Silicon Valley Real Estate Blog

Kenneth Harney laments in his piece published in the San Jose Mercury News that, once upon a time, people actually made "sizable" down payments on houses they bought.  The statistics he quotes are downright scary: almost 50% of all first-time home buyers financed 100% of the transaction.

That's right, half of all new home buyers put zero percent down.

How much should they have allocated as a down payment?  In a period where there seemed to be no limit to the price of single-family homes, or bounds to lending practices, it's easy to understand how people got carried away.

After all, every infomercial personality worth his salt was talking about cash-on-cash return and buying properties with no money down.

Now that we've seen the sequel to the movie "Buying on Margin" which bankrupted more than a few daytraders at the turn of the century, we need to talk about the concept of "negative equity."

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Feb.13.2007 [ Filed under: Mortgages, Silicon Valley News ] 1 Comment »

Let's say that you've just gotten engaged and that you and your fiancee find your dream house.  But since you're just getting started on the rest life, you can't get a reasonably-priced mortgage. 

Your parents have a pretty good credit score and a strong income, so you ask them to buy the house for you and then transfer ownership to you using a trust deed.  You promise to pay them on the mortgage that you couldn't qualify for yourselves.

Your parents are acting as a "straw" through which you are getting ownership of a house.  This scenario seems relatively innocent, but it's illegal and leaves your parents on the hook for mortgage payment responsibilities on the house you now own.  You are now a straw scammer.

There's another class of straw scammers that causes real estate bubbles all over the country and you can stop them dead in their tracks.

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Feb.10.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Home Owners, Mortgages, Silicon Valley News ] 2 Comments »

Between the speculation and pricing madness during real estate booms, people actually buy houses so they can live long, happy lives there.  

But home buyers should know — particularly if one of your goals in buying a house is achieving a more stable lifestyle for yourself and your family — that losing a house is a fairly easy thing to do.  Here are five common ways people lose their houses.

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Feb.05.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Mortgages, Silicon Valley News ] 4 Comments »

Can you imagine a world where everyone had to buy a house using only cash on hand?  Very few people would own a home if the world were like that.

Lenders know this and have come up with a number of loan types (they call them products) that ostensibly help people get into their dream houses.  Some of these products, however, carry more risk to you than others.

The most notorious of these loans is the option ARM, sometimes called a "pick a payment" mortgage and it is as dangerous as it is powerful. 

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Feb.02.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Mortgages ] Comment Here »

That's the headline from the Silicon Valley Business Journal.  The San Jose Mercury News states it more plainly as "More Californians fall behind on their mortgages."

Impact on Silicon Valley Real Estate: There's a Moral Below…

So what's the impact here in Silicon Valley?  According to John Karevoll, who works at DataQuick, the company that compiled these statistics, "None right now.  Literally none."

Why? 

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Jan.24.2007 [ Filed under: Mortgages, Silicon Valley News ] Comment Here »

Sometimes they may not know what they're doing either.  There's a story in the Wall Street Journal about a mortgage loan officer (and landscape designer) whose family invested in a single-family house they wanted to flip.

Based on the assumption they'd flip the house quickly, they put no money down and took out an 80% mortgage priced well-above market at the time (almost 7%) and a double-digit interest piggy-back loan. 

The article mentions that the market in their area has shifted towards buyers, but that's not the half of it.  My parents retired to that city and it's bleaker than it reads.

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Jan.18.2007 [ Filed under: Bay Area Real Estate, Investors, Mortgages, Silicon Valley News ] Comment Here »

In Part 1, we talked about the financial half of deciding how much house you can afford.  But how happy you are after buying the house depends on how well you balance the financial of your decision with the psychological ones.

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Jan.09.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Mortgages ] 2 Comments »

As with most decisions when buying a house, figuring out how much house you can afford is half financial and half psychological.  My goal as a real estate agent is to see you deliriously happy after buying a house and how happy you are after your purchase depends on how well you balance the two.  This is part one of a two part article on how much house you can afford.

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Jan.04.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Mortgages ] 2 Comments »

Getting a mortgage and buying a house involves around 300 sheets of paper.  And many people are intimidated by the monumental stack of formerly living trees or the terms they don't know printed on them.  But with only a few key concepts, you can usually protect yourself from getting very ripped-off.

When looking for a mortgage, most people know to look at the rate, terms, amortization, and monthly payments.  While these are obviously very important characteristics of a loan, the key item to look out for — one that careful people good at math miss — is a prepayment penalty. 

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Jan.03.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Mortgages ] 1 Comment »

Your FICO score is the number makes-or-breaks your ability to buy a house and determines whether you get the best rates or get charged enormous fees. You can directly affect the strength of your credit and, in turn, how much your dream house really costs you.

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Jan.02.2007 [ Filed under: Bay Area Real Estate, Home Buyers, Mortgages ] Comment Here »

Did you know you can opt-out of receiving those pre-approved credit card offers just like you can put yourself on the "Do Not Call" list for telemarketers?

There's good reason to do this.  Besides the fact that they're annoying, these pre-approved offers also put you at risk for identity theft. 

In fact, MSNBC posed the question, "What if a desperate identity thief digging through your trash found a credit card application ripped into little pieces, taped it back together, filled it out and mailed it in?"

"Would he get the credit card?"  The answer is one of those "You've got to be kidding me?!" moments.

So how do you opt-out of these pre-approved credit card lists, help protect your credit (especially if you're thinking about getting a mortgage), and get less junk mail in the process?

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Dec.19.2006 [ Filed under: Mortgages ] Comment Here »

A basic benefit of buying a house is being able to deduct the interest you pay on mortgages from your income tax.  This benefit not only applies to your primary mortgage but also to "piggy-back" loans like your home equity line of credit (HELOC) if you put less than 20% down.

In the article, How Much Should You Allocate as a Down Payment?, I also talked about another way of putting less than 20% down.  (Again, putting a larger down payment on your house decreases your risk and may lower your interest rates and fees so there is a trade-off.)

This involved taking a greater mortgage from your lender and paying for private mortgage insurance (PMI).  The big disadvantage to PMI was that you couldn't deduct it like you could mortgage or HELOC interest.

Mortgage News Daily reports that, at the behest of happy private mortgage insurance lobbyists everywhere, the exiting Congress may have fixed all that…

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Dec.17.2006 [ Filed under: Mortgages, Silicon Valley News ] Comment Here »