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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

#151

Post by arcanus »

phamilton wrote: post #85
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…

> some Apple guy who's salary is apparently 50%(!) stock, as examples I don't see the surprise there. I'd wager most senior Google employees have around 50% comp in stock.

> most senior Google employees have around 50% comp in stock.

Far more pervasive than that. A buddy of mine just took a typical sys-admin position at AAPL and is paid 50% stock/equity. Same with an MBA I know working at AMZN.

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

#152

Post by jdmichal »

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…

> That's because 20% is based on the current appraisal value of the property, not the purchase price. With Bay Area and other real estate markets appreciating so much, it's a ticking time bomb to get out of PMI.

I think you have that reversed. If values are rising, you have to do less work to get to 80% LTV (loan-to-value).

Example: I put $10 down on $100 worth of stuff with a $90 loan, giving a 90% LTV. If the value of stuff jumps to $120, then that $90 loan is now at 75% LTV, with zero payments made.

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

#153

Post by [deleted] »

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…

[deleted]

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

#154

Post by jf »

czep wrote: post #143

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?

Alameda

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

#155

Post by DannyBee »

gdubs wrote: post #126
sybhn wrote: post #110

Earlier quoted context omitted.

>He avoids paying taxes on the sale of stocks to finance the home. Can you elaborate on that?

If you want to buy a million dollar home using shares, you have to liquidate them and pay capital gains. By getting a mortgage you lower the amount of income you 'realize' on a year-to-year basis, lowering your taxable income. There are details on capital gains vs income taxes, etc, but in general I think the point was that the less income you realize in a given year, the less taxes you'll pay.

"If you want to buy a million dollar home using shares, you have to liquidate them and pay capital gains. "

Just to note: you don't :) In fact, if you wanted to pay all cash, and had enough shares, you'd generally take out a portfolio loan against the shares at some very low interest rate (probably not lower than current mortgage rates however) rather than sell the shares at all.

Whether this is better/worse than a mortgage depends on various things.

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

#156

Post by refurb »

patcheudor wrote: post #150
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 no…

When I bought my home in 2004

I think the "2004" in your reply is key. Crazy things were happening back then and as you called out, the housing market crashed.

I think what freaks people out is that only ~8 years out from the crash, you can already see lending standards getting more relaxed. Didn't we learn anything last time?

Not to mention the number of people I've talked to that said "housing always goes up, it's a great investment!". In less than a decade people have gone from "housing sucks" to "it will never go down".

Amazing.

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

#157

Post by refurb »

hibikir wrote: post #95
calgoo wrote: post #32

Earlier quoted context omitted.

Reminds me of the banks here in Spain in the early 2000s: "Why do you want the loan to only cover your house? Add a car and some vacations in there as well!".... Ummm sure, Ill add a car and vacations... to my house loan? Yea, then people wondered why the country crashed (apart from other issues such as corruption).

To be fair, in Spain, failing to pay a mortgage will mean not just losing the house, but pretty much anything else you own. A cousin of mine, very well off, bought a summer house, which quickly lost a lot of its value. In the US, she could have said screw it! and let the bank have the house, but Spain being Spain, she'd have to pay the difference between the house's market value and the remainder of the mortgage. Tha…

Mortgages in the US are barely above 3% right now (they were sub-3% 30-year fixed not long ago).

How much lower are they in Spain?

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

#158

Post by elgabogringo »

jpmattia wrote: post #99
elgabogringo wrote: post #5

How does it make sense to tie up $1M+ at 1%? Are they turning around and selling the note to Fannie or Ginnie Mae? Unless we are Japan (and that's a slight possibility, but not likely IMO) this will be a total loser - not as bad as buying Spanish/French/Italian debt at negative rates, but pretty bad. Who else has friends going through all sorts of ridiculous acrobatics to buy houses in the bay right now? Where they a…

> Are they turning around and selling the note to Fannie or Ginnie Mae? No, they're well beyond the conforming loan limits, even in "high-cost areas". https://en.wikipedia.org/wiki/Conforming_loan As I work through this thread, I'm wondering how the banks are structuring the liability (additional assets of the borrower are exposed?), or whether a new set of bagholders has been found (the taxpayers last time, hopefull…

I'm wondering how the banks are structuring the liability

Yeah, that's what is I was wondering as well. They aren't selling those 1M+ 0% down to GSE's, but maybe somebody on wall street? If not, is it on their books? And yes, what is collateral? Just the property itself?

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

#159

Post by sandinmyjoints »

abbottry wrote: post #94
vermontdevil wrote: post #70

Medical school graduates get similar deals as long as they verify proof of residency. They can get up to $500k with no money down and $1m with some down and near zero interest rates. I'm sure other types of employees get these deals. See this for example: https://www.53.com/mortgage/physician-loan.html

Came here to mention this exact thing -- you don't even have to be an attending, my wife and I have this loan through a different company, and she is still a resident. We had banks fighting over our mortgage. No money down, no PMI, and they portfolio the loan instead of selling it right away like a standard mortgage. We live in a Detroit suburb.

Why would they "portfolio" (I'm inferring this means keep it on their books) such a loan instead of selling it? Because the risk is thought to be so much lower than standard mortgages that keeping it somehow helps them in some way?

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

#160

Post by twblalock »

orasis wrote: post #93
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…

Real estate is a local competition among capital. As long as you have a lot of reasonably wealthy people in the area, prices will stay very high. I don't see the Silicon Valley startup machine quitting anytime soon.

Even if it does quit, there are so many large, established tech companies here that prices will remain high anyway.

Actually, most of the people I know who have bought houses in the past few years work for such companies: Cisco, Apple, Google, etc. Their employee stock plans are so generous that startup stock options are not very attractive.

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