the value of their home purchase up to $8,000. To qualify as a “first-time home buyer” the purchaser and his/her spouse (if applicable) may not have owned a residence during the three years prior to the purchase. The credit is subject to income limits. Single buyers with incomes up to $75,000 and married couples with incomes up to $150,000 may receive the maximum tax credit. The credit decreases for single buyers who earn between $75,000 and $95,000 and for married buyers filing jointly who earn between $150,000 and $170,000. Home buyers earning more than the maximum qualifying income—over $95,000 for singles and over $170,000 for couples are not eligible for the credit. Unlike the credit for homes purchased in 2008, the tax credit for purchases in 2009 does not need to be repaid unless it ceases to be the primary residence of the tax credit recipient within three years after the purchase. In that case, the credit recipient will owe the full amount of the credit at that time the income tax return for the year the home ceased to be your principal residence is due. (i.e. You sell your home on January 1, 2010 or December 31, 2010; the full amount of the credit is due when your tax return is due on April 15, 2011.)

Available at Closing!

You may have heard that some states make the funds for the tax credit available for the borrower at closing. This is particularly helpful for cash strapped borrowers who need to cover closing costs. However, this option is supported on the state level, and is NOT available in California at this time.

More Information

Of course sometimes it’s nice to go straight to the source. The IRS has some helpful web pages on the tax credit, too. Check out the overview page.

Also be sure to visit the “Scenarios” section of the question and answer page for guidance on issues such as splitting a credit between non-married persons, having cosigners, how to handle the credit for married couples. For further clarification, consult with a tax attorney.

The tax credit is a great opportunity for first-time buyers, but it is only available for a limited time. To see if you qualify or would like further information, please contact me for a consultation.

Joseph Capote

Filed under: Buyer's Blog

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