2010 home buying seminar

BUY A HOME ON THE SAN FRANCISCO PENINSULA

2010Aimee Snodgrass Klarich

Realtor ® Alain Pinel Realtors

Burlingame, Ca

Business [email protected]

www.AimeeKlarich.com

Eileen HoranMortgage Broker

Mortgage CaliforniaSan Mateo, Ca

Business [email protected]

mailto:[email protected]

http://www.aimeeklarich.com/



Aimee KlarichRealtor ®

http://www.AimeeKlarich.com


Mortgage California

• How the Stimulus Plan benefits first time home buyers

• Tax Credits available for home ownership• Why buy a home in 2010?

• Steps for a successful home or condo purchase• Differences between owning a condo vs a

single family home in San Mateo County• How to finance your home purchase?

• State of the San Mateo County real estate market

HOME BUYING SEMINAR

PRESENTATION TOPICS

http://www.AimeeKlarich.com/


Aimee Snodgrass KlarichRealtor ®


• Stimulus Plan benefits local buyers by enabling them to qualify for specific loan programs with lower interest rates.

• $8000 First Time Home Buyer tax credit on purchases through 6/30/10 for qualified buyers.

• $6500 Tax Credit for current qualified homeowners

• Mortgage rates remain historically low but are projected to increase.


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WHY BUY A HOME IN 2010?





• You build wealth as value appreciates

• It can be a tax write-off

• House expenses usually increase slower than renting

• You have much more flexibility in how you use, decorate and make physical changes to your home

• Pride of homeownershipEileen Horan

Mortgage BrokerMortgage California

WHY BUY A HOME?



Aimee Snodgrass KlarichRealtor®


The "American Recovery and Reinvestment Act of 2009," was signed by President Obama on February 17th, 2009.

On the housing front, the good news is that the legislation resets the conforming loan limit cap at $729,750, up from $625,500. This means lower interest rates for those getting a loan between the $729,750 and $625,500 in San Mateo and San Francisco Counties.

On Nov 13th, 2009, congress extended this thru Dec. 31st, 2010. .


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STIMULUS PLAN





The bill also increases the first-time home buyer credit from $7,500 to $8,000 through June 30th, 2010.

See Appendix for more details


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STIMULUS PLAN





Homeowners who currently do not qualify for aid under the federal housing-rescue plan still may qualify for tax credits on energy-efficient upgrades.

Homeowners may qualify for up to $1,500 in tax credits for adding qualifying windows, doors, insulation, roofs, heating and cooling equipment, water heaters, and wood andpellet stoves.

The installations must take place in 2010 to qualify for the tax credit.


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OTHER TAX CREDITS






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RENTING VS BUYING A HOME• $1000 per month in rent

• 5% annual rent increase

• After 5 years you have spent $66,307 in rent.

• Net equity gain: $ 0

• You have nothing to show after spending all this money.





The rent you pay could build equity in your own real estate.Using this chart, find your month rental payment and you can determine how much money you are “giving away” in rent and interest (5%) over 10, 20, 30 years. Rent plus 5% Earned Interest

Rent 10 Years 20 Years 30 Years

$ 800 $ 124,225 $ 328,826 $ 665,806

$ 1,000 $ 155,282 $ 411,033 $ 832,258

$ 1,200 $ 186,388 $ 493,240 $ 998,710

$ 1,400 $ 217,395 $ 575,447 $ 1,165,162

$ 1,600 $ 248,451 $ 657,653 $ 1,331,613

$ 1,800 $ 279,508 $ 739,860 $ 1,498,065

$ 2,000 $ 310,564 $ 822,067 $ 1,664,517

$ 2,200 $ 341,628 $ 904,274 $ 1,830,968

$ 2,400 $ 372,776 $ 986,480 $ 1,997,420

$ 2,600 $ 403,732 $ 1,068,636 $ 2,163,872

$ 2,800 $ 434,790 $ 1,150,894 $ 2,330,324

$ 3,000 $ 465,846 $ 1,233,100 $ 2,496,694


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RENTING VS BUYING A HOME





The government rewards homeownership through write-offs and deductions on your taxes.

Homeowner Deductions• Mortgage Interest Payments• Property Taxes• Discount points (closing costs)

• It is customary in San Mateo County that buyers pay closing costs. This is negotiable.


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HOMEOWNERS HAVE TAX DEDUCTIONS






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TAX DEDUCTION EXAMPLE: 3 Bedroom 1 Bath Single Family HomeEast Side San Mateo• Home Price• 20% Down

Payment• Home Mortgage• Interest Rate• Annual Interest

Paid• Annual Property

Tax• Total Deductions

$500,000 $100,000 $400,000 5.50% 22,000 6,250 $28,250






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TAX DEDUCTIONS = TAX SAVINGS

Home No Home

Annual Income $100,000 $100,000

Total Deductions

$28,250 0

Taxable Income

$71,750 $100,000

Tax Rate 28% 28%

Annual Taxes $20,090 $28,000

Annual Savings

7,910 0



TAX DEDUCTION EXAMPLE



2 Bedroom 1 Bath CondominiumWest Side San MateoPurchase Price $340,000Buyers Combined Annual Salary $65,000 (28% Tax Bracket)

Purchase Price $ 340,000

Minus Down Payment (10% down) 34,000

Loan Amount $ 306,000

Monthly Principal & Interest $ 1737

Property Taxes + Mortgage insurance (Monthly Rate) $ 481

Monthly HOA Fees (Condominium) $ 320

Gross Monthly Payment $ 2538

Less Monthly Tax Savings (deduction of interest and property taxes) $ 527

Net Monthly Payment After Tax Benefit $ 2011

Rental Pricing for Unit $ 1,400

Difference Between Homeownership & Renting $ 571


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OUR MARKET?Months of Inventory is used as an analytical tool in determining who holds the power in negotiations.

Months of Inventory = # homes of sale/#homes sold

Supply and Demand…

Months of Inventory <4 = Seller Market

Months of Inventory =4 = Flat Market

Months of Inventory >4 = Buyer Market


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San Mateo County Single Family Homes

* Cities within the county vary from the total.

FLAT MARKET: SAN MATEO COUNTY SINGLE FAMILY HOMES

All reports are published Jan. 2009, based on data available at the end of Dec. 2008. All reports presented are based on data supplied by San Mateo County Association of Realtors. Neither the Associations nor their MLSs guarantee or are in anyway responsible for their accuracy. Data maintained by the Associations or their MLSs may not reflect all real estate activities in the market. Information deemed reliable but not guaranteed.



At an aggregate level, San Mateo County continues to be a flat market.


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STATE OF THE MARKET (DEC 2009): SAN MATEO COUNTY SINGLE FAMILY HOMES






• Inventory was down 37% to last year• Unit Sales were up 23% to last year• Most note worthy was the significant increase in pending sales: up 47% to last year.

• Average Days On Market was 64 days vs 79 last year

• Avg Sales Price vs. Original List Price: 93%

Median Sales Price: $755,000 (+28% to last year)Each city, neighborhood and area shows a different picture. Schools, commute, weather are all key factors in the variances between cities and areas.


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STATE OF THE MARKET (DEC 2010):SAN MATEO COUNTY SINGLE FAMILY HOMES




* Cities within the county vary from the total county picture.

San Mateo County Condos and Townhomes

FLAT MARKET: SAN MATEO COUNTY CONDOS &TOWNHOMES




At an aggregate level, San Mateo County continues to be a flat market. Months of Inventory based on closed sales was 3 last month vs 5.6 a year ago.


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STATE OF THE MARKET (DEC 2009): SAN MATEO COUNTY CONDOS & TOWNHOMES





• Inventory was down 26% to last year• Unit Sales were down 3% to last year.• Average Days on Market was 77 days vs 83 last year

• Avg Sales Price vs. Original List Price: 98%

Median Sales Price: $465,000 (+23% to last year)Each city, neighborhood and area shows a different picture. Schools, commute, weather are all key factors in the variances between cities and areas.


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STATE OF THE MARKET (MAY 09): SAN MATEO COUNTY CONDOS & TOWNHOMES




0%

3%

6%

9%

12%

15%

18%

1972 1976 1980 1984 1988 1992 1996 2000 2004

30-year Mortgage Rateson Conventional, Conforming Loans

Source: Freddie Mac

4th Quarter, 2007: 6.24%Jan/Feb 2008: 5.83%

Average, 1972-2007: 9.22%

MORTGAGE RATES ARE HISTORICALLY LOW




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LOCATION, LOCATION, LOCATION

• Bridgeless commutes to San Francisco and Silicon Valley

• Employment opportunities• No more land to build upon since we are flanked

by the bay and the ocean• Moderate weather• Good schools


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WHY BUY A HOME ON THE SAN FRANCISCO PENINSULA?






Mortgage California

WHY BUY A HOME ON THE SAN FRANCISCO PENINSULA?

CA Rank (% Sub-Prime Loans to total

hsg units) County

Num of Subprime

ARMs

% Total SP share of total

hsg units

% Already Reset

% to Reset in

2009

% to Reset in 2010+

1 San Bernardino 37,300 9.0% 70% 23% 7%2 Riverside 36,700 8.7% 73% 20% 7%3 San Joaquin 12,300 8.4% 77% 18% 5%4 Merced 4,200 8.3% 76% 19% 5%5 Kern 12,400 8.1% 70% 24% 6%

15 Sacramento 21,300 6.0% 79% 15% 5%22 Los Angeles 79,200 3.7% 68% 24% 8%32 San Diego 21,500 2.9% 74% 17% 9%34 Orange 17,900 2.7% 72% 20% 8%49 San Mateo 2,400 1.5% 75% 17% 8%51 San Francisco 1,400 0.7% 71% 21% 7%

TOTAL CALIFORNIA 364,800 4.1% 66% 17% 7%

San Mateo County sub-prime loans are only 1.5% of total housing units.

SOURCE: FirstAmerican CoreLogic, LoanPerformance Data, U.S. Census Bureau, and Federal Reserve Bank of New YorkDec 07



ADVICE FROM FIRST-TIME HOME BUYERS: Top 10 Answers from a Survey of 1000 Buyers by

California Association of Realtors on advice they would give other home buyers.

1 Do your own homework on the Internet

2 Get a good understanding of the type of mortgage you are getting

3 Check the agent's references

4Make sure the agent pre-qualifies homes before showing them to you

5 Get pre-qualified for a mortgage by more than one lender

6Find out how frequently the agent is going to be in contact with you

7 Don't use the seller's agent

8 Make any agent you use prove they will negotiate hard for you

9 Get your financing locked in as soon as possible

10 Find out how fast the agent is going to get back to you

WHO’S WHO IN REAL ESTATE ?



• Lender: Qualifies buyer and provides the home financing.

• Buyers Agent (Realtor ® ): Fiduciary responsibility to buyer(s)

• Selling Agent (Realtor ® ): Fiduciary responsibility to seller(s)

• Escrow Officer: Neutral 3rd party manager of the transaction

• Appraiser: Hired by lender to confirm property values

• Inspectors: Provide insight into the condition of a home Eileen Horan




TIMELINE OF BUYING A HOME



• Initial Consultation and Planning: Lender or Realtor

• Get Pre-Approved for a loan• Search for a Home• Find a Home• Submit an Offer and Negotiate• Final Agreement on Terms and Price• Open Escrow with a Title Company.• Deposit your earnest money deposit into Escrow Account• Appraisal and other further needed inspections and reports• Secure Home Insurance as a requirement of the lender• Removal of remaining contingencies• Final Inspection and Walk Through of Home• Secure loan funds. Deposit your remaining funds into escrow.• Record Deed of Title• You take possession of property


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FINANCING A HOME PURCHASE



Meet with a Lender to see how much you qualify for.

Your qualifications are based on the following:• Credit • Income• Assets

The most important part of this is for you to decide how much you WANT to pay on a monthly basis.


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IS MY CREDIT GOOD ENOUGH?



• It’s a fact: qualifying criteria has gotten tighter than in previous years.

• Homebuyers need to pay more attention to their credit scores than they did before.• Credit history • Your credit score may impact your interest rate.• Your credit score may impact your down payment

requirements.• But you don’t need perfect credit to buy a home.


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HOW MUCH MONEY DO I NEED?



• For a down payment?Source of Down Payment:

Checking/SavingsMoney Market/StocksGift FundsBorrow from a 401k, 403b, etc.

Your money must be seasoned• For closing costs?

AppraisalProcessing and UnderwritingTitle & EscrowWhat are Pre-Paids?Interim interestInsuranceImpounds


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HOW MUCH MONEY DO I NEED?



Monthly Payment Expenses:• Your monthly payments include:

• Principal & Interest.• Property Taxes • Insurance • Mortgage insurance - if your down payment is less

than 20%.• Association fees - if applicable.

• Your maximum monthly payment is calculated using:• Your housing monthly debt.• Your other debt

• Again, the most important part is to be comfortable with the calculated monthly payment:

• Repairs and maintenance costs are part of homeownership.


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WHAT TYPE OF MORTGAGE SHOULD I GET?



• What type of documentation will be required?

• 2 pay stubs• 2 years W2s and Federal Tax Returns• 2 months bank statements

• What type of product?• What kind of rate?• How long a term?


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• We’ll help you select the product type that meets your needs:

• Conforming loans up to $417,000* for a single-family.

• Jumbo Conforming loans $417,001 up to $729,750*

• Jumbo loans greater than $729,750*.• Combination loans: conforming first + a

second mortgage.• Government loans: FHA & VA.

*The conforming ceiling of $417,000 has been raised in high-cost housing markets starting 01/01/2009. The loan limit on these “conforming jumbo” loans varies by location but doesn’t exceed $729,750 in the continental U.S. Eileen Horan







Fixed-Rate(FRM)

Adjustable-Rate(ARM)

3,5,7,10 year ARM

• Rate is usually higher than an ARM rate or a Hybrid.

• The principal and interest portion of the mortgage payment stays the same through the entire term.

• Stable, easy to budget.

• May want to refinance if rates go lower.

• Usually starts with a lower rate than an FRM or hybrid.

• The rate may adjust every year, changing the monthly payment.

• Rate may eventually be higher than the rate for a fixed-rate loan.

• The shorter the term of the fixed portion, the lower the interest rate

• Interest only during the fixed years are optional

What kind of rate?


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40-Year 30-Year 15-Year

• Rate is higher.• Payments are lower because they are spread out for a longer period.

• Easier to qualify for a larger loan amount.

• Pay more interest and it takes longer to build equity.

• Rate is lower than a 40-year, higher than 15-year.

• Payments are higher than a 40-year, but lower than a 15-year.

• Pay less interest than a 40-year, but more than 15-year.

• Rate is lower.• Payments are higher.

• Pay the least amount of interest over the life of the loan.

How long a term?


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• Initial Consultation and Planning: Lender or Realtor® • Get Pre-Approved for a loan• Select Your Team of Professionals• Search for a Home• Find a Home• Submit an Offer and Negotiate• Final Agreement on Terms and Price• Open Escrow with a Title Company.• Deposit your earnest money deposit into Escrow Account• Appraisal and other further needed inspections and reports• Secure Home Insurance as a requirement of the lender• Removal of remaining contingencies• Final Inspection and Walk Through of Home• Secure loan funds. Deposit your remaining funds into escrow.• Record Deed of Title• You take possession of property


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CHOOSING THE RIGHT REALTOR



Things to consider…• How well does the agent know the market you are

considering? How will the agent help focus your search?

• How well does he or she listen to you?• Do you feel that the agent will be respectful of your

desires, enabling (not forcing) you to make your own decisions?

• Do you feel they will negotiate hard for you?• Do you feel a rapport?• Are they clear on their services and expectations?• Per the survey of Home Buyers from CAR:

• Check references• What online services does the Realtor provide?


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CHOOSING THE RIGHT HOME



Meet with a Realtor®• Discuss present and future housing needs and wishes• Single Family Home, Condo or Townhome• Number of bedrooms and bathrooms• Home square footage and lot size• One story vs two story• Desired neighborhoods• Location vs. commute to work/school• Desired amenities (garage, laundry, pool, etc)• Your family size- current and projected• Hobbies or special needs to accommodate• Preferred condition of the property (fixer upper?)• Any non-negotiable points for you• Current housing and terms of current contracts• Learn and discuss types of salesAimee’s Buyer Services Packet in Appendix


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• Initial Consultation and Planning: Lender or Realtor® • Get Pre-Approved for a loan• Select Your Team of Professionals• Search for a Home• Find a Home• Submit an Offer and Negotiate• Final Agreement on Terms and Price• Open Escrow with a Title Company.• Deposit your earnest money deposit into Escrow Account• Appraisal and other further needed inspections and reports• Secure Home Insurance as a requirement of the lender• Removal of remaining contingencies• Final Inspection and Walk Through of Home• Secure loan funds. Deposit your remaining funds into escrow.• Record Deed of Title• You take possession of property


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NEGOTIATION HOMEWORK: HOW MUCH SHOULD I OFFER?



• Know the sales history of similar sold properties within the area over the past 3-4 months.• Compare sale and list price• Months of Inventory• Days on market

• Know the current property offer and disclosure packet activity, if any

• Know the property condition and short-term repair expenses (including HOA Assessments)

• Know the seller's situation and motivation for selling. • Examples of other things to negotiate on other than price:

• Closing Costs• Repairs • 30 day rent backs

• Know your financing options and have your pre-approval letter from your lender for the exact offer price


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MAKING AN OFFER ON A PROPERTY



• Your offer will be written on a Purchase Contract by your Realtor.

• Traditionally, the accepted deposit (earnest money) is 3% of the offer price.

• The down payment and amount financed will be determined. • Understand what is included with the purchase of the home as

in fixtures & appliances and negotiate accordingly.• Decide on needed inspections and contingencies to be

negotiated into the contract• Examples of Contingencies

• Financing• Appraisal• Property Condition

• The close of escrow date will need to also be negotiated• The lender will most often influence the closing date so your

lending partner must be involved during the negotiation process


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YOU’RE IN CONTRACT… NOW WHAT?



• Open Escrow with a Title Company. • Traditionally done by your Realtor.

• Deposit your earnest money deposit into the Escrow Account

• Complete appraisal and inspections• Secure home insurance as a requirement of the

lender• Remove contingencies (if all is satisfactory)• Final Inspection and Walk Through of Home• Secure loan funds. Deposit your remaining funds

into escrow.• Record Deed of Title• You take possession of the property


Mortgage California



2010 home buying seminar

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