American Pacific Mortgage

American Pacific Mortgage

Monday, January 29, 2018

Using a Reverse Mortgage to Buy a Home

That’s right! A Reverse loan can be used for a home purchase for buyers over the age of 62. They are perfect for those wanting to move where they want to remain for the rest of their lives. A reverse loan for purchase is beneficial for a number of reasons:

• No future payment is required;
• Borrowers on fixed income who may not qualify for a typical home loan will qualify for a reverse;
• The loan allows you to build equity in your home, and tap into it in the future;
• Flexibility - You can make interest payments if you wish to keep loan balance fixed.

Purchasing a home with a Reverse Loan requires a larger down payment than a conventional loan. The amount of cash down will depend on the age of the borrower, and the home's value. But the down payment can be gift funds! (Want to get mom and dad into their own place?) Once the purchase is completed the buyer will never have to make a loan payment. They are only responsible for paying RE taxes and insurance.

Some people ask “Why not buy all-cash?” Many "senior" buyers on fixed income rely on their retirement/investment accounts to provide additional income. By limiting the cash that is put into a home purchase, they may be able to buy a superior home, and have more cash available to put into investments for the future. Plus, if the buyer wants, he or she can put extra funds towards the down payment to increase the future availability of a line of credit, which grows at a rate equal to the interest rate on the loan plus the mortgage insurance rate.

Reverse mortgages have proven to be safe and powerful financial tools for homeowners that want to access the investment they have in their homes, without having to make monthly mortgage payments. When it is time to move up or down, into a retirement home, it is imperative to consider a Reverse loan as an option.

Here are a few answers to FAQs about Reverse Mortgages:

• You own the home, not the bank;
• You can prepay the loan at any time;
• Your heirs can pay off the loan balance through sale or refinance, which will never be more than 95% of the home value at time they inherit;
• These loans are non-recourse (so you can never owe more than the home is worth);
• Your spouse can remain in the home for their lifetime.

Monday, January 22, 2018

Tips to Get Your Offer Accepted!

Tired of making offers to purchase property, and being passed over? Here are my tips to get your offer accepted:

1. Offer all Cash. This is the top way to be accepted, but obviously it takes a lot of cash! Many clients today are borrowing funds from retirement funds or parents, and refinancing post-close to pull out the funds to repay parents. There are a number of "delayed purchase" type financing options available and some are priced as if they were a purchase. It is important to verify ahead of time with your lender what you will be eligible to refinance the home for post-close. In some cases it might be necessary to wait for six months, but there are other options available within 90 days of closing.

2. Obtain a full-pre-approval from your lender, if using financing for the purchase. We have a program called "Keys on Time" where we actually submit the loan file with all income and asset documentation for a full pre-approval with underwriting. Once completed, we guarantee closing within 12 days of a contract to purchase, assuming all goes well with the property appraisal. This is a powerful negotiating tool.

3. Offer a non-refundable deposit, or an offer with no-contingency period for financing or inspections. Risky? Yes...

4. Last, but certainly not least: Write a personal letter to the seller, describing why you love their home, and telling a story about yourself. This may be the most powerful tool you have in the toolkit. Sellers have been known to accept lower offers, or those with contingency periods for financing, for buyers who wrote heartfelt letters about why they love the neighborhood, the home, how important it is to them, and why. We all appreciate the personal touch. Relationships are key to everything.

For your reference, here is an article in the WSJ on this topic: The Strangely Effective (and Easy) Way to Win a Bidding War

Monday, January 15, 2018


You have signed your loan documents. The process is over, right? Not so fast!

There are many last-minutes checks and balances that take place during the closing process that can stall or stop the loan from funding.

Here is a quick list of last-minute obstacles to closing on time, thanks for my friend Jeff Lazerson who writes a column for the Register. Plus I've added one of my own.

1. Funds wired to escrow for closing must come from accounts previously reviewed and approved by underwriting. No last-minute new accounts may be used. All large deposits must have been sourced. If you wire funds from a previously undisclosed account, the process will stop until two months' statements have been reviewed by underwriting.

2. Double check that your insurance policy meets underwriting guidelines for adequate coverage. Your Underwriter should review and approve the amount of coverage prior to closing so we aren't scrambling at the last minute.

3. Make sure you understand the implications of any HERO or PACE liens recorded against the property, as these will have to be paid at closing in most cases.

4. Make sure you are going to be in town and available when the loan is scheduled to close. You can always have someone sign for you with a Specific Power of Attorney, and it had better be the correct type of POA. I can't tell you how many times I've had clients go out of town on vacation, or out of the country, when it is time to close. We can always use mobile notaries country-wide...but it does slow things down. I once had a client sign documents in Italy. She had to go to the US Embassy to get them notarized by a U.S notary.

5. Make sure when you sign 4506T forms, to request transcripts from the IRS, that they match the address on your tax returns. If not, they will be returns "no results." If you have recently filed returns, there will be a lag time waiting for the returns to be processed which could delay closing....for weeks.

6. Solar leases can be problematic. The lease must be re-assigned to the new property owner, and if recorded against the property as a lien, it must subordinate to the new lender.

7. If you are refinancing, make sure you make your loan payment on the current loan in enough time for escrow to get an updated demand for payoff, reflecting that payment. Otherwise, you will have to make that payment twice (again through escrow) and wait to get a refund post-closing. This will mean coming into escrow with more cash than you expected.

8. Don't quit your job before the loan closes. Yes, this happens. I had a client who signed loan documents, quite his job, and when the funding department called to verify employment, they were told he no longer worked there. Lucky for me (and him) he had a new job lined up that started the next week and we were able to verify the new employment and close. Only with a streamline!

Saturday, January 6, 2018

CONDOS - The Pitfalls

Condominium financing has always been a bit more challenging than financing for single family residences. Why?
1. They are considered to be riskier than single family residences, since the HOA has much control over the property, and charges to owner, and therefore the loans carry loan-level pricing adjustments (e.g. higher interest rates)
2. The HOA has to go through a separate approval process. This is more rigorous for investment (rental) condos vs. the review for owner-occupied condos.
3. Master Insurance policies must meet guidelines for coverage and also include a Fidelity Bond (WHAT?) that covers the HOA from losses due to embezzlement or misuse of funds.
4. There are limitations on the number of rental proprieties in the complex that vary depending on the loan type, and whether the property is to be owner occupied or a rental. This can be problematic in coastal or resort areas where rentals are common. (think Mammoth or ski communities)
5. There can be no litigation against, or on the part of the HOA, with certain exceptions. If an attorney opinion letter states that the litigation is essentially a "nuisance" lawsuit, or that damages are easily covered by the insurance for the project, it MAY be acceptable.
6. There are specific reserve requirements that must be met. If there are inadequate reserves, the HOA is not acceptable.
7. A separate "walls-in" insurance policy is usually required for the owner; called an "H06" policy, this insurance covers not only the contents of the home but also interior improvements and upgrades. Most Master policies do not include Walls-in coverage with upgrades.
8. FHA loans, including Reverse loans, require that the project be HUD approved.
9. VA loans require that the project be VA approved.
10. Some conventional lenders also have lists of approved and disapproved condos.

The bottom line is, make sure you do your homework before making an offer to purchase a condo. Please call me to help with questions and/or searches for approved condos.