Category Archives: Personal Finance

House Hunt..the beginning

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Nesting?  My favorite sites and mobile apps for house hunting have been Redfin and Trulia.  Other popular sites are Zillow or Realtor.  I find Redfin generally is faster and more user friendly, providing headline stats like price, bed/bath count, days on redfin, $/sqft, yr built followed by detailed information.

Any agent can also set you up with a portal from theMLS, which is the multiple listing service brokers use to list houses.  In hot markets like Los Angeles, I keep in touch with brokers with the hopes they can alert me to off market properties, but word spreads fast.  If you are browsing, and don’t want to commit to an agent yet, Redfin is  enough.  The alerts setup is more visually  appealing than theMLS portals.  House hunting should be a little bit fun!  Any questions?

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Jumping through hoops for a US Home Loan

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Post housing collapse, taking out a loan has become significantly harder.  Even for people who have enough assets and income to get a loan, the application process has become a tedious barrage of questions and demands for proof.  Think filling out an online job application with 10 different fields for one work experience, even though the relevant details are on your resume already.  Or filling out an online form that crashes repeatedly so you end up submitting similar versions of the same form many times.

What’s the smoothest way to loan approval?

  • Before buying a house, you need to have enough cash to cover: down payment amount +12 months of mortgage payments + closing costs+buffer of a few thousand
  • The formula to a simpler approval process seems to be: employed, Credit score >650 , low debt to income ratio, have cash (the amount above) sitting in the checking account for >2months.
  • Documents required: Typically the requirements come in 2s:
  • *2yrs of a tax returns, W2s
  • *Most recent pay stubs
  • *2 months of bank statements, all pages, full account #s included –
Here’s a sticky part I was surprised to learn: the lender has to  verify the source of income as well, so if you transferred money from different accounts, they will ask for the statements of those accounts.  You will have to explain your statement line by line, especially cash deposits.  If your statement is fairly clean for the last 2 months, this part is easier.  Finding the paper trail slows the process down, which has the knock on effect of delaying funding of your loan (ie the money for the loan doesn’t come through).  if you can’t close the loan in time, you might lose the house and your deposit!
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Protip to secure your financial information?
You may feel a little uncomfortable, as I did, about sending docs over email.  I had to specifically ask, but most banks will send you an encrypted secure email chain or folder sharing system -these are secure ways to attach documents to email.
Self employed?  Sure you could get fired anytime at a company, but if you have the capability to generate income on your own, you will be welcomed to a new level of suspicion.  Any income that hasn’t been consistently collected for over a year, you can forget about.  If in a partnership, provide 2 yrs of partnership returns, your business license, etc. The requirements vary, but one of the banks also asked for current profit and loss statements for the year.  Any sudden drops or jumps in income will be red flags, and some banks may not even recognize more than a 20pct increase in income from one year to the next.
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Broker Beware-Mortgage Rates BS

Brokers say the darndest things

This is a warning against any callous declaration of fact. Especially one tied to a random pattern.

Email blast from a mortgage loan broker (the guy who arranges your house loan) about the interest rate paid on mortgages: ” This email is being sent to all my clients, to inform you of the rate pricing has dropped significantly, if you were waiting for rates, this is the best it’s going to get. Also if you look at the past history of rates for the last 3 months, every time we get close to the 3rd of the month pricing dropped, it’s the same case this month.”   

The interest rate determines the cost of your loan, so a lower interest rate is better.  This guy has fished out a pattern in mortgage rates by looking at the rates every 3rd of the month (ok for the last few months).  Btw, the first thing brokers learn (well, smart ones) is that past performance is not indicative of future results.

Now if he wanted to make an intelligent argument, maybe he would bring up non-farm payrolls that occur the first Friday of each month and their potential impact on interest rates.  But saying rates are the lowest on the 3rd of the month, just because they’ve been for the last few months, is like saying rates are low because my Starbucks coffee tasted the same the last 3 months, or because my toenails were painted purple for the last 2 weeks.