May 31, 2022

I hope you had a wonderful weekend, and I know it was a beautiful one here in California. I am not too fond of long weekends as business slows and my mind goes in a million directions, but I am learning to cope! LOL!

When my business starts to slow down, I always want to go back to the basics, talk a little slower, and make sure our clients understand what they are getting. Believe it or not, this is still a first-time buyer market, but it is more expensive to buy today than recently. So how does it make sense to buy vs. rent? Below is today’s illustration that we point out to all of our first-time buyers.
Purchase price $800,000.00 – 5% down $40,000.00 – 30 year Fixed rate – 5.250% – Principal and Interest payment = $4196.75 + Property Taxes $833.00 + Insurance $125.00 + PMI $190.00 = $5344.75
Principal pay down $10,716.40 the first year – $893.03 Per month
Appreciation – California has average 5.7% increase in value over the past 50 years. We assume 3% annual – $24,000 – $2000.00 per month
All in payment = $5344.75 – $2000 appreciation – $893.03 Principal reduction = $2451.72 = the true cost of owning your home. There could be additional Tax benefits too.
An $800,000.00 property would rent for $3500 in this market and if rents go up 3% annually, you will be paying $4065.66 in 5 years.
If your property value increases by 4% annually – $5344.75- $2666.67 appreciation – $893.03 Principal reduction = $1785.05 True cost of owning a home
If your property value increases by 5% annually – $5344.75- $3333.33 appreciation – $893.03 Principal reduction = $1118.39 True cost of owning a home
If rates go down and you can refinance at 4.00% = Principal and Interest payment = $3628.36 + Property Taxes $833.00 + Insurance $125.00 + PMI $190.00 = $4776.36 – $568.39 savings
If you refi at 4.00% and your property appreciates by 3%, the true cost is $2451.72 – $568.39 = $1883.33
If you refi at 4.00% and your property appreciates by 4%, the true cost is $1785.05 – $568.39 = $1216.66
If you refi at 4.00% and your property appreciates by 5%, the true cost is $1118.39 – $568.39 = $550.00
All of the above are estimates. Please note that you still have to pay your mortgage taxes and insurance, and the “True Cost” only reflects the long-term benefit of owning a home.
This looks a lot better with 10% or 20% down, but this is what you get with 5%, and I think it looks pretty palatable.

Interest rates had an excellent week last week, and they gave some of that back this morning. Home prices for March were up 20% year over year, plus Covid restrictions have been lifted in China. Hang tight as this will be a bumpy ride.
30-year Government Loans (FHA / VA) are in the mid to high 4’s
Conventional Loans up to $647,200.00 – High 4’s low 5’s
High Balance Loans $647,201.00-$ 970,800.00 are in the high 4’s and low 5’s
Jumbo loans above $970,801 are in the high 4’s and low 5’s. We can do mid 5’s with as little as 10% down. We can do 1-year findings on these too!
5/1, 7/1, 10/1 Arms are in the 4’s for over $647,201. Under that, don’t bother right now!
Bank statement loans – They are available with 10% down again! 6’s+ depending on down and credit score.
Stated income loans – I have one bank with 30% down, but everything else has to be perfect! Interest rates are in the high 5’s.
0 down loans are in the 5’s – 620 credit score min right now! Mid 5’s, for the most part, up to $670,000.00 Price.
0 down Jumbo to $975,000.00 – 680 credit score – call for a quote
Private Money lenders – hard Money Loans – 35% down!
No Ratio Loans 30% down
Debt Service Coverage loans with as little as 25% down
Bridge Loans – are typically 5.49 – 6.49% with limited fees – But they get you where you need to go!
Interest rates are subject to change without notice! Above are LA County Loan Limits.

I will be around all week if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 xt. 2222. Please text me at 661-714-6258 or email me at Mike@AugustaFinancial.com. Have a great day and a better tomorrow! Please call me when you have a client that needs to borrow!