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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

#141

Post by sliverstorm »

mmanfrin wrote: post #134
gmarx wrote: post #52

Does anyone else experience mild anxiety reading stories about Bay Area real estate? Long ago I decided it can't be wise to buy instead of rent. Logic and math argue this must end and yet it seems there is always another "sucker". We seem to have entered a new phase in which Chinese are moving money offshore and into the local market. Lots of Chinese, lots of money, could go on and on but for how long? Ultimately a h…

I think the market is over-exuberant right now for sure, but I also feel that people like the Bay Area because the Bay Area is an exceedingly pleasant place to live . This market has hit a little perfect storm of pricing and may correct, but I think the longview is that Bay Area housing prices will just keep marching up. A lot of the price of homes is the land, which means that (barring local regulation) homes will b…

A lot of the price of homes is the land, which means that (barring local regulation) homes will begin to be built up a lot more.

It might seem that way, but I've come to believe it's the other way around. When land is cheap, people build lavish houses (see the midwest). When land is unholy expensive, people are devoting every dime just to get the plot, they can't afford to build a nice house.

Similar to how (this is hearsay) new development is more lavish in times when mortgage interest rates are low, and more spartan when rates are high. Buyers who must devote more of their payment to interest, have proportionally less to spend on the property.

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

#142

Post by sokoloff »

tcoppi wrote: post #23
fsckin wrote: post #10

Earlier quoted context omitted.

Just bought my first house a couple months ago. Despite picking a lender that seemed to have their ducks in a row, I wound up 'at the table' from 9AM to 6:45PM. Everybody involved was surprised it actually got done. Fundamentally broken is an understatement.

We bought a house last year with a credit union, and everyone during closing was quite surprised that we actually closed within two hours of starting. Apparently it is not unheard of for mortgage lenders to be doing final approval up to the day of closing, and keeping people on hold/not answering phones while you and the seller are sitting there twiddling your thumbs.

Both of mine (1996 and 2007) were under an hour, and that was gated on me reading each of the docs and validating the figures on the HUD-1, which I demanded they present to me the afternoon before and I scheduled both closings to start at 4 PM.

On both HUD-1s, I found "innocent mistakes" that would have been against my interests by a few hundred dollars. I started to believe that those weren't so innocent after all, but rather calculated to get people to just sign over an extra few hundred dollars to get things over with. Starting that argument at 10 AM by email was a way more effective use of my time than raising it (or caving) during the closing. "If you don't have this sorted, we'll have to reschedule the closing" is effective motivation for the real estate agents and mortgage broker, whose commissions are on the line.

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

#143

Post by czep »

Any advice on where to look for a house in the bay area right now?

Like I'm sure a million others, I'm sick of renting in a market where landlords sell and evict every day (happening to me right now, again). Got a kid, need good schools. Other than that, anything goes. I just want to live without constant fear of being upended every 6 months. Is that so much to ask?

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

#144

Post by niels_olson »

white-flame wrote: post #136
gmarx wrote: post #52

Does anyone else experience mild anxiety reading stories about Bay Area real estate? Long ago I decided it can't be wise to buy instead of rent. Logic and math argue this must end and yet it seems there is always another "sucker". We seem to have entered a new phase in which Chinese are moving money offshore and into the local market. Lots of Chinese, lots of money, could go on and on but for how long? Ultimately a h…

Regarding Chinese capital coming in, there's a sense that they're not doing it to invest for a profit. They're doing it protect funds from the Chinese government access and potential future instability. So it might not matter to many of these "investors" if they houses are profitable or not; they're just funds being held in something perceived as more real/secure than what they can get in China.

And the Chinese government is not happy about it. They are actively pushing banks to not allow their citizens to get mortgages. I have a colleague whose family pushed her pretty hard to accept and hold hundreds of thousands of dollars so her cousin could buy a house with it. She found the situations quite distressing. Apparently her father, in China, was not happy.

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

#145

Post by Domenic_S »

brebla wrote: post #125
Domenic_S wrote: post #109

Earlier quoted context omitted.

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 so…

The contingency period in the contract is parallel with the financing process. They are not intertwined - apart from the contract being contingent upon securing a loan. If the inefficiency results from compliance issues due to needing to rate, package, and sell the loan, then couldn't an enterprising banker market speed of closing and absorb moderately more risk by having the loan on his books for a few additional we…

Speed is just not that important for most residential purchases. The most critical thing is ability to close, which is where cash excels. Predictability is #1 - given the choice between 80% chance to close in 10 days (remaining 20% the deal falls thru) or 99% chance to close in 30, almost everyone takes the latter, all else being equal. I just can't think of any situation where a turbo close gets you so many more deals that it's worth the extra risk as a lender.

On the other hand, people often pay extra for a lender that has a history of closing on-time.

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

#146

Post by jasonmp85 »

I realize this headline is meant to be inflammatory (look at those entitled people who get it all!), but this practice already exists for medical doctors: http://whitecoatinvestor.com/personal-finance/the-doctor-mor...

Basically: "you're about to have a high income and—as a class—have a very low default rate. We'll let you put 0% down and not count your student debt against you". Usually before you get your first paycheck (just need to show them the contract).

FWIW I'd argue that tech workers are—financially speaking—much more varied than doctors, who generally exit residency, get a position (sometimes in a new city) and see their income skyrocket. So I can't say this is perhaps as justifiable an idea as it is for new doctors, but I can buy the rationale for certain workers.

If you're in the boat of "I could afford a mortgage around here, but would take years to save a huge downpayment on these prices", the doctor mortgage can be a great thing. Not least of all because it's not always savvy to make a big downpayment: http://themortgagereports.com/18520/20-percent-downpayment-r...

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

#147

Post by balls187 »

orky56 wrote: post #128
balls187 wrote: post #104

Earlier quoted context omitted.

> 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…

Have you tried making extra payments to get your principal up from 10% to 20% sooner? That's the ideal situation for someone with more disposable income but less in savings (or doesn't want to tie up more saving in equity). The main thing to note is that you need to get up to 20% as quick as possible. That's because 20% is based on the current appraisal value of the property, not the purchase price. With Bay Area and…

Actually yes, that is what we're doing.

We are (currently) making the equivalent of 1 extra mortgage payment a year, which should reduce the amount of interest that is paid over the lifetime of the loan. That, coupled with the increased value of the house since we've bought it, would help us remove the PMI payment.

Doing the Maths, paying the extra 10% down, wouldn't save us much over the length of the loan where PMI applies, so we opted to make an extra mortgage payment instead.

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

#148

Post by jdmichal »

sliverstorm wrote: post #141
mmanfrin wrote: post #134

Earlier quoted context omitted.

I think the market is over-exuberant right now for sure, but I also feel that people like the Bay Area because the Bay Area is an exceedingly pleasant place to live . This market has hit a little perfect storm of pricing and may correct, but I think the longview is that Bay Area housing prices will just keep marching up. A lot of the price of homes is the land, which means that (barring local regulation) homes will b…

A lot of the price of homes is the land, which means that (barring local regulation) homes will begin to be built up a lot more. It might seem that way, but I've come to believe it's the other way around. When land is cheap, people build lavish houses (see the midwest). When land is unholy expensive, people are devoting every dime just to get the plot, they can't afford to build a nice house. Similar to how (this is…

I believe GP meant built-up as in denser multi-family buildings, not sparser single-family buildings.

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

#149

Post by wiredfool »

refurb wrote: post #20
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…

Why do you assume housing provides a 5-7% yearly return? Past performance is no guarantee of future performance. You're also ignoring the carrying costs of a house.

Owning a home can destroy real money if you have 20% down and prices fall by 10%.

At that point, if you need to sell, you've lost your down payment, as in WA at least, it costs approx 9.3% to sell a house (unless you're in an insanely sellers market, which you're not if you're down).

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

#150

Post by patcheudor »

jasonmp85 wrote: post #146

I realize this headline is meant to be inflammatory (look at those entitled people who get it all!), but this practice already exists for medical doctors: http://whitecoatinvestor.com/personal-finance/the-doctor-mor... Basically: "you're about to have a high income and—as a class—have a very low default rate. We'll let you put 0% down and not count your student debt against you". Usually before you get your first pay…

I found it to be a particularly interesting headline because I thought such things were normal. When I bought my home in 2004 it was not only zero down but on a 7/1 interest only arm at just 1 point above the basis rate with a maximum increase over the life of just 4 points. As a bonus I got $50K out to pay off the boat. Needless to say when the housing market crashed I wasn't freaked out because I had effectively nothing to loose. Sometimes not having any money invested, especially for the first decade or so can be a relief if one must consider a strategic default of the mortage.
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