Financing in Marin County>Question Details

Susan, Home Buyer in San Francisco, CA

Can you still get interest only loans in California (Bay Area)?

Asked by Susan, San Francisco, CA Fri Jan 23, 2009

I really dont know how people are still affording homes in the more desirable parts of California (those areas with good schools, good commutes etc) without interest only loans. Since these areas still have homes starting at 1-1.5MM for an average home, I cannot imagine all of these buyers earn a minimum of 250k and have 20% down to buy these places...which even w/ 250k you are looking at a maximum home purchase of 1MM, which doesnt get you much. It seems the prices are holding firm, so I am assuming people are either still getting funky loans with an interest only option, spending over 1/2 their income on their mortgage and giving up travel, dining out, and other things that make life pleasurable.

Can someone please tell me what is going on with the loans out there? I cannot imagine the only people buying all of these homes are millionaires.

Thanks!

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Answers

13
Hi Susan,

The Realtors that have responded to your question have answered the inventory question quite well: there are some great buys in the Bay Area right now that are in safe communities and have great schools. When choosing a home, it is important that you talk with a Realtor who can advise you on the specific areas you are looking at. If you are not already working with a Realtor, you may want to contact those who responded to your question as a start.

My specialty is in lending. Are there interest only loans available? Yes. Are interest only loans the reason for the real estate down turn? Not necessarily. Can interest only loans be good for homeowners? Absolutely. The thing to keep in mind is that an interest only payment is a minimum option, not a maximum. An interest only loan is a financial planning tool for many who manage their money well.

In the past, homeowners qualified on the interest only payment, income was often not verified, and loans were available for 100% of the purchase price up to $1,000,000 or more. Today, borrowers are qualified on the principal and interest payment, even if the loan has an interest only minimum payment option. Borrowers should expect to prove all of their income and have reasonably good credit. Additionally, low down payment loans (3.5% for FHA,) are availabe for purchases up to $417,000. With 5% down, the price can go higher depending on the county you buy in. For jumbo loans, lenders will require a down payment of 20% or more depending on the loan amount.

The bottom line is that each homeowner's situation is different, and no one can say that any one loan product - even a 30 year fixed - is best for everyone.

With interest rates at all time lows and property values where they are, there are some incredible opportunities for home buyers today. My advice is to work with professionals who know their area of specialty.

I have created a chart on my blog that might help to illustrate what is happening with affordability in Contra Costa County.

Good luck!

Jim
1 vote Thank Flag Link Sat Jan 24, 2009
Great response Sylvia, I don't write loans in CA I just stick to Florida. I can but choose not to. I would give Susan advice on a loan but I don't have enough information. She mainly talks about other buyers.
1 vote Thank Flag Link Sat Jan 24, 2009
Hi Susan:

Don't know if you have made progress on house hunting since, but one good news is they did open the extra lane on Southbound 101 from North San Pablo Road in San Rafael to Lucky Drive in Corte Madera.

http://-www.marinij.com-www.marinij.com" target="_blank" rel="nofollow">http://www.marinij.com/marinnews/ci_11605417?IADID=Search-ww…

Although from what I read (I don't usually do rush hour commute since that's not required in my business), the commute soften some, but was still rough the first two days., and finally see more improvements after people are more used to the new opened lane.

http://-www.marinij.com-www.marinij.com" target="_blank" rel="nofollow">http://www.marinij.com/marinnews/ci_11620306?IADID=Search-ww… from San Pa

So, that might allow you to look a bit further north with your husbands easier commute into city. The further North you go, the better the price. In North Marin, there are million dollar homes on sale. One of my clients bought a one year old 3,800 sf home with top of line appliances, workmanship, backs up to open space for $850,000. This was a distressed sale, not short sale, but the owner took a huge loss before it went into short sale. I worked with my clients for two years before we found this one. They are very happy with that purchase.

In addition, the slower market is finally reaching Southern Marin Luxury market.. .very slowly, but it;s moving lower. With some time, as you planned to do, I can help you find some great homes ... if you can be patient enough to wait (which you are) for the right one to come on the market.

Best,
Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Wed Feb 4, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
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Hi Susan:

Just came back showing Marin to out of state buyer (with relatives in other parts of Bay Area). We only had a few hours, so a quick run through; they were pretty happy with Marin. They did not realize how many facets Marin has and we are talking about in many fronts!

I will not argue with you about the pricing in Marin county, I think that is something you have to weight against your current and future needs and wants and decided what is the best situation for you.

However, my advise to my clients are that they should keep their options open, and if they are interested in properties in Marin county (or any other places), they should go out and actually look at properties that are around and/or higher than their price range. Invest time in doing that, and then when a good property comes on the market at a time when they are ready, they will know it.

Looking on Internet is only the starting step, and it can only go so far and do you so much (little) good. Being right on the property and look at it is what's going to make the difference.

That's why I said in my other reply to you, that I take my clients to go around and see many, many properties before they buy. There is no wasted time for me and It has to be right for them!

Back to the mortgage issue, I think the statement of "nobody is being qualified" is definitely not correct. My clients were qualified, approved and they bought, just recently. I have several other buyers looking at properties; not to mention that my office is really hopping...

But then again, we don't know your specific condition / combination, other than what we see on Trulia, which is probably minuscule compare to what is really in your mind. So, if you really want to find the mortgage, talking on Trulia is not going to help you.

Don't despair is the important thing and you sure are not one of those that gives up easily.

By the way, pick up the phone and talk is not that bad. There is no contract to sign, no obligation and we can't even call you if you don't want - that privacy thing. A much easier way to go, seriously!

Best,
Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Sat Jan 24, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
There really isnt anything worth buying right now in Marin that I can see. Unfortunately, there isnt a single house I am interested in that is worth what they are asking right now. Maybe that will change in a few months.

I am really more concerned about the loans available at this point because everything I am hearing is that nobody is being qualified.
0 votes Thank Flag Link Sat Jan 24, 2009
I guess then she should check in with you for a Jumbo rate that's lower than 5%.

I am fine with either as long as Susan gets the best deal she can - I am a Realtor, not a mortgage broker, and I have absolutely no other interest in this than to find the best thing for clients :-) .

And please shoot me a note to let me know who offers that, it might help my other clients.

Best,
Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Sat Jan 24, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
Slvia why would someone want an ARM with rates this low She can get a fixed as under 5%?
0 votes Thank Flag Link Sat Jan 24, 2009
Hi Susan:

Just received an email from a mortgage broker I Know. They are having a "special pricing for jumbo loans up to $1.5 Million with 5/1 Rates being as low as 5.125%."

Let me know if you are interested.

Gonna run for appointments, but will catch up with you

Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Sat Jan 24, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
Actually there are great Bay Area homes starting at $700,000. Consider the East Bay: San Ramon, PLeasanton, Danville, Livermore. Easy commutes with BART.....good value.
Web Reference: http://www.cindihagley.com
0 votes Thank Flag Link Fri Jan 23, 2009
Cindi Hagley, Real Estate Pro in Pleasanton, CA
MVP'08
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O.K. Susan:

I am going to give it to Issac - I did say that hastily, and I should have said that you should contact a mortgage broker to get the most up-to-date mortgage information and I can refer a few very reputable ones in Marin for you; both mortgage brokers and direct lenders.

I am a Realtor and should have defer the answer to a mortgage broker.

Best,
Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Fri Jan 23, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
Susan:

You should contact a loan officer in your area to inquiry about interest only loans. The advantage of interest only loans is that your monthly mortgage payment gets to be substantially lower. Of course, nowadays, in order to obtain a jumbo loan, opposite to conforming loans that you can obtain sometimes with as little as 3.5% downpayment , is that in order to obtain a jumbo loan you have to show proof of enough income, have excellent credit and a sizable downpayment.

I believe in interest only loans. They are not funky at all. My point is that after all, the amount of principal that you pay down at the beginning of your first few years of payments with regular loans is certainly minimal, so you end paying a much higher payment every month, getting worried about making such high payments and only reducing your principal very slowly.
0 votes Thank Flag Link Fri Jan 23, 2009
Hi Susan:

Sorry to report that there is no interest only loan or anything like that anymore ... those are what got everybody into trouble before and we are back to the way how lending should be.

My clients are putting 20, 30, 50% down payment to buy a home. . Everybody jumped when the mortgage rate dropped to 4.875% last week. They are waiting...

A house in Novato, short sale, just went on the market, 9 offers, with at least 2 all cash offer. Went into escrow within a week.. The buyer thought he is getting a great deal.

I hold open houses all the time (hope to see you this weekend http://www.2197Vineyard,com) and I see the buyers out there. A lot of people downsizing, or are renting now and just waiting for the right house at the right place to come on market.

If you have good income, great credit, good down payment, you can still get great loans.

Some buyers are out there buying fixers - a Kentfield property, complete fixer, sold with 12 offers, small house, but big lot with potential to expand. Closed at around $750K; but the buyer is willing to fix it up. That's something you might want to consider.... Great location though on a large sunny flat lot and we know about the schools there.

And we should really explore other possibilities.

Trust me, there are great places in Marin, not as expensive, and wonderful, friendly people out there, I know them in person; and you haven't met me yet :-)

BTW, my husband grew up in Brentwood, LA, many friends in some really nice areas there, including Orange county.

There were only two places he was willing to move to (not L.A), Denver and Marin, and here we are.

Best,
Sylvia Barry
Marin Realtor
0 votes Thank Flag Link Fri Jan 23, 2009
Sylvia Barry,…, Real Estate Pro in Novato, CA
MVP'08
Contact
There are many people who were waiting for homes foreclosures staying on top of market. Interest only loans are "thing of past" We have continual flow of very qualified clients with downpayments ranging from 3.5% or more .
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Fri Jan 23, 2009
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