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Some Silicon Valley Tech Workers Get Home Loans with No Money Down

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Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#101

Post by superuser2 »

CPLX wrote: post #56
ryandrake wrote: post #50

I'm confused. The title says "Silicon Valley Elites" but the article says "tech workers", then goes on to list Mark Zuckerberg and some Apple guy who's salary is apparently 50%(!) stock, as examples. So who are these banks "courting" again? Elites or tech workers? Or just these two guys? It's hard to tell. Interesting news would be "Banks giving kickbacks to CEOs and VCs who throw them corporate business." This artic…

I find it hilarious that the answer to this isn't obvious. This is 2016. Tech workers are the American elites. Did you think elites were still guys with a monacle sitting in a drawing room that overlooks a coal mine or something?

Elites are the guys who make deals for a living. Investors, executives, traders, etc. The people who own the tech companies, the people who service the IPOs, the people who own the real estate we pay such ridiculous rents on, the CEOs and board members of our employers and the companies we buy stuff from.

Our pay is high, all things considered, but not nearly as high as law or medicine, and certainly not management. I'd say we are rising from the upper tier of clerical workers to the lower tier of educated professionals. That is "elite" compared to the average person, certainly, but not compared to the economy as a whole.

The term generally given to this strata is "upper middle class." Some resent calling it middle class at all, but nonetheless - there is a critical distinction between "owners of the means of production," "managers of the means of production," and "highly skilled operators of the means of production."

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#102

Post by ryandrake »

dang wrote: post #87
ryandrake wrote: post #50

I'm confused. The title says "Silicon Valley Elites" but the article says "tech workers", then goes on to list Mark Zuckerberg and some Apple guy who's salary is apparently 50%(!) stock, as examples. So who are these banks "courting" again? Elites or tech workers? Or just these two guys? It's hard to tell. Interesting news would be "Banks giving kickbacks to CEOs and VCs who throw them corporate business." This artic…

Ok, we changed the title above to say "some tech workers", which seems accurate enough.

Oh my god. I just realized I've crossed over and become a HN title complainer. I need to take a break from HN for 24 hours.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#103

Post by cloudjacker »

refurb wrote: post #4

One reason: Almost half of their compensation packages are in Apple shares. So their lender, Opes Advisors, assigned the couple a financial adviser who used a software program to factor in debts and future income, including the stock, and the costs of education over the years for two young children. They don't go into much detail, but this part scares me. I'm assuming the "model" estimates some sort of future value f…

I think the bigger picture is that they got a lender that actually looked at their specific financial profile instead of a cookie-cutter credit score.

ECorps have a lot of trouble doing that.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#104

Post by balls187 »

aresant wrote: post #58

I'm going to counter the "math" in this thread Let's take the example of Nick eg: "Nick Merz knows how tough it can be. He’s a 41-year-old product designer at Apple Inc. whose wife also works there, and says they couldn’t figure out if they could afford to own a place anywhere near the company’s offices in Cupertino, where the median value is $1.8 million." Glassdoor check for sr product designer = base of $157,000 t…

> But problem for nick and others is that lenders want a 20% down payment because that gets skin in the game.

Lenders typically charge PMI if you have LTV > 80%.

Our first home was purchased with 0 down (perks of being military brat), and no PMI. Current home was ~10% down, with ~$500 in PMI (kind of a cluster-fuck--the mortgage broker said the loan had no PMI, but last minute it had PMI. We had 2 days before closing, and couldn't find a better deal, so we had them drop the rate).

Our family income is north of the projected Merz' family income of $290k, and while we could afford that 1.8m home, financially it wouldn't make sense to tie up so much of our income into a house (even though it would be straight baller).

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#105

Post by [deleted] »

GeneralMayhem wrote: post #98
CPLX wrote: post #56

Earlier quoted context omitted.

I find it hilarious that the answer to this isn't obvious. This is 2016. Tech workers are the American elites. Did you think elites were still guys with a monacle sitting in a drawing room that overlooks a coal mine or something?

The new elites are in tech, but they're not the rank and file. Making even $250k/yr may be top-5% for income and give you breathing room to make a few investments, but it will never make you wealthy . That's lifetime earnings of about $10m before taxes, so you likely wouldn't get to fuck-you money ever, let alone with time to use it. There's a very serious discontinuity somewhere around the $1m/year mark where you ge…

[deleted]

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#106

Post by JumpCrisscross »

jpmattia wrote: post #89
JumpCrisscross wrote: post #57

Earlier quoted context omitted.

> Restricted shares may not be used to back a loan This is not true. All manner of restricted stock units (granted to insiders) and unregistered stock (not publicly traded) can be used as collateral for loans (though some issuers make you sign documents promising not to do so). I have been asked to appraise private stock for lenders and render an opinion around its volatility and liquidity.

> I have been asked to appraise private stock for lenders and render an opinion around its volatility and liquidity. That must be a ton of fun. How do they incentivize you and your operation to be conservative? Because they presumably only make money if you hit the number, which was the big problem with home appraisers in the housing bubble. They only way I can think of to cause correct behavior would be to ensure th…

I do think it is fun! My firm works with companies and their shareholders. Issuing a letter to a lender is something I do for clients as a professional courtesy. I receive no special compensation in connection with it, and strongly prefer to mark assets to market (i.e. the last comparable trade or fundraising event) over model.

The contents are less "this is where you should mark this asset" and more "this is where others have marked it, the circumstances under which they did so and how those circumstances may differ from this situation". The value isn't in providing a "right" number as much as turning a zero-information situation into an information-positive one.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#107

Post by whack »

loeg wrote: post #45
whack wrote: post #9

I have little interest in tying myself down by buying a house, but the part that's most appealing to me is the mortgage structure. You get to borrow money at a ~3.5% interest rate, in order to invest in something that produces 5-7% yearly returns. On average, this is going to make a ton of money in the long term. Is there any way to do something similar with stocks, without paying an insane amount of money in interes…

Real estate returns are historically flat. Only recently have they risen so quickly. If the bank thought they would get 5-7% on the house, why wouldn't they just buy it themselves instead of giving you a 3.5% loan?

You're ignoring the cash flow that real-estate-owners get from collecting (or not paying) rent. Once you factor that in, 5-7% returns are the norm.

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#108

Post by rgbrgb »

whack wrote: post #9

I have little interest in tying myself down by buying a house, but the part that's most appealing to me is the mortgage structure. You get to borrow money at a ~3.5% interest rate, in order to invest in something that produces 5-7% yearly returns. On average, this is going to make a ton of money in the long term. Is there any way to do something similar with stocks, without paying an insane amount of money in interes…

Sorry to pile on, but I wanted to throw out the fact that there's currently a huge transaction cost to exchanging real estate in the US too -- the largest factor of which is real estate agent commission (typically 5% in California, 6% in some states).

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#109

Post by Domenic_S »

brebla wrote: post #35
tinbad wrote: post #2

We looked at financing through some of those new 'hip' lenders. My wife works for Google and SoFi had some of the highest rates (even with 'Google discount' and 10/20% down). They may get your pre-approval within a day, but in reality most lenders get that done quickly. In the end, they have to play the game everyone else is playing and it means long turnaround times to actually close. This is the part that is fundam…

Yes. Completely irrational. I can secure $60k+ in a matter of hours to purchase a new Tesla or Merc. Drive it off the lot and suddenly worth less than the loan. Real Estate, however, can take 45 days to close a loan when the projected value of the asset is surely positive. Antiquated and balkanized title process and (I suspect) unhealthy regulatory requirements are a bog. From there, I think it is simply inefficienci…

I'm on my 3rd house. The escrow length isn't just about the loan, it's also to give you time to complete inspections. Home inspectors -- especially in hot areas -- can be booked out for weeks.

It also gives the sellers time to find a new place/get packed and moved.

The lender gets their ducks in a row because they're going to package and sell the loan, and there are lots of compliance issues to jump thru to get it sold (properly) after what happened during the crash. Lenders are very careful now, verifying down payment sources, income, credit, etc.

I also did cars for a while and I can tell you most (all?) in-house car financing is provisional, and they do the hard work AFTER you drive off the lot. They like it this way because once you've parked that shiny car in your driveway and shown your friends, you'll work hard to keep it should something come up with the financing. If it doesn't work out they can (at worst) tow the car back to the lot. Not quite that easy with a house ;)

Re: Some Silicon Valley Tech Workers Get Home Loans with No Money Down

#110

Post by sybhn »

mywittyname wrote: post #40
artursapek wrote: post #8

Why does someone like Zuck need a mortgage? Is it economically advantageous to him in a significant way?

He doesn't need a mortgage, it's just financially savvy to have one. He avoids paying taxes on the sale of stocks to finance the home. Mortgage interest is tax deductible. His stocks will almost certainly yield more than the interest rate on the mortgage. He's getting a sweetheart deal from the bank. For him, selling stock is a PITA because he has special class of stock that grant him voting rights far beyond what a…

>He avoids paying taxes on the sale of stocks to finance the home.

Can you elaborate on that?

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