San Diego Housing Bubble News and Analysis

You're joking right??

Wrangler I am not sure where to start....

1 - Have you verified that there is no soft prepayment penalty for the loan that you get from the in house lender?

2 - Have you thought about what may happen if the home does not appraise?

Bugs or other appraisers may give you comments on appraisals of new homes.

Your plan may or may not work out but I am leery about it. To be honest I am concerned it may not work out but I could be quite wrong. I would also talk to some other lenders to check to see if your idea will work, if they will provide the financing on a new home immediately after your purchase.

As far as the home inspector, do you feel that there are problems with the home? If the home inspector finds something are you sure that the builder will remedy the problem? The short answer is yes, of course an inspector has the ability to find many items that you do not know about. The question is will the builder remedy them. It depends on the purchase agreement.

SD Realtor

HLS is a straight shooter finance guy, I haven't seen him on the boards lately but he has a website, homeloansheldon.com

I'm not pimping him but I bet he can give you an honest answer about your finance plan, he's given free advice to me via e-mail and on the boards for a while. Also, 10% down and good credit isn't going to get the panties of the lenders any more, is your income to expense ratio in good shape?

hi SD R, We appreciate your comments. Now I'm more concerned about the refinance after COE. If you could let us know about other lenders if they will immediately refinance a new home purchase in a month or a few months after the COE, it'll highly appreciated. Builder's mortgage broker told us there is no prepayment, no fee if we refinance or sell or make additional payment. The rate is rather high > 7.5% for 30 year fixed jumbo loan.
Anyway, we'll double check with the builder's broker about the soft prepayment penalty. Are there special clauses in the loan documents that we need to watch out for the soft prepayment penalty?

hi temeculaguy, Thanks for your suggestions! Just went to the website and sent an email to HLS, and hopefully he will reply.

yes, our income to expense ratio is ok, 30 year fixed 7.5% PI is within 1/3 of gross income.

Don't mean to sound insensitive, but kiss your 10 percent down goodbye. End of year incentives next year will be much more tempting, as the price will be 10 percent lower, too.

1. The fact that the builder is telling you the inspection would be a waste makes my skin crawl. I'd hire an inspector ASAP & force the builder to remedy anything the inspector finds. Get a GOOD inspector & tell him/her you want **every detail** checked out.

2. RE: financing... Either the builder has a pre-payment penalty in there (ask a lawyer to review docs!!!) OR they are charging you mega bucks on points (front or back end). Find out EXACTLY what they are charging you -- ask about total compensation (front & back end points) -- tell them to disclose EVERYTHING. Are you using their lender because that's the only way to get certain incentives? If so, tell them you demand the same incentives, but will use your own lender (if they are trying to rip you off).

Remember that YOU are in the driver's seat on this deal & always be prepared to walk away if things don't go exactly as you request. Best thing to do is not get emotional when dealing with big purchases. There will be plenty of better and cheaper homes to buy over the next few years.

Just MHO.

Good luck!!!

I remember my loan broker making a comment about waiting one year before doing a new loan on a property - she felt that getting an underwriter to approve a new loan within one year of a purchase could be an 'iffy' thing - and that was in a much more accommodative mortgage market than we have today - bottom line: ensure that you can afford the property based on the parameters of the purchase loan because you may be stuck with it

Get you own inspector - less than $500 bucks could save you thousands of dollars and many headaches - DO NOT CLOSE ESCROW until the builder has resolved any issues found by the inspector

Your only strength in negotiating a real estate deal is your willingness to walk away - are you willing to walk away from this property?

4plexowner nailed it on both points.

1) Get your own inspector and
and
2)don't expect to refinance a loan with zero seasoning.

At various times in the past mortgage brokers have told me that lenders like to see seasoning of a year before refinancing. I think during the heyday you may have been able to get away with shorter times.

Wrangler....Congrads on your new purchase...Don't let all the negativity on this board get you down...Many don't realize that you need to put down roots and stop bouncing around, changing kid's school's just to try to time the market...

Anyway, I was just curious as to what development you are buying into and did the developers require you to pay more upfront for your upgrades if you went with an outside lender...

Wrangler, I recommend you get a home inspector since this is a big investment. I purchased 3 new homes in the past 5 years and had inspection done on all of them. The inspector can see lots of issues or building code problems we can't see. The cost is about $300-$500 depending on the size of the house. Almost all builders say you don't need a home inspector, I mean who would like a 3rd party to inspect their work and might have to fix the issues or problem that can add extra cost to the bottom line. You should get an inspector to inspect the house from the beginning during the framing stage until the walk through for thorough inspection. Builders have been using non-quality workmanship contractor (day laborer) in the past couple years due to cost and lack of skill labor. Another good reason to have your home inspected.

"Is it necessary to hire our own home inspector? The builder says it's a waste of money since the county and themselves have done many rounds of inspection, plus there is warranty, if anything goes wrong, they'll come to fix them anyway."

We bought a spec home in 2005 and were told the same thing about inspection being a waste of money, county inspections were performed, home warranty in place. The builder agreed to an inspection as long as the inspector wasn't a particular contractor who gives them headaches about every little detail. We had an inspection and found a few small issues that the builder fixed. When we moved in we found many more issues that we wanted fixed. The builders warranty amounted to a fight for every thing we wanted fixed. The builder attributed all of the problems to "settling" and sent over their amatuer carpenter to slap a quick fix on everything. We ended up raising hell, reporting the builder to BBB at which point they cut us a check to have our own contactor make repairs including tear up the 1500 sqft of harwdwood floors an reinstall new stuff with appropriate fastners. It was a giant headache.

My advice is demand an inspection, ask the builder if there is any inspector they won't work with, then demand that inspector or else you walk away.

pk92108--

Way to cheer on the newest member of the GF/FB club! May I assume that the "pk" portion of your handle refers to when you bought your home: the peak??

Congrats on the purchase! Enjoy your new home!

I'm with you - I'm not willing to wait 5 more years to buy. Others can wait if makes them happy - owning a home makes me happy.

As a purchaser of new homes in the past, I concur that a home inspection is necessary...they may be able to point out things you wouldn't notice on your own for YEARS, maybe after the warranty has expired!!!

Another very important point sort of hit on already, DO NOT have the builder or real estate agent recommend an inspector - they'll recommend one who has no motivation to dig deep for defects (they want this thing to close!).

I'm excited for you!

From an appraisal standpoint I would not automatically assume the property will reappraise for the same amount as your purchase price. That's particularly true if there's more than a couple months lag between your contract date and the close of escrow. Remember, your builder is probably wheeling and dealing with a number of prospective buyers right now and there's no telling whether your deal is as good as theirs'.

No matter what, a prudent lender will have any appraisal they get under these circumstances reviewed, closely, to ensure they don't overencumber the property.

Congratulations on finding a home you like at a price you feel is a good deal. For people here to criticize the purchase without knowing the price is ridiculous.

This may or may not be the bottom, but it definitely is not the peak.

CDMA ENG...

Hey SD Realtor,

would you mind defining the word "soft" in this statement?

"1 - Have you verified that there is no soft prepayment penalty for the loan that you get from the in house lender?"

Thanks in advance,

CE

CDMA -

There are different classifications/terminologies used to define prepayment penalties.

A prepayment penalty implies a fixed period of time that you must keep a loan. You cannot refi, you cannot sell your home, you cannot do squat otherwise you pay a prepayment penalty. A "hard" prepayment penalty means you cannot sell the home without paying a penalty. A "soft" prepayment penalty implies you cannot refi the home without a prepayment penalty.

Just about all hybrid loans carry a soft prepayment penalty for a fixed number of years. Some of them even carry a hard prepayment penalty as well.

I am not a mortgage broker so I am sure many who are more well versed then I can comment.

Wrangler good for you on the purchase as well. My only concern is that the refinancing strategy part concerns me. Honestly covering that "base" is a VERY important thing and I feel that this may be a portion of the purchasing process that was not as well researched as could have been.

The physical inspection part is a very good idea. No reason not to do it. For a few hundred bucks it makes sense to do on an investment that is at least several hundred thousand. As I said, the important thing to check is that the builder will indeed remedy findings that are brought up by the inspector. I would ASSUME they will BUT asking beforehand could not hurt.

hey lendingbubble....No the pk doesn't mean that i bought my home at the peak...You may be able to correctly pick the bottom and top of the market, but 99.9999% can't do it...

Everyone's situation is different...Maybe the person who stared the thread doesn't want to be a serial renter and be at the whim of rent increases or an owner's foreclosure...Maybe he has kids in school that he wants to provide some stability for...Even moving a few blocks can mean a change of schools if you go the public route (especially in C.V.)

Plus, just as one dollar cost averages with mutual funds, I do the same with investment property...Buying one every 5 years or so...I will get some near the bottom and maybe some near the top, but hopefully after 30 years of doing it I will be ahead....Maybe not, but I wish I had a crystal ball.....I would love to buy everything at the bottom but I can't...

I'm going to take the centrist route here, do get the independent inspector, but if you already have non refundable money down, you may have asked about condom brand preferences after a positive pregnancy test (shameless analogy, I know). I agree that at a certain point it isn't worth it to many people to wait for the bottom, "better than most, not as good as some" is a good policy. I for one am not waiting five years and have already dealt with the foreclosed landlord thing, i only have patience for one more rental and that's it. If you can completely afford what you want with conventional financing, even if there is no appreciation for a decade, have at it. Stability has it's benefits and it's costs. On another thread i posted a pad that I felt was fairly priced and a week's pay would cover it for me, yet there will always be those who think that it is still overpriced and those who think it is a steal, the best wine is not the highest rated, it's the one YOU like. I haven't seen evidence of drastic reductons in SD yet so i think mid to late 08 would be better but the OP didn't ask about that.