Here’s Your New Year’s Resolution: Buy a Home Early in 2017

Let’s finish out the year with a holiday basket packed with good news: We’re ending 2016 in better economic shape than in recent years. Unemployment is down to 4.6%, its lowest level since August 2007; consumer confidence is higher than it has been since July 2007; and home values nationally and in more than half of the major markets in the country have recovered.

We’re employed, confident, and have recovered equity in our homes. The stock market is up and flirting with all-time  highs.

That sounds like the perfect backdrop to buy a home in 2017, whether it’s a first-time purchase, a move up, a downsize, or a relocation. Right?

Maybe. But before you take the plunge, you’re going to have to come to grips with two factors that are now decidedly worse for buying than they were at the end of last year: Mortgage rates are higher, and the inventory of homes for sale is lower.

Mortgage rates are a bit more than a quarter of a point higher now than they were at the end of 2015. That translates into payments that are 3% higher. Still, that increase can be managed by most.

The key challenge for potential buyers is that rates are now likely to move up more—as much as three-quarters of a point in 2017. That would be increasing payments by an additional 9%.

Tight inventory levels have been a problem for more than four years. As sales have grown, supply has fallen. We’ve seen the age of inventory—how long homes sit on the market—drop dramatically as home buyers burn through the available stock.

We’ve had an abnormally strong autumn for home sales because frustrated buyers are keeping at it even after the end of peak buying season. We also saw more new buyers emerge later in the peak season. Then as mortgage rates started to move up in October and then accelerated their rise in November and December, a new sense of urgency was added to the mix.

As a result of this unusually strong demand in the slower time of the year, we will end this year with at least 10% fewer homes for sale than we had last year. And we thought last year was bad!

Get started on your home hunt now

If your New Year’s resolutions include buying a home, I would suggest getting an early start. January and February typically are the slowest months of the year for sales, as harsh weather in most of the country dissuades most potential buyers.

Buyers in January and February face far less competition from other buyers, yet inventory is only marginally lower than in the spring.

Since mortgage rates are likely to move up as the year progresses, the beginning of the year represents the best time to lock in rates before they get even higher.

Real estate reports show that time is almost running out for low mortgage rates. Make 2017 the year for you to make it finally happen–having a place you can call your very own home!

Give me a call and let us get you started in your home buying journey.

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The Ins and Outs of Showing Property

Whether it’s a last-minute private visit or an open house for anyone who stops by, homes need to be seen to sell.

Showing a property is essential to the home-selling process. Every market works differently, but buyers and sellers will quickly learn the ropes by working with a competent local agent.

The last-minute call to show a property is par for the course. Should the listing agent and seller accommodate? Is it better to hold off a buyer for a day or so?

It’s a dilemma, but sellers and their agents should have a concrete strategy for showing. While homeowners need to be as flexible as possible to show their home, serious buyers and smart buyer’s agents know that last minute scrambles aren’t always desirable.

When it comes to showing and viewing homes, buyers, sellers, and agents need to understand how to best use their options, which include open houses, lockboxes, and private showings.

Open houses

 

Most people make their first foray into the real estate market by cruising listings online on Sunday morning and deciding to check out open houses that afternoon. Attending open houses helps buyers get a feel for the market without committing to an agent or the process. It is in the fabric of the real estate industry.

Open houses are great for some sellers, too, because they ensure that, within a two- or three-hour period, a good number of buyers can get in to see the property.

Lockbox showings

In some markets, the lockbox showing is the easiest and best way to see a home for sale. To make entering the home convenient for everyone, the listing agent places a special digital lockbox on the front door for agents to access with their buyer clients.

For home shoppers who are unavailable on the weekends, lockbox properties can be a good way to start getting a feel for the market and learn from their buyer’s agent. Also, if an agent has an out-of-town buyer coming in for just a day to see properties, lockbox listings might be the way to go.

Lockboxes can also enable buyers and their agents to quickly pop in and out of a house, and it’s an easy way for buyers to get up to speed quickly on the types of properties available.

Private showings

Most buyers who are interested in a particular home will have attended an open house and viewed the home once or twice with their agent. But when they get serious, they’ll want to go back another time. In this case, the seller’s agent will accompany the showing.

The seller’s agent can answer questions and represent the interests of her client. The buyers will likely have numerous concerns as they walk through with a more critical eye. This private showing provides the seller’s agent an opportunity to be the eyes and ears of the seller.

Advice for buyers and sellers

Buyers and their agents should be mindful of the home-viewing process, and always be respectful of the seller’s and the listing agent’s time.

Sellers who are serious about getting their home sold should be ready for anything. Showings can sometimes happen at a moment’s notice. As a result, they must maintain the home in its “staged” appearance at all times.

It is always best for home sellers to work with professional real estate agents to market their home. Agents who have been in the field for quite some time surely know more on how to stage a home effectively, which could make them sell their home the shortest time possible, in the highest price it could get.

Ready to sell your home and need help on staging and marketing? Contact me and let’s get it rolling.

4 Ways Mortgage Lenders Can Help You Buy a Home

In the long home-buying journey, lenders are often pegged as the bad guy—the villain who holds the purse strings and decides whether (or not) to loosen ’em up and grant you a mortgage. Then again, a home buyer simply has no choice but to go to one, most especially if he cannot purchase a home in cash. Mortgage requires a lender, it is that simple.

OK. Let’s take a step back. This bad rep is mostly a bad rap. Because the reality is that lenders make homeownership possible for the majority of Americans who do not have the ready cash to buy a home. And even if you’re a less-than-ideal home buyer, because of bad credit or lack of a down payment, they can actually help your loan go through.

Here are five ways lenders can assist you on the path to homeownership, and some recommendations as to how you can make the most of this relationship.

1. Lenders can get you pre-approved

If you know you’re ready to buy—before you’ve even seen the inside of a single house—it’s wise to head to a lender to get pre-approved for a mortgage, pronto. This means lenders check your financial history and determine how much money they’re willing to loan you to buy a home. “You want to apply before you’re entirely under the gun,” says Steven Bogan, regional managing director for Glendenning Mortgage Corporationin Haddonfield, NJ. “If you wait until you’ve made an offer on a house, you could run into problems.”

Pre-approval is proof to home sellers—and yourself!—that you won’t have problems getting the loan you need, once that special house comes your way. It is best to seek a pre-approval at least a month or two in advance, Bogan says. Requirements for approval in a post-housing bubble world can create headaches even for stellar borrowers.

But don’t start too early. Pre-approvals are only good for 30 to 60 days, so make sure you’re really ready to hit the pavement and start looking for houses. Still, don’t stress if your pre-approval expires; getting it re-upped isn’t a big deal.

“We usually just need to run your credit again, maybe get an updated pay stub or bank statement, and you’re good to go,” says Bogan.

2. If you can’t get pre-approved, lenders can show you how

So what if you apply for pre-approval and get denied? It hurts, but don’t worry—the pre-approval process isn’t a one-shot deal. Most lenders will be happy to work with you, even if you aren’t pre-approved right off the bat.

“The majority of lenders will give buyers a step-by-step path they need to follow to get up to approval,” says Bogan. And that usually involves boosting your credit score (more on that next).

3. Lenders can help you boost your credit score

One of the most common reasons home buyers don’t get approval is a lousy credit score—the all-important numerical summary of how reliable they’ve been paying off debts, from credit cards to college loans. You want a simple equation? The lower your score, the less likely you are to get a loan. The good news is that you can take action to boost your credit score. A credit repair company will show you the ropes, but will charge for those services.

You’ve actually got a free credit-boosting guide at your disposal: the lenders who just passed you up for a loan. In most cases, they’ll be happy to show you what you need to do to boost your credit score. And while it usually takes a few months for the credit bureaus to record these changes, lenders have another ace up their sleeve: They can do a “rapid re-score” that corrects and updates info on your credit report in a matter of days.

4. Lenders can help atypical borrowers

Many home buyers are employed, earning a regular W-2 income—a generally safe bet for lenders. But If you’re self-employed, a contractor or running your own business, and your income is more prone to valleys and peaks, a good relationship with a lender can help you cut past reservations about your loanworthiness. “Basically, we’re just going to look at the last two years of tax returns, instead of W-2’s and pay stubs,” says Bogan.

However, Bogan does recommend applying even earlier if you’re a non-W-2 wage earner, since there is more paperwork and more of an investigative process into your earnings. And unlike everyone else, you’ll need to consider your timing. “Say, for example, 2016 tax returns are almost due, and it was a great year incomewise. It would probably be in your advantage to wait until after you’ve filed your taxes to apply for a mortgage,” Bogan says.

No matter what your situation, though, to get the best help, you’re actually going to have to call. “You absolutely want to talk with somebody in person,” says Bogan. So skip the online forms, and ask your friends and family (or your Realtor®, if you have one already) to recommend someone you can sit down with to get the process rolling.

Taking the Fear out of the Mortgage Process

Have you always wanted to purchase your own home but have had second thoughts that hinder you? There are several instances where home buyers get scared with the process, or some parts of it.

A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need to have saved for a down payment (the average down payment on all loans was 11% last month, with many buyers putting down 3% or less), a stable income and good credit history.

Throughout the entire home buying process, you will interact with many different professionals, all of which perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests to follow:

1. Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score of all closed loans in September was 731, according to Ellie Mae.
2. Start gathering all of your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
3. Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
4. Consult with your lender – he or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
5. Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

If you have ever really decided to go for it and finally get started with home hunting and buying, feel free to give me a call or shoot me an email. I’ll be glad to be part of that journey.

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6 Upgrades Under $1,000 That Give You The Most Bang For Your Buck

Pop quiz: Would you rather buy a home with 1990s laminate countertops or pristine marble? It seems like an easy “A,” yet many home sellers are so immune to pre-existing (read: old) features in their homes that they can’t understand why buyers can’t see past them too. But even if you aren’t ready to list your home just yet, a few smart changes can make a big difference in adding to your home’s value — especially in competitive markets like Los Angeles, CA.

If you want to increase your profit potential, strategic home improvement ideas in these six categories — some of which won’t cost you a thing — will give you the biggest return on your investment.

1. A budget-friendly kitchen remodel

Real estate agents will tell you time and again: Kitchens and baths are what sell a home. A dated kitchen can be a big turnoff, and there are lots of ways, both big and small, you can make yours as refreshing and inviting as possible, without investing in a total overhaul. When it comes to spiffing up your kitchen for resale, you don’t need to majorly splurge to make a better impression on buyers.
Instead, bring the space to the point of what’s known as “builder-grade luxury”: Replace basic black appliances with stainless steel, for example, and ditch the laminate countertops in favor of granite. Yes, these home improvement ideas might sound pricey, and you could spend a pretty penny on appliances and granite, but builder-grade improvements stop far short of those over-the-top luxuries. So make your decisions with thriftiness in mind: choose one of the more affordable granite countertops (such as Napoli, Baltic Brown, or St. Cecilia), with a crisp and in-style beveled edge. Leave higher-end stone and more ornate beveling for your next home. The cost to upgrade appliances and/or countertops will vary within the four-digit range. But to keep this upgrade within your budget, try to find a deeply discounted appliance at an outlet or local “scratch-and-dent” store — where almost-perfect pieces come with perfectly approachable price tags.

Want an even cheaper way to give your kitchen a quick face-lift? Simply refinish or repaint your cabinetry and add updated hardware (such as new hinges and drawer pulls), which can dramatically transform the look of the room for less than $100. Your best bet is to choose colors and styles that are likely to appeal to the widest range of homebuyers and make them feel as if they’ve walked right into their dream kitchen Pinterest board.

 2. Upgrade the bathroom

When it comes to bathrooms, most buyers envision themselves relaxing in a modern, sleek space. The most basic upgrade starts with replacing old, pastel, 3-by-3 ceramic tile with modern tile like white subway-style ceramic or 12-by-12 porcelain tiles in a neutral hue. Replacing your plastic tub surround with a tiled shower costs about $1,000 but makes a big difference, and for an extra $100 to $150, you can also add a recessed alcove (a built-in wall niche for your shampoo bottles).

As with a kitchen remodel, consider which changes will have maximum impact. You may not need to replace that old pedestal sink. Instead, you could change out the faucet — upgrade it from nicked brass to sleek new chrome — and hang some luxurious towels next to it. The same goes for quirky floor tile; choose a new paint color that will enhance it rather than clash with it. Make sure the colors and styles you choose are as universally appealing as possible so buyers see a space they know they can live with. And again,scrub your bathroom from top to bottom — there is no bigger turnoff than yellowed grout and leftover toothpaste in the sink.

3. Pick neutral paint colors

Paint still reigns supreme as the easiest and cheapest way to refresh any room, especially if you do the work yourself. Whites and neutrals can help buyers envision themselves in the space, since they provide a blank slate to serve as a backdrop for buyers’ stuff. Forgo that bold navy accent wall — the idea of priming and painting over it will just stress buyers out. Plus, lighter earth tones look good with hardwood floors, and white always brightens a room. If your rooms include mixed wood surfaces (floors, doors, and cabinets), select a neutral color and ask your local paint purveyor to mix in a few drops of gold to add warmth and harmonize discordant wood tones.

4. Make an impact with flooring

Like paint, quality flooring can drastically change the look and feel of your rooms. Hardwood is always appealing to a wide range of buyers, as are high-quality laminate options and (affordable!) ecofriendly choices like bamboo and cork. If your home is hiding hardwood floors under that carpeting, let them shine if they’re in good condition. If you already have hardwood floors but they’re looking a little worse for wear, it’s time to invest in a good sanding and refinishing. Whether you go the DIY route and rent a sander or pay someone to get it up to snuff, you’re looking at a few hundred dollars for like-new floors. Just be realistic about your DIY skills before tackling a refinishing project. Gouged floors can bring your home’s appeal way down, so if you’re not handy, choose a pro instead.

 

Kitchens and baths gain value with tile or laminate flooring, which are both visually appealing and easy to clean. Carpeting is still acceptable in bedrooms, especially if it’s plush, in great condition, and in a neutral color. But more and more buyers are turning away from carpeting altogether, so if you’re in doubt about whether to replace your carpets or install different flooring, hardwood (or its more-affordable cousin, bamboo) is your best bet. Even a basic snap-to hardwood installation can beat out wall-to-wall carpeting when it comes time to sell.

5. Consider home staging

Staging your home helps buyers imagine themselves living in the space, and it’s a relatively inexpensive way to dress up features you’re trying to highlight. The first step isclearing the entire home of any clutter and removing any overly personal touches like family photos or children’s artwork. Furniture should be arranged in a way that flows well and maximizes space — buyers will feel claustrophobic if they need to navigate around big pieces as they move from room to room. If you can, bring in a professional home stager or interior designer to consult on the ideal room arrangements. Otherwise, use the following tips for a DIY approach.

 

In each room, place furniture so it feels inviting and functional — just because you can’t live without a footstool next to your bed for Fluffy to climb on doesn’t mean it should stay there when your home is on the market. In the living room, seating and tables can be configured into social and conversational areas, while placing an armchair in an empty bedroom nook will frame it as a cozy reading spot. Bright lighting will make spaces seem larger, so turn on those lamps, and make sure your decor and artwork enhance their surroundings rather than distract from them. Depending on whether you need to add, subtract, or rearrange, staging shouldn’t cost very much at all, especially relative to how much of a boost it could give your home when it comes to bringing in buyers and helping your home sell quickly.

6. Amp up your curb appeal

Don’t neglect your home’s exterior. If buyers don’t like what they see when they first pull up, they may not even get out of the car. To make the outside of your home appealing, ensure all walkways are clear, the landscaping is neat and tidy, and everything is in good repair. This may require more substantial repairs like repainting or replacing siding, fixing loose shutters, and sealing those cracks in the driveway. Or it could be as sim
ple as mowing the lawn, raking the leaves, and planting a few colorful annuals to make sure nothing looks bare. Add one or two “homey” final touches, like a new welcome mat, new or repainted mailbox, updated house numbers, and an outdoor seating area with festive lights. Your home will feel extra inviting from the get-go — and just may get a quick offer if it’s love at first sight.

 

 

Building Wealth: First Rung on the Ladder is Housing

How Housing Matters is a joint project of the Urban Land Institute and the MacArthur Foundation. It is “an online resource for the most rigorous research and practical information on how a quality, stable, affordable home in a vibrant community contributes to individual and community success”.

A recent story they published, The First Rung on the Ladder to Economic Opportunity Is Housing, discussed the importance of having affordable housing available to as many families as possible because:

“The ladder to economic success can stretch only so high without the asset-building power of homeownership.

Home equity provides Americans with the ability to send their children to college with less student loan debt and is the primary source of funds for retirement. Half of the assets of Americans over age 55 are in their home.”

Bottom Line

We have often posted that the net worth of a family owning a home is 45 times greater than that of a family that rents. That is not a coincidence.

For when you’re ready to make the plunge of building your wealth and owning your home, contact me and let’s go over great properties in Maui.

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6 Things You Need to Know When Buying Home Insurance

Whether you’ve just begun searching for a new place or you’re waiting to close on your dream home, one important aspect of moving you can’t ignore is insuring your investment.

Enter the homeowner’s best friend: the homeowners insurance policy.

Just like any other kind of insurance, there’s no such thing as a one-size-fits-all policy. Home insurance policy costs typically depend on the home’s location and age, the size of the deductible, and the coverage level. You’ll have to look at these and other variables to figure out what kind of home insurance is right for you—and how much you’ll shell out for it.

To make sure you purchase the perfect policy that fits your budget and coverage needs— and to avoid potential pitfalls—we’ve pulled together a list of the most important things you should consider. Let’s take a look.

1. It’s all about location, location, location

Along with size, construction type, and overall condition of the house, location plays a big role in the cost of insurance and types of policies available. But unlike home buyers, insurance companies aren’t checking out school districts, awesome nearby restaurants, or your commute time.

But others factors do come into play. Homes located near highly rated, permanently staffed fire departments (and even fire hydrants), for example, may cost less to insure, says Loretta Worters, vice president of communications for the Insurance Information Institute.

And of course, proximity to the coastline is also weighed heavily. You’re likely going to pay a pretty penny for that idyllic spot near the coast.

“Because of the increased risk of catastrophic weather events resulting in claims, it will generally cost more to insure,” Worters says.

On top of a higher policy cost, coastal home insurance policies could include a separate hurricane or windstorm deductible based on the fees to rebuild a home.

2. You might want flood insurance—even if you think you don’t need it

Damage from flooding isn’t covered by typical home insurance policies. Any home located in an area prone to flooding requires separate flood insurance to cover these kinds of claims. (Flood insurance is available from the federal government’s National Flood Insurance Program as well as a handful of specialty insurers.)

Don’t live in a flood zone? Don’t assume you’re off the hook. Flood insurance may be a smart option for any homeowner, regardless of zoning—and if you’re not in a high-risk zone, you can probably snag some lower premiums.

“Ninety percent of all natural disasters in the U.S. involve flooding,” Worters says. “However, 25% to 30% of all paid losses for flooding are in areas not officially designated as special flood hazard zones.”

3. That goes for earthquake insurance, too

Californians aren’t the only ones who have to worry about earthquakes—in fact as many as 39 states have experienced tremors, according to data from the Insurance Information Institute. And the resulting damage usually isn’t covered by traditional home insurance policies.

Homeowners need to purchase an addition to their home insurance policy to cover
any earthquake-related claims. The cost varies by location, insurer, and the type of structure being covered as well as age of the building, Worters says.

4. Have a pool? Dive into extra protection

Ahh, your new home has a fabulous swimming pool and hot tub. Yay for you! We’d love to come over—but before we do, you should look into bumping up your liability insurance.

Liability coverage is the part of a home insurance policy that may pay court costs or other expenses if you’re found responsible for an accident, such as someone drowning or suffering a serious injury after doing a cannonball into the shallow end of your pool.

Another option: You can purchase an umbrella liability policy to provide a level of protection not typically available with standard home insurance policies.

5. Your home’s claim history matters—even from when you didn’t live there

Whether you’ve just begun your home search or lived in your home for years, it’s never too late to get familiar with your home’s claim history—and how it might be affecting your homeowners insurance rates.

It’s all summed up in a nifty database called the Comprehensive Loss Underwriting Exchange, or CLUE. Essentially the equivalent of a credit report for your home, the CLUE contains all kinds of records of insurance claims on the house.

That’s important to know because a claim filed for the property in the past five years could cause your rates to inch upward, even if you didn’t own the home at the time of the claim.

But take heart, dear home buyer—not all prior claims have a negative effect.

“Some recent claims can have a positive impact, because replacing a roof damaged by a windstorm could make the house more desirable to an insurance company,” Worters says.

If you’re looking to buy a home and want a copy of the CLUE report, check with the sellers (only the owner of a property may access its CLUE report). There’s no guarantee they’ll fork it over, but there’s no harm in asking. If you already own the home, you can get a free report from database giant LexisNexis.

6. A high deductible can really pay off

It should come as no surprise that you’ll want to shop around before committing to a policy. Compare the rates, deductibles, and coverage options of at least two to three companies to make sure you have adequate coverage for your situation.

Pro tip: Pay close attention to the size of your deductible.

“It’s recommended to opt for the highest deductible you can afford because most people only file a claim every eight to 10 years,” Worters says. “A higher deductible saves money year after year and encourages only using insurance in catastrophic situations when it’s truly necessary. And that also helps keep your costs affordable.”

A professional real estate agent will have proper knowledge in insurance and other investment matters. Contact me for more information in all things real estate.

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Here’s What Everyone Gets Wrong About Jumbo Loans

Jumbo loans—they’re not just for McMansions anymore! The oversize loans are becoming an increasingly viable option for entry-level home buyers in some parts of the country.

So what are they? Jumbo loan mortgages are those for amounts above the limits for government-sponsored loans. In most parts of the country, that means over $417,000, but in areas where the cost of living is extremely high, the threshold jumps to $625,000. (You can check the limit in your local market.)

But these XXL loans have a reputation of being expensive and hard to get, causing some eligible buyers to dismiss them out of hand—and stick with a more traditional conforming loan. (Conforming loans meet certain guidelines specified by Fannie Mae and Freddie Mac in terms of the size of the loan, the borrower’s debt-to-income ratio, and documentation. These loans usually have lower interest rates than nonconforming loans such as jumbos.)

While the jumbo loans of the past may have presented more barriers to home buyers, recent lending trends have made them more accessible. Read on to learn about four myths around jumbo loans—and to find out the truth!

Myth No. 1: They’re only for buying mansions

In expensive cities with a hot housing market, you’ll be hard-pressed to find much housing stock that would require a mortgage within the conforming limits. If you live in San Francisco, for example, where the median home price tops $1 million, most home buyers would qualify for jumbo loans. In other parts of the country, rising home values have pushed even some middle-class homes into jumbo territory.

“In some markets, the first-time buyer is looking at a jumbo loan,” says Bob Walters, Quicken Loans’ chief economist.

Myth No. 2: You need a huge down payment to qualify

It used to be that lenders required down payments of as much as 30% to secure a jumbo loan. That’s not always the case any more. Lenders competing for qualified buyers have loosened up on that standard, with some banks now offering jumbo loan financing for as little as 10% down. Plus, unlike with conforming loans, putting down less than 20% on a jumbo loan doesn’t automatically trigger the need for costly private mortgage insurance.

To qualify for a lower-down-payment jumbo, you will need impeccable credit and may face stricter requirements regarding your debt-to-income ratio and cash reserves—butlending requirements have been easing steadily for the past three years. As with any

mortgage product, it pays to shop around to make sure you’re getting the best rate.

Myth No. 3: You’ll get a better rate on conforming loans

During the housing boom, jumbo rates were around a half-point higher than the rates you could get on a conforming loan. Recently, however, those rates have converged, with some banks offering jumbo products at rates lower than those found on conforming loans. The average rate on jumbo loans was 3.8% in late February, while conforming loans had a rate of about 3.85%, according to the Mortgage Bankers Association.

“In markets where there is a lot of jumbo activity and all the lenders want market share, the pricing competition is fierce,” says John Pataky, executive vice president of EverBank.

Myth No. 4: There are fewer options

For a few years after the mortgage crisis, the big banks were the only ones making jumbo loans, which lenders typically keep on their books (rather than selling them to Fannie and Freddie once the loan is made). As the market has improved, however, more small lenders are returning to the space, along with online, nonbank lenders such as Quicken and startups such as SoFi.

More & More Singles Are Falling For Their Dream Home

Contact me for details if you’re ready for your dream Maui home.

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Understanding Affordable Housing

This past January, Alexander & Baldwin, one of Hawai‘i’s original Big Five corporations, kicked off the year with a groundbreaking for its newest residential development, Kamalani, in north Kihei. The dirt-and-shovel affair also promises groundbreaking opportunity: a long-awaited and much-needed affordable housing component.

On an island where most properties are out of reach for the average first-time buyer, this is big news. We interviewed Grant Chun, vice president of A&B Properties, to learn more.

How is affordable housing defined?

It is not low-income housing, nor government-assisted. Per the County of Maui, affordable housing must be attainable to buyers whose household income is 80 to 140 percent of median income. On Maui, median income for a family of four is $76,700.

So families with a household income of $61,360 to $107,380 would qualify?

Yes.

How much will Kamalani’s affordable homes cost?

Prices will start in the high $200,000s and go up to the high $400,000s for condos and townhomes. The pricing is determined through a formula provided by the County of Maui, based on median income and prevailing interest rates.

The units will be available to the various income groups under different price points, as required by County ordinance. For those earning 80 to 100 percent of median income, homes will stay on the market at that level for ninety days. They can then move to the next income level, 100 to 120 percent of median income, for ninety days, followed by the highest level, 120 to 140 percent of median income.

If, after that time, there are still affordable homes available, the County will open the opportunity to off-island folks [who qualify for affordable housing]. After all those markets are exhausted, remaining units would go into the mainstream market. The entire process takes about a year.

What kind of demand to you expect?

This is the first time we’ve offered homes under the County’s affordable-housing ordinance. Market research tells us there is a tremendous shortage. Therefore we expect strong demand from entry-level buyers. When the first affordable units go on the market later this year, applicants will be invited to put their name on a list for the opportunity to purchase by lottery, and then vetted to see if they qualify.

What kinds of loans are available to families interested in the program?

The best are provided by banks and other lenders that work with federal programs such as Fannie Mae and Freddie Mac. These programs are designed for first-time buyers.

Are the rates more favorable for those qualifying for affordable housing?

Yes. Federally assisted loans may offer lower rates, and also lower-percentage down payment.

An important thing to know about some of these loan programs is homebuyer education. Since the economic downturn, many lenders now require the borrower to take an approved course in home buying, which includes a one-on-one counseling session and a credit report. Many folks earn enough money, but because of their lifestyle, may not qualify for a loan. The course provides information on what a mortgage is, what the costs of homeownership really are, and what responsibilities the borrower is accepting when taking out  a loan. A&B is requiring first-time applicants to take such a course to be eligible for Kamalani’s sales lottery, so that when it comes time to apply for the loan, they’ll have the best chance to qualify.

Who offers these classes?

The course is currently provided through Hale Maha‘olu for $75, and is two sessions. A variety of dates are offered, plus an online version. Potential borrowers who complete the class receive certification that they have satisfied the requirement for these loans. This is a great tool, regardless of whether the borrower is interested in Kamalani or another project.

How much of Kamalani is set aside for affordable housing?

Out of 600 units, 170 in the first increment will be affordable: two- and three-bedroom condos and townhomes.

Are there rules for resale of affordable housing?

Yes. The owner is not allowed to sell the home until after a specified number of years. Owners who want to sell before that time are required to offer the unit to the County first. Additionally, the buyer may realize only 25 percent or less of the increased value during the restriction period — that is, the difference between the purchase price and the appraised value at resale. For example, if the home has increased in value from $300,000 to $400,000, the owner may sell for no more than $325,000. The intent is to encourage true first-time homebuyers and discourage speculators. After the specified time restriction, the owner may sell at market price.

Affordable units are sold at a loss to the developer. For the first-time homeowner, they can be a huge windfall — if the owner stays in the unit for the required duration.

What are the time restrictions?

Ten years for those qualifying at the first level of affordability [applicants earning 80 to 100 percent of mean income]; eight years for next level [100 to 120 percent]; and five years for the third [120 to 140 percent].

Are you working with specific lenders?

Yes. Our lead lender is Ann Sakamoto from Central Pacific Bank. Bank of Hawai‘i and American Savings are also participating.

What is your advice for families interested in affordable housing?

Take the Home Buyer Education class as soon as possible. Seating is limited, and advance registration is required. To register, call 808-856-4045, or go online at KamalaniLiving.com. The website also has information on eligibility requirements for the County’s Residential Workforce Housing.