2011 FHA and VA Loan Limits for Los Angeles County

Los Angeles County 2011 VA loan limits dropped to $700,000, as did Orange county,  The 2011 VA loan limits for Ventura County was set at $562.500.  Riverside and San Bernandino counties' limits remain at $417,000. These loan limits are the maximum base mortgage amount for a zero-down VA home loan.

2011 FHA loan limits for Los Anegeles County are $729.750 as is Orange County.  Riverside and San Bernandino Counties have an 2011 FHA loan limit of $500,000.

View the full list of 2011 VA loan limits for California counties.

VA mortgages allow veterans to borrow above the county loan limit if the buyer has a down payment.  You can use this VA mortgage down payment requirement formula to calculate the amount needed.  Los Angeles County homebuyers have found VA loans to be a particularly good option for loan amounts up to $1,000,000, because of the low down payment requirement, in 2009 and 2010.

VA loans do not require private mortgage insurance (PMI) because they are insured by the VA, which collects a funding fee from the buyer.  This makes most VA loans a less expensive option than FHA or conventional loans, where PMI is required.


Los Angeles Mortgage Rates Report- June 17, 2010

Q: Why are mortgage rates in Los Angeles low but nobody ever seems to get the rate that's advertised?

A:  It's getting harder and harder to qualify for the "best offered" mortgage rate.

Let me start at the beginning:  How do Los Angelenos qualify for the "best" mortgage rate?

Firstly, have great credit.  This means you need to have a credit score of 740 or higher.  For each 20 points below the magic 740, there is an upfront fee to qualify for that great rate.  Credit score of 640 are the minimum for both conventional and FHA loans and VA loans will fund down to 600 credit score. 

but...that's not all!

Secondly, your debt-to-income ration has to be aligned with the underwriting guidelines.  For conventional loans, your monthly debt payments (inclusive of your total housing expense) can't exceed 36% of your monthly income.  If it does, there's an upfront fee to qualify for that great rate.  If it exceeds 45%, no loan conventional loans are available.  For FHA loans, the debt-to-income ratio allows up to 55%.  VA loans use a different underwriting formula called residual income analysis.

Still, there's more!

Finally, the collateral position needs to be solid.  There are three components to the collateral position:

  • how much equity (or down payment) you have in the home
  • the type of property
  • the use of the property

Equity positions of 25% or more are required for the best conventional loan rate.  FHA loans allow for as little as 3.5% and VA loans have no equity requirement.

The "safest" property is a single-family detached home (not on more than five acres).  If the property is more than five acres...upfront fee.  If the property is an attached home or condo, even more upfront fees.  Manufactured homes are nearly impossible to finance.

Owner-occupied homes have no additional upfront fees nor do vacation homes.  Investment properties have a healthy upfront fee.

In some cases, "upfront fees" can be traded off for a higher rate.  Does this sound confusing?  It is to me and I deal with it daily.  This is why you haven't seen me post the Los Angeles Mortgage Rates Report in over a year.  Rather than represent rates that most folks can't get, I spent thousands of dollars on a search engine, which allows you to input the relevant criteria, to get competitive rate quotes.

Search for your personalized mortgage rate quote here.


2010 VA Jumbo Mortgage Limit Drops in Los Angeles County

Los Angeles VA jumbo loan limits will be reduced to $593,750, from the 2009 limit of $737,500, in response to the lower median home prices.  Los Angeles veterans looking for a VA home loan above that limit will be required to put down 25% of the difference between the new loan limit and the higher sales price.

EXAMPLE:

An eligible veteran, looking to purchase a home for $693,750, will need a down payment of $25,000 which equals the 25% of the $100,000 difference.

An eligible veteran, purchasing a home for $993,750 will be required to put down $100,000 which is 25% of the difference between the sales price and 2010 loan limit.

Median prices across Southern California stabilized in 2009 in response to the high balance loan program, foreclosure stays, and home buyer tax credits.  Los Angeles County's median price dropped from $355,000, in October, 2008 to $325,000, in October, 2009.  It is anticipated that the 2010 VA loan limit should facilitate approximately 75% of the sales prices for 2010.

2010 VA loan limits in Southern California:

San Diego ..................$437,500

Los Angeles................$593,750

Orange ......................$593,750

Riverside.....................$417,000

San Bernardino............$417,000

Imperial.......................$417,000


Los Angeles Times Gets It Wrong On Mortgage Rates (Cuz They Ain't In Real Time)

Didjya ever pick up the Los Angeles Times to shop mortgage rates?

That worked way back in 2000 before the internet grew up.  Today, the Los Angeles Times is, well...a great opinion rag but the relevant information, you know, the stuff you want to know RIGHT NOW, ain't so relevant. 

Wanna know some inside poop about whether Manny will or won't wear Dodger Blue this year?  Read the Times.  Wanna know how many points Kobe put up before you go to bed?  Type in Lakers.com.

Want expert opinion about the art exhibition tonight, in Northeast Los Angeles?  Run down to the store, buy the Times, and browse through the Neighborhoods section; the analysis will be superb. Of course, you already Googled "art exhibitions in northeast los angeles" to find out who WAS showing, before you wanted that expert opinion.

I'm not EXCLUSIVELY pickin' on the Times, I'm an equal opportunity picker-onner.  My hometown fish wrap, the San Diego Union-Tribune, is equally as irrelevant when it comes to real-time information.

Are mortgage rates THAT volatile and the mortgage market THAT confusing that the information the Times offers irrelevant?  Yup.  Today, the mortgage rates are changing as much as 2-3 times daily but you already knew that.  How can a potential home buyer get real-time information about the mortgage market?  Try entering a loan request to the Zillow Mortgage Marketplace.  There, lenders will size you up and compete for your business without having to relinquish your personal data.  No phone calls, no e-mails, just a straightforward loan quote...from lots of lenders.

You wouldn't wait for the Times to publish the box score and now you don't have to wait to get real-time mortgage rate quotes from credible sources.  The Times is best for opinion and analysis (well, maybe for Sports- you can get expert mortgage market analysis here).

PS:  I purposely wrote this article in the vernacular, slang and all.  San Diego Union-Tribune columnist, Logan Jenkins described us "citizen journalists" this way:

No way can a loose network of bloggers in pajamas – or, for that matter, time-challenged broadcast outlets – match our concerted effort to inform in detailed depth.

I didn't want to rain on his self-adulatory parade so I tied one hand behind my back.


Los Angeles homeowners can get a 4.5% mortgage rate in March

  ...if you like the terms. Here's the rub:Finishline

  • it's for a fifteen-year, fixed-rate mortgage and...
  • it costs 1.25% in points and...
  • the loan amount has to be for $250,000 to $417,000 and...
  • you have to have a 700 credit score or higher and...
  • all of your monthly debts (including the new payment) can't exceed 40% of your documented income and...
  • you must have at least 20% in equity if it's a purchase transaction or....
  • you must have at least 20% in equity if it's a refinance of your purchase loan (no cash out) or...
  • you must have at least 40% equity if it's a refinance where you took cash out of the house.

Lots of restrictions but it's here.  Contact me if you want to give it a go.

PS:  This might not be that bad of an idea if your rate is 6% or higher.  If you took out a $300,000 loan, at 6%, for thirty years, your payment is $1798. Refinancing your mortgage to a 15-year loan, at 4.5% would raise your payment to $2294.  That's only $500 a month. 

That's an extra $90,000 that you'll pay towards your mortgage over 15 years.  If you bought your home in 2006, you still have 27 years left.  If we could knock off 144 payments at $1798, you'd save $259,000.  So...

It costs you $3750 in points PLUS another $3000 in closing costs PLUS the $90,000 extra (the higher payments).  Pay out $97,000, over fifteen years, and save $259,000?  Hmmm, maybe you'd do better in your 401-k.

Then again, maybe not.  I'm just sayin'.

I'll run the numbers for you if you contact me.


Los Angeles Mortgage Rates Report: January 21, 2009

Shopping for mortgage rates might have become easier but shopping for a mortgage is still quite difficult. Did you know that half of the loan applications taken last month did NOT result in a funded loan?  The long desired 4.5% mortgage rate is hard to get.  We’ve been there twice and you received a 4.5% mortgage if you:

1- Have impeccable credit

2- Have lots of equity (many borrowers were surprised at how foreclosures stole their equity)

3- Have plenty of documented income and were prudent in your use of debt.

4- Only refinanced the loan amount you used to purchase the property (you didn’t extract any cash out from a previous refinance)

5- Dealt with an originator who understood that mortgage rates were VERY volatile, gathered your information, picked a lender who wasn’t swamped with loans, and executed a rate lock at the appropriate time.

Have you seen what happened to mortgage rates this past week? They shot up from the mid 4’s to over 5%; that’s a half-percentage point rise in eight days.  The mortgage bonds market is skittish about our new President.  His Economic Recovery Plan relies on huge government borrowing and that is inflationary.

I have no comment about his plan; that’s far above my paygrade.  I do, however, think this massive government borrowing will drive rates into the 6’s within 12 months.  Still, there should be a pinprick of light through this dark cloud (in the form of a low mortgage rate)

Listen to this 3 minute podcast to find out when we should see that light.


Los Angeles Mortgage Rates Report: January 14, 2009

atlasThe US Treasury Department has been supporting the mortgage bonds market, in order to keep mortgage rates under 5%.  I cited two reasons why sub-5% rates might not happen:

1- Capacity: Lenders don’t have the horses to ride since they laid off so many workers in 2008.

2- Greed:  Lenders typically made a loan at a rate and sold it for about a half a point profit.  The improvement in mortgage bonds allowed lenders to fatten up their margins and make as much as 3% of the loan when they sold it.

I think the real reason was more in line with my first guess; capacity.  What I didn’t realize was that the mortgage lenders were out of money.  Well, sort of.  To understand this concept you have to understand the “flow” of mortgage loans.  The big banks, like B of A, Citi, and Wells, loan direct or buy loans from other lenders and brokers.  We “commit” those loans to them and they sell the loans off to Wall Street.  If my company loans you $300,000, we’ll sell it to a bigger bank for $303,000, and they sell it to Wall Street for $306,000…except…

They don’t really get paid but once a quarter.  Loans made back in October have been COMMITTED to Wall Street, by those big lenders, but the transaction (sale of the loan) only happens every three months.  While they wait for that transaction day, their funding line gets filled up.  Imagine a funding line (sometimes called a warehouse line of credit) like a big credit card,  Normally, a big bank needs, say $100 Billion for its line.  The unexpected refinance volume filled up that line quickly.

Those big lenders were “at their credit limit”…until today.

Today was this past quarter’s settlement day, which means, the big lenders sold off all of the loans to Wall Street and paid off their “super-sized credit card”. From Mortgage News Daily:

Tomorrow brings us the final day of Class A settlement, in which sellers of MBS deliver the loans in pools to satisfy the executed sale trades made over the last 3 months.  When this occurs, sellers will finally receive payment for the most action-packed month of originations in recent memory.  Up until now, the cost to originate these loans has been borne by MBS sellers, aka originators.  We have surmised that one of the several components that is causing a much-larger-than-welcome margin of MBS prices to lenders’ rate sheets is the funding constraint created by the gradual exhaustion of money to satisfy a rapidly increasing originationd demand.  As this money has dried up, it stands to reason that lenders must artificially raise rates to deter incoming business in order to avoid exceeding their funding sources.

Lenders have lots of cash to lend again. NOW is when we should see the lenders start pricing in line with the mortgage bonds market.  Mortgage rates should drop to 4.5% …IF the mortgage-backed securities market remains strong.

This is what the Treasury Department was waiting for.  Expect the Government to support mortgage bonds, so that lenders can lend out all this cheap money they have and still make a healthy profit.  It might take a radiofew days and I don’t expect mortgage rates to stay this low for too long.


Listen to how this phenomenon might get you a mortgage rate as low as 4.5% on Radio Mortgage.

At the risk of sounding alarmist, you should be getting your ducks lined up and talking to a mortgage adviser….NOW…not later.  I’m not selling you, I’m TELLING you to…

take action now.

 


Los Angeles Mortgage Rates Report: January 6, 2008

Los Angeles mortgage rates are 4.75%…No, wait a minute.  They shot back up !Up graph

Welcome to January, 2009.  It looks to be a rocky ride through Inauguration Day.  After that, all bets are off.  Here’s the good news, though; mortgage rates, while just over 5% this afternoon (up from 4.75% this morning) are still excellent.

Sean Purcell and I discuss why the lenders are raising rates on Radio Mortgage.

Give this ten minute podcast a listen.


Will The 4.5% Mortgage Rate Craze Reach Los Angeles?

Last night, I speculated that Los Angeles mortgage rates would open in the 4.5% range because of the Fed’s post-market Press Release about its mortgage-backed securities market intervention:

Mortgage markets are responding with EXUBERANCE…joy…unbridled passion!  In post-market trading, the 4% coupons are trading at a premium, suggesting that  mortgage rates should open below 4.5% tomorrow.

That…didn’t quite happen. Mortgage-backed securities open higher, then fell off the table, then recovered, then fell again.  Lenders offered wholesale par rates (with no yield spread premium) at 4.625% and 4.75%, today.  My article moved over 20 people to call to find out about a potential refinance and most seemed frustrated that the 4.5% rate was not available, yet.

My hypothesis is that the mortgage traders were still on vacation, in Cabo, and didn’t see the Fed’s Press Release as sufficient cause to jump on a plane and get back to Wall Street.  I still think we’ll see a 4.5% mortgage rate…next week.  Here’s why most borowers will never get that rate for their refinance:

It won’t stay down at 4.5% for long. We saw this happen, for about three hours, about two weeks ago.  Borrowers who “had it tee-ed up” got that rate, with a 1% origination fee.  “Teeing it up” means you’re ready to lock your rate.  Lender require the following to lock a mortgage rate:

  • Credit report pulled
  • Loan application completed and entered into the system.
  • Documentation for income, and assets, ready to fax, email, or send via overnight mail.

Lenders are cracking down on lock commitments.  The rate locks are coming with conditions, meaning that the loan file needs to be submitted to underwriting within ten business days.  This means that a title report needs to be supplied (3-5 days) and an appraisal needs to be uploaded (7-8 days).  That leaves very litle time for deliberation, if Los Angeles mortgage rates “just touch” 4.5%.

As such, deposits for appraisals, condominium certifications, and/or credit reports need to be supplied at rate lock commitment.  What this means is that your originator will collect about 4 or 5 hundred bucks from you.  I have no doubt that some of the originators who comment on my articles will try to “sell you” with the comment that “upfront fees are evil” or “take your time and decide”.  Others will say that I’m using fear to intimidate you.

Okayfine.  I’ve worked in financial services, both trading mortgage-backed securities and originating mortgages, since 1989.  It is my professional advice that you need to be prepared if you choose to take advantage of this opportunity.  These are unusual times with extraordinary benefits for the swift.  Banks know that they hold the upper hand with these low mortgage rates; they’ll only reward the prepared.

Contact me if you have questions. The phone is the most efficient and reliable medium.

PS:  The requirements to get this “magical rate” will be steep.  You must have excellent credit, be refinancing the amount of the mortgage you had when you bought the home (meaning you didn’t take out any cash from the property), and have plenty of documentable income.  If you don’t meet those steep criteria, don’t fret.  While you may not qualify for that rate, you will still be offered an historical one.

PPS:  If you contacted me today, I’m still digging out from under.  I’ll be scanning and e-mailing promised documents on Friday.

PPPS:  I almost forgot; Happy New Year !


Los Angeles Mortgage Rates Report: December 5, 2008

If you’re a regular reader of my mortgage rates report, you’ll notice that I adopted a locking posture, late last month, for the rest of the year:

If the Fed’s thinking of cutting rates further, why aren’t mortgage rates going down? I think it’s because the Fed has done all it can do.  Future rate cuts are like that eighth scotch.  Drinking that eighth scotch isn’t going to make you feel any better than the seven prior.  It just might make you feel worse.

I advised folks, right after the election, to lock loans with rates under 6% if they were closing within 30 days. Today, I”m suggesting that you lock any loan that is closing this year.  Today, a 45-day lock for a 6.0% rate would costs 1.25%.  While you may see rates drop below 6% , in the next 45 days, the risk of them moving higher is greater.

Take 6% and run.

That was a colossal screw up, huh? That eight glass of scotch didn’t do anything but the injection of heroin did. The eight glass of scotch I referred to was a rate cut.  I feel that in a zero interest rate environment, no further rate cuts would have a marginal effect on Los Angeles mortgage rates; I was right.  What I didn’t see is the Fed-induced rumor mill (the shot of heroin) of buying mortgage-backed securities so as to drive down mortgage rates to a 4.5% level.

If you’re worried about the long-term affect on the economy, the Fed action is a pretty dumb idea.  The only way for them to really affect mortgage rates is to buy up about $1 Trillion in mortgages.  If you’re a would be home buyer, that could really benefit you.  Even if you’re closing in December, lenders called off all bets and gave you another chance to relock yesterday, at the lower rates.  They want your business so take that opportunity and lock that rate. When the MBS traders see that this idea is probably NOT feasible, mortgage rates could back up another .25-50%, putting us back in the high 5.75%-6.0% range.

Let’s pretend, however, that the silly little market manipulation might work.  How would we pay for this massive purchase?  Remember when I said that mortgage-backed securities trade higher than their treasury bond cousins? In banking we call that a “spread” and that spread was really fat last week.  Mortgages were trading at 5.75% while the 10-year Treasury bond was trading below 3%.  If the government was guaranteeing mortgages, why would that paper yield so much more?

Traders still think there is risk in the mortgage market. Homeowners continue to walk away from mortgages and that creates an inherent risk to the principal.  Since the explicit guarantee of MBS didn’t work, the only option is to buy those mortgages to drive rates lower; that’s what the rumor is all about.

Brother Can You Spare a Trillion or Two?

So, where are we going to get the money?  If the Treasury can borrow $1 Trillion, for 30 years, and they don’t drive the yields on that paper above 4.49%, they can buy mortgages in the open market down to a yield of 5.5%.  That’s called arbitrage and it’s how banks make money. They “buy” money cheaper than they sell it.

This is why you, as a home buyer looking for a mortgage, must NOT keep your eye on the wrong ball.  Follow the mortgage-backed securities market here; ignore the 10-year Treasury bill,  You could very well see yields rise on the Treasury bonds while Los Angeles mortgage rates decline…

…if they actually try to attempt this silly idea.

PS:  I think the traders on Wall Street will catch on to this ruse and sell of mortgage-backed securities, driving mortgage rates higher. You have to ask yourself if you’d be more upset watching rates rise to 5.75%, and missing a 5.25% mortgage rate, or watching mortgage rates drop to 4.75%, after you locked.

PPS:  My guess is that you could renegotiate your rate lock if the latter happens.  If you’re working with a mortgage broker, that broker will have the flexibility to re-lock you with another lender should that happen.


Los Angeles Mortgage Rates Report: November 19, 2008

The economy is really sick:

Today's CPI report signals deflation, or a prolonged price slide, may become another hazard facing Federal Reserve Chairman Ben S. Bernanke and President-elect Barack Obama. Deflation could worsen the economic downturn by making debts harder to pay off and countering the impact of Fed interest-rate cuts. 

   

``The economy's really just in horrific shape,'' said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. Fed officials will ``take rates as low as they have to'' to avoid ``a deflation-type scenario, which now all of a sudden is very possible.''   

   

LaVorgna predicts the Fed will cut its main rate to 0.5 percent from its current 1 percent when it meets on Dec. 16.   

       

Fed Vice Chairman Donald Kohn said today that while the risk of deflation is ``still small,'' policy makers must be ``aggressive'' in fighting the danger. The economy ``is declining right now'' and will record a couple of quarters of contraction, he said in answering questions after a speech in Washington.   

   

Fed policy makers last month forecast the U.S. economy will contract through the middle of 2009, with some officials prepared to cut interest rates further in response, according to a record of the group's meeting.

If the Fed's thinking of cutting rates further, why aren't mortgage rates going down? I think it's because the Fed has done all it can do.  Future rate cuts are like that eighth scotch.  Drinking that eighth scotch isn't going to make you feel any better than the seven prior.  It just might make you feel worse.

I advised folks, right after the election, to lock loans with rates under 6% if they were closing within 30 days. Today, I"m suggesting that you lock any loan that is closing this year.  Today, a 45-day lock for a 6.0% rate would costs 1.25%.  While you may see rates drop below 6% , in the next 45 days, the risk of them moving higher is greater.

Take 6% and run.


Los Angeles Mortgage Rates Report: November 5, 2008

We have a new President and his name is Barack Obama. Is that good for mortgage rates?

I think either man being elected would have been good for mortgage rates provided the victory was decisive.  The Obama victory was clearly decisive and markets should reward that.  In anticipation of this decision, mortgage-backed securities rallied today bringing mortgage rates to the 6% level  I thought we might reach this week.

On Wednesday, conforming mortgage rates should be offered at 6% or below; take any rate under 6% if you're closing in the next 45 days.  While the euphoria of an Obama victory may bring mortgage rates even lower, the risk of a quick reversal still exists.

Mortgage rates under 6% are about as good as it gets.

Originally posted on Mortgage Rates Report