Category: Mortgage

Got Debt?  You Are Not Alone

If your credit card balances are creeping up on you, it may be time for a cash-out refinance

Total US household debt continues to climb even as borrowing costs rise with higher interest rates, particularly on credit cards. The total debt level for credit cards hit a record amount of $1 trillion…with a T!!! And it seems on pace to keep on climbing. 

Many of us are facing harder times with the on-going economic slow down & lingering inflation. With credit card balances & their interest rates at all-time highs, it may be time to consider a cash-out refinance to consolidate high-rate loans. 

Home values remain reasonably resilient & most homeowners have record levels of home equity. Even with elevated mortgage rates, it may be better to roll higher rate credit card debt into a new mortgage balance.

Has the economic slowdown forced you to borrow more against credit cards, cars, and education? Borrowing from your equity at a lower rate to pay off higher rate debt will lower your overall monthly payments and lower your interest costs over the long-run. I can help you determine the “blended rate” of your various debts, the effective interest rate you’re paying across all of your loans (including your mortgage). If your blended rate is over 7%, then its time to consider a cash-out refinance.

Consider the following graph…according to CreditCards.com the national average credit card interest rate is over 20%!. With The Fed suggesting they don’t plan to reduce the Federal Funds Rate any time soon, this will lead to high credit card rates for some time.

Let us help alleviate the financial stress of carrying high credit card balances at astronomically high interest rates by refinancing them into a lower fixed rate mortgage.

It’s May Madness. Bring on…EVERYTHING!

May seems to always be the most hectic month of the year.  Graduations, picnics, school parties, sports, boating…commitments and fun keep us busy all month long, and I’m sure the same is true for you.

The real estate market has a way of hitting its full stride in May as well.  For the last few years, May has signaled the time when many homeowners decide to put their homes on the market.  This year appears to be similar as I’ve already listed two homes for sale in recent days. This is a good sign for the market at large since the single greatest issue we have in our market is too few homes for sale. Yes, that’s a bigger issue than high mortgage rates (although one could argue these issues are linked together)!

At the time of this writing, there are fewer than 100 single-family homes for sale in Folsom. 

May is often when new listings hit their annual peak

This is an incredibly low amount, considering we are a town of over 80,000 people and 28,000 housing units. Over the last few years, beginning in May, we start to see this figure increase through the summer months, but since interest rates began rising two years ago we have seen the number of homes for sale in the summertime decrease dramatically.

What will this summer bring?  Unfortunately, much of the same.  Unless I get more calls from clients interested in selling their homes this summer, I expect the number of homes for sale to be similar to last summer.  For current homeowners not looking to move, this is great news.  For those looking to buy their first home, this is truly discouraging, at least for now. 

I am anticipating mortgage rates to improve in the second half of the year, which will likely do two things: #1) more buyers will re-enter the market due to improved affordability; and #2) more “move-up” and relocating sellers will choose to put their home on the market as they feel less committed to remaining in their current home to hold on to an ultra-low mortgage rate. This increase in both demand and supply should keep prices level while increasing options for buyers.

Much like May’s relentless calendar, the real estate market keeps chugging right along despite challenging conditions. Either way…Bring. It. On.

GET REAL – CA Dream “For All”

Let’s Get Real about California’s new loan program coined Dream For All. The Blue Waters Group has this shared appreciation 2nd mortgage available to eligible applicants when it comes back on April 3rd, but is it really a Dream “For All?”

It truly is a great loan program for those who qualify, as it will allow folks to buy with no money down, avoid PMI, and keep their monthly payment at a reasonable level.

The program is, unfortunately, underfunded. The state legislature recently allocated $220,000,000 in funding for CalHFA’s Dream For All loans, which will likely only reach approximately 2,000 California applicants. To put that in perspective…our state had over 250,000 transactions in January alone. So Dream For All loans will impact less than 1% of transactions.

This program is getting a lot of hype and I am happy to help you apply for it before the application window closes at the end of April. Keep in mind, however, it will not end up being a Dream For All, but rather For a Very Lucky Few.

With that said, it’s a great program if you qualify and are fortunate to have your name pulled in the lottery system. Reach out to me and I can help you navigate the application process and give you more details about CalHFA’s Dream For All loan program.

California Dream For All Loan Example

Our team has become well-versed with the new California Dream For All Loan program and is ready to offer it to first-generation home buyer clients when the program is released next month.  Let’s unpack a common example and see how this program functions.

Assume someone buys a home for $500,000.  They would obtain a traditional 30-year fixed loan at a fair market interest rate for 80% of the purchase price, making the loan $400,000.  Now instead of making a $100,000 down payment, something most first-generation home buyers don’t have, they obtain a 2nd mortgage from the state of California for the needed $100,000.  No monthly payments are required and no interest accrues on this $100,000 2nd mortgage.  But it is not a grant; it is not free money.  This 2nd mortgage is a Shared Appreciation Loan, meaning that when the home buyer goes to sell the property they have to pay back the loan in full AND share in the gained equity with the state of California.

Lets see how those numbers work.  Lets assume this $500,000 home appreciates over the next few years and is now worth $600,000; it has appreciated by $100,000.  Most folks utilizing this program will need to pay back 20% of that appreciation to the state, in this case $20,000 dollars.  So when they sell the home, they will pay $120K to the Dream For All mortgage, the outstanding balance of the 1st mortgage that started at $400,000, leaving them with $110,000 in equity before selling costs.

So, in a nutshell, a borrower who put in nothing for a down payment ends up earning nearly $110,000 in realized equity.  And to do so, they had to pay $20,000 in shared appreciation to borrow a $100,000 loan. 

Here’s another example created by CalHFA worth taking in:

Like any loan program, there are qualifying restrictions and there are limited funds available so a lottery system is being implemented by the CA Housing Finance Agency to award approximately 2,000 folks to utilize the program. Contact my team and I for the full details on how first-GENERATION home buyers can take advantage of this new loan!

GET REAL – Marketing

Let’s Get Real about Marketing. There’s no 1 right way of promoting a business, and in real estate it’s common for REALTORs to use automated ads to stay in front of their clients. Maybe it’s a baking recipe postcard, or an email newsletter written by a marketing agency, or even a video like this where the agent is reading a teleprompter script that they paid for to sound smart on camera. And these tactics kind of makes sense, right?! If we are all busy helping clients buy and sell homes, who has time to create marketing materials?

But that approach sort of backfires when the same copied content is used by many others. Check out this screenshot from my inbox last month where I received the exact same canned email wishing me a Happy New Year from 5 different real estate professionals. There’s nothing personal or sincere about this; kind of falls flat if you’re the audience, right?

For me I make it a point to create all of my own marketing content. In the age of AI and virtual assistants, some will probably say I’m inefficient and old-fashioned for doing so. And they’d be right! But it also makes me genuine and authentic. I would like to think that before you work with me, you would want to know about me, my business, and my approach to serving my real estate and mortgage clients. And how are you learn those things if I’m out here hocking generic stuff that others pre-fabricated to be used by any REALTOR willing to pay for it?

Whether it’s the 200 posts I’ve written at MattsMemos.com, these Get Real videos, or emails if you’re on my mailing list, you can count on me keeping things real. If it’s from me, it truly is from me.

“Spreads” Revisited

The difference between mortgage rates & U.S. treasury rates (aka-The Spread) is the story to watch in 2024

For the past 6 months I’ve been pointing out how many interest rate markets are out of whack. While technical in nature, these topics are SUPER IMPORTANT to watch if you are even remotely interested in the future direction of mortgage rates. Since most of my readers either own a home or hope to own one in the near future, this content is critical to cover and keep you informed.

Typically, most interest rates trend in generally the same direction (up or down). Here is a chart showing how both mortgage rates and treasury rates have been in sync with one another over the years.

But these normal relationships have severed as of late. Mortgage rates have risen at a faster pace than treasury rates, and remained at these inflated levels for nearly two years. These oddities have occurred before in prior decades, but generally when things get out of whack they snap back in order fairly quickly. Presently, the difference, or “spread”, between rates on 10-yr treasury rates and 30-yr mortgage rates stands at 2.78%, over 1% higher than the 40-year average!

As you can see in the historical chart, there have been only two prior instances when this spread has flirted near 3%. In both cases, things returned fairly quickly back and even bottomed out well below the long-term average. This time around, however, the spread has lingered at nearly 3% for over a year and a half!!! I shaded in red the duration the spread lingered over the average of 1.75% to easily illustrate how odd the current episode looks.

What gives? My prior post on this topic explained the two distinctive risks investors face when purchasing mortgages versus treasury bonds (in short, foreclosure risk & pre-payment risk). Market experts are stumped as to why investors continue to see such high risks in mortgages. The Mortgage Bankers Association president forecasted just last week that they anticipate this spread to reduce as we proceed through 2024. Falling inflation & The Fed’s pivot on their approach to fighting inflation are the cited reasons why investors will see lower risk in mortgages, which will lower the spread and will ultimately lower mortgage rates.

The next test of this theory is coming up at the end of the month when The Fed meets next. At their last meeting on December 13th, we saw this spread drop severely as investor’s recalculated their perceived risks of holding mortgage bonds. Let’s hope January’s meeting has a similar result!

GET REAL – Teams

Let’s Get Real about Teams! I hope your favorite NFL squad is playing this coming playoff weekend…GO NINERS! But the ones I want to Get Real about right now are Real Estate Teams.

They have become all the rage in the past decade in our industry, but I wonder how many of them are truly teams if it’s called the John Doe Team or the Jane Smith Team. Truthfully many real estate teams are more about image, ego, or revenue sharing; an actual team may not even exist beyond the name. 

Not all of you know that in 2018 I took a nine-month sabbatical to live abroad on a sail boat with my family. I spent the six years prior to casting off building and teaching a team to operate without me. While I was away, I did not run my business or interact with clients, and our firm did great without me! It was a testament to the systems we’ve built to not be dependent on any one person, even the leader of the company.

I’ve been back for five years now and am very active and involved again in our operations and serving our clients, but I can’t do what I do at the level I do it without the entire Blue Waters Group! Our clients are better served by us as a team than by me trying to be a one-man-show. The next time you need a REALTOR or Mortgage Broker, give me a call and put the experience of our entire team to work for you.

GET REAL – Big Banks

Let’s Get Real about BIG BANKS! They have big-time overhead expenses, so they have to earn big-time interest on their loans. For the best rates, skip the big banks use the services of a mortgage broker like me.

This is not about supporting local or shopping small. This is about getting the best deal possible on your next home loan!

Click on this link to read about how the rates I offer my clients tend to be nearly 1/4% lower than the average national mortgage rates!

GET REAL – IMAGE

Let’s Get Real about IMAGE in Real Estate. Make sure you don’t fall for flashy marketing and false self-promotion that makes a REALTOR’s image suggest they’re more successful and valuable to you than they truly are. Look for EXPERIENCE and AUTHENTICITY!!!

GET REAL – Brand New Homes

Let’s GET REAL about…Buying New Homes! Never forget that the builder’s sales office and in-house lender work for the builder, not you!

My latest client learned the hard way of the many pitfalls of buying a brand new home. I was glad to come into the transactions late to get him a great rate and restore some trust back into the transaction.

Before looking at model homes, reach out to me and learn why you should have your own REALTOR and mortgage professional on your side when buying a new home.