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Michael Smith, MBA, MPM's Blog

By Michael Smith, MBA, MPM | Mortgage Broker
or Lender in Roseville, CA
  • New home sales jump 7.6% in May

    Posted Under: Market Conditions in Sacramento, Home Buying in Sacramento, Financing in Sacramento  |  June 25, 2012 12:39 PM  |  577 views  |  1 comment

    NEW YORK (home buyers) -- The housing market got some good news on Monday, as the government reported that sales of new homes rose 7.6% in May.

    Sales hit an annual rate of 369,000, according to the Census Bureau, compared with the revised April rate of 343,000. That's up 20% year-over-year, but still a long way from the annual rate of nearly 1.4 million recorded during real estate's boom years.

    The sales hike beat expectations. Economists had forecast a sales rate of 350,000 new homes, according to Briefing.com.

    But not all housing numbers looked rosier for the month. Existing home sales slowed slightly in May, slipping 1.5% versus the month prior.

    Economists said that the numbers restored some optimism after the soft March and April numbers.

    So what does this mean to Sacramento area home buyers? 

    Those buyers looking to purchase should get pre-approved as the first step in the process of looking at a home.  With most properties experiencing multiple offers and with interest rates at an all time low, sellers are more demanding. 

    Buyers looking to get pre-approved with Trulia's own Mike Smith should contact him at 916-813-4003.  Mr. Smith can also be reached via email at broker2banker@gmail.com

    Equal Housing Lender
  • "Operation Twist" and it's impact on mortgage rates!

    Posted Under: Home Buying in Sacramento, Financing in Sacramento, Home Ownership in Sacramento  |  June 20, 2012 12:49 PM  |  650 views  |  No comments

    The Fed said by year's end, it will have purchased about $267 billion in longer-term Treasury securities with maturities of 6 years to 30 years in Operation Twist and sold or redeemed an equal amount of securities with maturities of 3 years or less. It has already shifted about $400 billion since September, when Operation Twist began.

    In continuing Operation Twist, the Fed seeks to "twist" long-term rates lower relative to short-term rates. Operation Twist has the advantage of potentially lowering long-term rates without expanding the Fed's record-high portfolio of securities. When the Fed adds to its portfolio of investments, that pumps cash into the economy and critics argue that it raises the risk of high inflation later.

    What does this mean to future buyers and existing homeowners?

    Expect to see mortgage rates drop further throughout 2012. 

    Rates on 30-year fixed rate mortgages today dropped to 3.625% (3.638% APR). 

    For more information on purchasing or refinancing a home, please contact Mike Smith at 916-813-4003.

    Equal Housing Lender. 
  • California Down Payment Assistance a great option for first time home buyers!

    Posted Under: Market Conditions in Sacramento, Home Buying in Sacramento, Financing in Sacramento  |  June 4, 2012 1:20 PM  |  950 views  |  1 comment
    Let's face it. 

    We work in a different world. Most first time homebuyers don't have 20% down & perfect credit. 
    For most they would simply turn to a direct lender who offers Federal Housing Administration (FHA). 

    FHA requires 3.5% down.  Even that might be a stretch for some buyers. 


    A great option for this group of buyers is CHDAP: California Housing Down Payment Assistance.

    As I meet with many realtors weekly in the Sacramento area, I am surprised how few actually know of CHDAP or even pitch it to their buyers. Equally surprising is the fact that many lenders don't offer nor in some case even know what CHDAP really is. 

    So what is CHDAP and how does it work?

    CHDAP is a program designed for first time homebuyers. 

    The CHDAP provides a deferred-payment junior loan – up to 3% of the purchase price, or appraised value, whichever is less, to be used for their down payment and/or closing costs. This program may be combined with a CalHFA or non-CalHFA, first mortgage loan.

    • 3.25% simple interest 2nd mortgage that closes behind your FHA 1st mortgage.
    • Payments are deferred up to 30-years or when the property is sold.  Otherwise known as a "silent second."  Borrowers can pay just the interest each year or just defer all of it. 

      For a $200,000 purchase:
      CHDAP = $6,000 assistance
      3.25% simple interest = $195 per year interest
      If deferred for the entire 30 years = $5,850
      Interest is also tax deductible (see your tax attorney)

    When used in conjunction with a n FHA first mortgage, the homebuyer can bring in as little as 1/2% down payment.  On a $200,000 purchase, the minimum down would be only $1,000.

    Borrower must meet income guidelines http://www.calhfa.ca.gov/homeownership/limits/income/income-moderateFHA.pdf

    Property must meet sales price limits:
    http://www.calhfa.ca.gov/homeownership/limits/salesprice/salesprice.pdf

    For more information about CHDAP or any other loan program, feel free to contact me at 916-813-4003. 

  • How to get your offer accepted in a multiple offer environment!

    Posted Under: Market Conditions in Sacramento, Home Buying in Sacramento, Financing in Sacramento  |  May 21, 2012 11:52 AM  |  850 views  |  No comments
    Record low mortgage rates coupled with relatively low home prices and a lack of inventory has once again created the multiple offer environment virtually everywhere in California. 

    As a local direct mortgage lender and Federal Savings Bank in beautiful Roseville, California, we are finding that our offers are getting accepted more often than not. 

    Here is a list of recent success stories:
    • 11 offers: Ours accepted
    • 5 offers:   Ours accepted & with FHA financing vs. two cash offers
    • 16 offers: Ours accepted vs. four cash offers

    So what is the difference in our approach and how can you as a buyer and realtor utilize these same strategies so that you don't get beat in this tough market?

    Cover Letters:

    Such a basic concept but so so effective in this environment.  The cover letter simply is scanned with your sales contract and placed on top so this is the first thing the listing agent and hopefully the seller see when viewing all the offers.

    Having said that, what are elements of a good cover letter?

    • Take a picture and upload and save to your desk-top.
    • Use www.snagit.com (which is a screen capture tool) to customize your picture, add commentary, etc.  Snagit offers a free 30-day trial, so download it and try it.
    • The cover letter should include a picture of your buyers.  Hopefully a family, preferably with a baby.  Make sure they are smiling!
    • Then tell the story for the owner.  "They are moving here and love your house and want to raise their family."  Really stress the emotions that your feel in speaking with your client into your letter.

    Don't ask for anything:

    • Don't ask for seller credit.
      • Don't ask for a credit for closing costs
      • Offer to buy your warranty for your buyer. Again don't ask the seller to pay for it.

    The Pre-approval letter:

    The pre-approval letter should be very clean. 

    • Make sure your mortgage lender can close in say 21 days vs. 30 days.
    • Stress that the appraisal will be ordered within 24 hours of contract ratification.
    • Stress that the purchase is not subject to the value of the home.
      • NOTE:  I didn't say release the appraisal contingency but rather just put in some verbiage relating to the fact that if value comes in lower, the sales price remains the same.  Discuss with your borrowers and prepare them for this and then, simply pull good comps. 
    • Have your mortgage lender utilize a lender credit to help the buyer pay for closing costs.
    • Have a pre-approval through DU and also through your underwriter prior to shopping.  Build that approval verbiage into the pre-approval letter.

    FHA with CHDAP (Federal Housing Association with California Housing Down Payment Assistance):

    I cannot tell you how many realtors get beat on their deals because they are asking for closing cost assistance.  Utilizing CHDAP is a great way to get more down payment money or closing cost money into the pockets of your first time homebuyers. 

    How does CHDAP work? 

    • CHDAP is 3.25% second mortgage
    • Payments on CHDAP are silent, meaning their are no required payments and all payments can be deferred until the sale of the home or 30 years (whichever comes first).
    • CHDAP is 3% of the sales price
    • The interest rate on the CHDAP is simple interest and fixed for life of loan (3.25% currently).

    Total financing is 99.50% if the buyer utilizes FHA with CHDAP. 
    Meaning literally, if you utilize a lender credit and don't ask for closing cost seller credits, the buyer can walk into their purchase with as little as 1/2% down payment. 

    Lastly, have your lender call the listing agent immediately after the offer is submitted to stress the information above and again stress the qualifications of the buyer. 

    Done in this fashion, we are seeing more offers accepted than not in this very competitive real estate market.

    For more information on this blog or ANY loan program offered or for a free rate quote and/or good faith estimate, feel free to contact me at: msmith@myprovident.com or 916-813-4003.  I will always welcome your call!



  • The Art of Funding a Mortgage Loan Quickly

    Posted Under: Home Buying in Sacramento, Financing in Sacramento, Agent2Agent in Sacramento  |  May 17, 2012 1:27 PM  |  752 views  |  2 comments
    What does speed look like?  


    Have you ever worked with a lender that closed like a freight train?  

    • He/she actually answered their phone and pre-approved your buyer quickly (say 30 mins). 
    • He/she got all the conditions from your buyer(s) with one request. 
    • Appraisal ordered same day contract is ratified. 
    • He/she reached out to the listing agent at time of contract and immediately after ratification to answer any questions the listing agent may have had and keep them abreast of all timelines and details related to the seller. 
    • He/she had docs in title 10 days before close of escrow. 
    • He/she funded prior to close of escrow. 
    Speed is a critical component of the art of mortgage loan closing.  

    And yet, my experience is that many lenders do not specialize in this critical component.  

    At the end of the day, what do you, as Realtors and buyers, want in a mortgage lender? 

    Do you want a Buddy?  Maybe 
    Do you want to look at his rate sheets?  Nope
    Do you want to see his ugly mug once a week?  Probably also No

    At the end of the day, I don't need another buddy.  I need a good realtor and I assume they need a good lender.  Do they work good together?  Do they harness the concept of teamwork and mutual respect?  Do they make money togehter?  

    My suspicion is that if the lender protects the commission of the realtor by getting their deals closed; concentrates on speed, then said lender has probably mastered this fine art of funding a mortgage loan quickly!  

    For more information, feel free to contact me.  We are a direct lender in Roseville, underwriting, drawing and funding onsite. 
  • When is the "best" time to lock in your loan?

    Posted Under: Home Buying in Sacramento, Financing in Sacramento, Home Ownership in Sacramento  |  May 9, 2012 11:23 AM  |  716 views  |  No comments
    This is a question that we, as mortgage professionals struggle with!


     We want to lock in our borrower's loan, but don't want the borrower to leave if rates go down.  On the flip side, we might really want rates to drop and in turn float the rate, only to see rates go up and a deal potentially lost. 

    As such, When is the "best" time to lock your loan?

    A wise former manager of mine expressed his view as this:

    A bird in hand is better than two in the bush.  

    Meaning

    It's better to have a lesser but certain advantage than the possibility of a greater one that may come to nothing.

    It's origin dates to medievil falconry where a bird in the hand (a falcon) was better than two in the bush (prey).  Another translation came in 1392 when this proverb was translated from the Bible to English:

    Ecclesiastes IX - A living dog is better than a dead lion.

    Meaning to you

    The Federal Open Market Committee (FOMC) meets eight times per year to formulate monetary policy and give markets an indication of what the future will hold for interest rates and inflation.  Inflation is calculated using the consumer price index (CPI) and is published monthly by the Bureau of Labor Statistics.  April's CPI will be released May 15, 2012; however March's CPI was 2.7% down from 2.9% in February. 

    Most experts agree however that the "real rate" of inflation is much higher in terms of the impact of stealth inflation on the true costs of goods and services.  Wheareas the price of a 4 oz yogurt for example, was priced at .79 cents yesterday; today it is 3 oz, albeit still priced at .79 cents.  Impact?  25% decrease in product sold at the same price or a 25% increase in the actual inflation rate of the product.  Experts see this "stealth inflation" as just one way in which manufacturers are passing on inflation without actually increasing price. 


    Couple this with America's insatiable appetite for spending make the prospects for higher inflation and higher interest rates highly likely.  US has a current "debt-to-GDP" ratio of 103.668% as of this morning.  Source: http://www.usdebtclock.org/

    Inflation and government spending will give the Federal Reserve Board little choice but to raise rates.  As such, I recommend that borrowers work closely with their lenders with the best weapon they have: communication; honest, open communication.  Trust your lender's instincts and follow their advice.  You can never quite know what might happen to interest rates, but it is sad when rates go up and borrowers either miss out or simply have wait and hope that rates come back down. 

    & remember, a rate in hand is better than two on the float. Yes, that Falcon would have been proud!
  • FHA Flips under 90 days & with profits greater than 100%!

    Posted Under: Home Buying in Sacramento County, Financing in Sacramento County, Foreclosure in Sacramento County  |  April 29, 2012 1:33 PM  |  751 views  |  1 comment

    Earlier this year, FHA (Federal Housing Authority) extended it's "anti-flipping" waiver through the end of of 2012.  Although this waiver applies to all FHA lenders, only a handful of lenders are actually still allowing FHA flips nationwide.  In California, my organization is one such lender who understands that flips are a great way to get inventory into an already tight real estate market. 

    Since FHA instituted the waiver in 2010, they have insured over 42,000 loans that were resold within 90 days.  This amounts to an over $7BB marketplace. 

    In order to qualify for the waiver, certain conditions must be met:

    • The transaction must be “arms length” with no other relationship between seller and buyer.
    • If the new sale price is 20% or more above the previous selling price, the lender has to document and justify the increase and meet other conditions, such as making sure the home has been inspected.

    Here are appraisal requirements for an FHA flip:

    • <90 days with profits <20% = one appraisal (21-day close)
    • <90 days with profits >20% = two appraisals (buyer can only pay for one, FYI)
      •  (35-day close)
    • >90 days with profits 20%-99.99% = one appraisal (21-day close)
    • >90 days with profits >100% = two appraisals (35-day close)

    In general, interest rates for FHA flips remain very competitive in today's low rate environment. 

    **For more information, please feel free to leave a comment, send an email or simply give me a call at 916-813-4003. 

    Equal Housing Lender.  NMLS#883642. All rates & terms subject to change without notice. 

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