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2018’s Cities with the Most Overleveraged Mortgage Debtors

Buying a home represents an important milestone for most consumers. But for those who dive in to the deep end of real estate without a financial safety net, the decision could lead to buyer’s remorse in the long run. Mortgage rates are slowly climbing after reaching historic lows in 2013, but still are close to the lowest they’ve been in the past 3 decades. This makes 2018 a tempting time to buy a home. But some industry experts believe 2018 is friendlier toward sellers than buyers because there’s much more demand than supply.

As with any major financial decision, it’s wise to improve one’s credit score before applying for a mortgage in order to qualify for the best possible rates. Using a Mortgage Calculator can also help to determine an affordable monthly payment and realistic payoff timeline, whether borrowing for the first time or refinancing an existing loan. Without a good grasp of how to pay off mortgage debt, consumers might find that debt unsustainable.

In this report, WalletHub determined which cities are home to the most overleveraged mortgage debtors by comparing the median mortgage balances against the median income and median home value in more than 2,500 cities. Read on for our findings, expert homebuying advice and a full description of our methodology.

Read More At Wallethub.com

 

Ask the Experts – Mark H. Goldman

As one of the biggest financial transactions of our lives, the purchase of a home requires careful assessment of our finances as well as the potential impact of a mortgage. For advice on both buying and owning a home, we asked a panel of experts to weigh in with their thoughts on the following key questions:

  • Is now a good time to buy a home?
  • What are the most common financial mistakes people make when buying a home, and which are most costly in the long-term?
  • If someone is currently overleveraged and has trouble affording their mortgage payments, what steps should they take?
  • Is there any way for an individual to tell if his or her local housing market is overpriced?
  • Are there certain housing markets or circumstances in which it is acceptable to be overleveraged in mortgage debt? If so, how much is too much?

 

Is this a good time to buy a home?

It depends on how long someone plans to live in the home. As a rule of thumb, if someone plans to stay in their home more than five years and their anticipated income is stable, this is a good time to buy. Interest rates are heading up. In most markets, home prices are outpacing inflation. The longer people wait, the more expensive a home will likely become. In addition to the probable appreciation, homeowners enjoy a place to live with very predictable costs. Also, a landlord is no longer a major influence on housing decisions from rental increases or the term of occupancy.

I suggest planned ownership for a few years to recover the acquisition and disposition costs. Speak to people who have and have not owned their homes. I find many people get priced out of their neighborhoods over time as home prices increase beyond their means. Many people regret ever selling a property, since equity usually increases over time. Many people buy a home and live in it for a few years. They move out, rent it and buy another home. It can be a great way to accumulate wealth.

 

What are the most common financial mistakes people make when buying a home and which are most costly in the long term?

I find most people should use a competent real estate agent to get informed advice about the price to offer. The financing is a subtle issue. Buyers should evaluate the comparison of loan origination points to the interest rate. Over a long period, it may be beneficial to pay some points to buy down the rate. A competent loan officer can help advise on this issue.

Also, buyers might wish to consider adjustable rate loans if they are fairly sure the will be selling or refinancing in the next 5-10 years. If a buyer expects to refinance in 6 or 7 years, then perhaps a 7-year fixed rate loan would be appropriate. But, remember, we cannot forecast interest rates into the future. So, rates may be higher.

In addition to financing, family issues matter. Young couples should consider space needs if they are starting a family. Of course, schools and proximity to employment, amenities, transportation and shopping are also important. Lifestyle is another important consideration. Do people want an urban or rural environment? “Walk Scores” are increasingly more important to younger and older households.

 

If someone is currently overleveraged and has trouble affording their mortgage payments, what steps should they take?

Financial difficulty may be temporary or long-term. It is imperative to make an objective assessment of the root cause of the difficulty. Act quickly before the financial burden is compounded. If a sale of the home is indicated, do it before credit is impaired with additional late payments or even foreclosure. In my experience, people who are confronted with financial peril become paralyzed to act. The longer people wait, the fewer options they will have.

I have also seen distressed homeowners use loans from family or friends to fend off immediate financial distress. It may be better to get out from under a home someone cannot afford and use those resources for a new housing solution. For example, borrowing from family for a temporary solution that will not solve the problem may only postpone the inevitable loss of the home. In that case, the family resources may be exhausted and/or unavailable to help with a move. So, make a very realistic evaluation of the financial difficulty and try to form a prudent long-term solution.

Basically, if a home is too expensive to keep, you may need to get a less expensive place to live.

 

Is there any way for an individual to know if their local housing market is overpriced?

Some indicators of overpriced homes are if marketing times for listings are getting longer. Also, are homes selling above or below list prices? Use several samples to avoid list prices that may have been unrealistic to start with for a particular property. “The signs are everywhere.” If a neighborhood has a lot of “For Sale” signs in the lawns, the market may be slowing down or the market may be losing jobs. It is a healthy indicator if properties are listed and sold in a fairly short time.

 

Are there certain housing markets or circumstances where it is understandable to be overleveraged in mortgage debt? If so, how much is too much?

If “overleveraged” means someone borrowed more than they can afford to repay, they will likely get into trouble. Time heals many wounds in real estate. If you can hold on long enough, it is probable values will eventually be restored (depending on the reasons for the market decline). If a family purchased a home with a big loan and small down payment without the capacity to support the home, they will likely experience difficulty. This often occurs in markets where there is over optimism for price appreciation. Even though a lender may be willing to make a big loan for the purchase of a home, the most important issue is how much can the buyer afford for their home payment. The month to month value of a home is less important for a family that can afford to live in their home and does not need to sell.

Many homebuyers only consider the home as an investment. I suggest to consider the cost of shelter as a component of their price decision. Shelter costs money whether we rent or own. Consider the utility of the shelter component of owning a home as part of the evaluation of what price and financing to select. It may sound trite, but it is good to live within ones means.

Read More At Wallethub.com


V.A. Homebuyers Often Turned Away

CHULA VISTA, Calif. (KGTV) — Hundreds of thousands of veterans and active duty military call San Diego County home, but a group says they are facing big disadvantages when trying to buy a house here.

The San Diego Veterans Association of Real Estate Professionals says more than 60 percent of listings in the county won’t accept offers with V.A. loans.

The federally backed loans don’t require a down payment or mortgage insurance. Those eligible in San Diego County can borrow up to about $650,000 without any cash down.

“We have served, and the V.A. loan is a guaranteed loan,” said Andre Hobbs, a San Diego realtor and veteran who heads the association.

Hobbs says the benefit is backfiring for some home seekers in San Diego’s ultra-competitive housing market. It’s because he says sellers are opting for offers instead that include cash down payment because of a misperception about V.A. applicants.

“They assume that this buyer is ready to walk,” Hobbs said. “He’s not motivated.”

Mark Goldman, a real-estate lecturer at San Diego State University, said there are some misconceptions about V.A. loans, such as that they are more complex. He added there are a few extra disclosures, but they aren’t cumbersome.

But V.A. buyers can also have an advantage if the current owner also served in the military.

“Luckily we may meet another veteran seller that understands, ‘hey, I’m willing to do that,'” Hobbs said.

Read More At ABC Channel 10 News


San Diego home price starts year at $529K

The San Diego County median home price was $529,000 in January, down by $11,000 since December, said real estate tracker CoreLogic on Tuesday.

The big picture: In a year, the median price increased 6.9 percent. San Diego County’s median home price hit an all-time high in June of $545,000. While January’s median is not far from the record, it might take a while to return to that level.

How prices could change: Rising interest rates and other factors could slow the pace of home price increases in the coming year, some experts say.

“The price is already pretty high and now you put higher interests rates on top of that,” said Alan Gin, economist at University of San Diego. “That’s going put home purchases out of reach for some people.”

The rate for a 30-year fixed mortgage was 4.52 percent Tuesday, up from around 4 percent at the end of last year, said Mortgage News Daily.

Mark Goldman, a real estate lecturer at San Diego State University, said he expected median price increases to slow as the market comes down from last year’s highs.

“The market is slowing down, in general,” Goldman said. “Prices are topping out and I don’t see a reversal. (Prices last year) were increasing at a very aggressive rate.”

Read the complete article on the San Diego Union-Tribune


Last Year’s Housing Market Broke Records

 

The housing market reached new price peaks in 2017, shattering records left over from the 2005 housing boom.

Home prices rose as the number of homes for sale continued to drop — even more so than previous years. Meanwhile, the number sales stayed about the same.

Strong job growth, low unemployment and historically low-interest rates all contributed to rising prices, said Mark Goldman, finance and real estate lecturer at San Diego State University.

“If you look back at 2017, it was a robust year,” Goldman said. “Interest rates were quite good, the economy was continuing to barrel ahead, wages were strong, employment was strong and millennials were aging into the homebuying market.”

 

Read complete article on the San Diego Union-Tribune


Best Way to Walk the Balance Transfer Tightrope

Balance transfer credit cards have a lot of moving parts, including a balance transfer APR, balance transfer fee, annual fee and, potentially, introductory rates and fees. Plus, offers change regularly. And choosing the best balance transfer credit card for your needs is only half the battle. You also need to get approved for a high enough credit limit and pay off your balance before high-interest rates start costing, rather than saving, your money.
To help you navigate the process successfully, we posed the following questions to a panel of experts on paying down debt.

What’s the best way to find the best balance transfer credit card?

People with good credit often get invitations and offers from their own bank, credit union or credit cards, inviting them to transfer balances. It is always good to check offers on the Internet. Although, be very careful about entering private information (Social Security number, etc.) into forms from advertisements that have been received in your email. If an ad looks good, do not follow a link in the ad. Find the bank’s website to ensure private information goes to a reputable vendor.

Why do you need good or excellent credit to get the best balance transfer credit cards?

High credit scores translate to lower interest rates. Do not take high-interest loans to restore credit scores. That can bring your score down. Credit management will impact scores. If you have limited credit (perhaps only one credit card), consider opening another account and try to pay balances in full each month to establish a good payment history.

What’s the biggest mistake people make with balance transfers?

A major pitfall is to reduce monthly minimum payments on transferred balances and getting stuck at the end of the introductory period with a balance, plus the accrued interest from the beginning of the transfer. Many credit cards allow 0% interest for an introductory period. However, if the balance is not paid in full during that period, they assess interest back to the beginning of the introductory period. The purpose of transferring a balance is to reduce the interest cost to help repay the debt. Avoid using transfers to get additional debt. Take advantage of the low interest to get debt paid off.

Why aren’t there more 0% balance transfer credit cards with $0 transfer fees?

Banks offer transfers to make money. They offer good deals to attract good, creditworthy customers.

 

Go to the full article on Wallethub.com


San Diego median home price drops to $537,750 in July

The San Diego median home price cooled slightly in July, ending a three-month streak of record-breaking peaks.

Experts attribute the high prices to a lack of homes for sale and intense demand. The relatively small reduction in home prices from last month does not have anyone thinking prices are heading south.

“I don’t see anything pushing prices back at this point,” said Mark Goldman, a finance and real estate expert at San Diego State University.

Read complete article on San Diego Union Tribune


Credit Scores

Improving one’s credit score is a different process for everyone, depending on one’s circumstances and spending habits. For advice on doing so and insight into faulty consumer thinking, we asked a panel of experts to share their thoughts.

  • What tips do you have for a person trying to increase his or her credit score in a short amount of time?
  • What are some commonly held misconceptions about how credit scores are calculated?
  • What are the most common mistakes people make when trying to improve their credit score?
  • What is the best way for a young person to build credit?

What tips do you have for a person trying to increase their credit score in a short amount of time?

Depends on why their scores are low:

  • First step is to ensure your credit report is accurate. Get a free copy each year. You may wish to get one from each credit bureau (Experian, Trans Union, Equifax) every 4 months, then start over each year. More information about free credit reports here.
  • Do not pay collection accounts that already appear on your credit report, since that will reduce scores for the near term. Scores will increase over time. Ironically, paying off a collection account triggers a “recent remark on a derogatory credit item,” which will reduce scores in the short run. This will occur if the account status changes to “paid.” If you are trying to close a home loan, the lender may approve your loan with a requirement to pay the collection account through the closing, so it will not impact your credit score. Lenders pull a credit report the day they fund a home loan. A lower score may cause delay, a higher interest rate, or even cancel the loan.
  • If you took a “no payment until 2027” loan recently to get the free interest, pay it off. These loans are often offered by furniture retailers and the like. They are new revolving debt, usually charged to the limit with no pay history. Pay it off if possible, and your score can go up more than 60 points within a month, when the account shows paid on your credit report.
  • Get your revolving credit balances down. Mortgage lenders look at “trended data” to see if revolving balances are moving up or down. When revolving (credit card) balances increase, scores will go down. Reducing balances will increase scores. Rising credit card balances are a danger signal that someone is spending more than they earn.
  • Multiple credit inquires for a home loan within a few weeks will not impact your score. However, multiple credit inquires for cars, furniture, appliances, etc. will have an adverse impact on your score. I have seen people who enjoy driving new cars at dealerships have scores reduced due to too many auto loan inquires.
  • The obvious way to have a higher score is to pay your bills on time.
  • One less obvious credit scoring issue is that good credit history is lost when accounts are closed. Bad credit history impacts your score even if you close the account. So, if you have inactive accounts with a good payment history, you may wish to leave it open. Although too many open accounts can also reduce your score. How many accounts should be open? I suggest less than 10. I find most people have 3-5 credit card accounts.

Which are the most common mistakes people make when trying to improve their credit score?

Paying off collection accounts can be a big mistake (see above). However, some collection companies will agree to “delete” (very important distinction compared to shown as “paid”) their credit line on credit reports if the account is paid. They are not supposed to falsely report credit. But, if the account is “deleted” from your credit report, your score will improve.

Another misconception is that if you do not have any open accounts, you will have good credit. People need at least 2 lines of credit for a year to have a score calculated. People need to demonstrate good credit management skills. That is, do not borrow more than you can pay, and pay on time according to terms.

I have seen people who are trying to restore their credit take very high interest rate loans to improve their credit scores. It is very costly. I suggest getting a secured credit card. Use it monthly, with charges that you know you will pay in full each month.

Which is the best way for a young person to build credit?

Pay your bills on time. Do not build up large balances on credit cards. Do not get too many credit cards (more than 3-5). I tell my students that the credit card vendors who come to campus to sign up students should be next to the crack cocaine dealers. Both will not hurt you, as long as they are managed properly. Young people often have a disconnect from getting the money from a loan, and the obligation to pay it back. You credit score is a predictor score that expresses the likelihood that you will pay your debts according to terms. If you manage your debt load and pay according to terms, you will have high credit scores.

 

Go to full article on WalletHub.com


As San Diego Home Prices Continue To Rise, Some Mortgage Lending Eases

Government controlled mortgage giant Fannie Mae is allowing borrowers to have higher levels of debt and still qualify for a home loan. Previously, the debt-to-income ratio was capped at 45 percent. Now it’s at 50 percent, making room for a larger house payment.

For example, for a household making approximately $7,000 in gross income a month, with a few hundred dollars in debt payments, it could mean a significant loan increase, said Mark Goldman, senior loan officer with C2 Financial Corporation and real estate instructor at San Diego State University.

Credit: KPBS San Diego
Posted: Friday, August 4, 2017
By: Susan Murphy
Read Full Article


Qualifying for a mortgage could get a bit easier

San Diego is in peak home-buying season, and the prices keep rising.

That can make it much harder for people to qualify for a mortgage. They have to show they can make the monthly payment — plus all of their current debt, including student loans, car payments and credit cards.

But starting this weekend, Fannie Mae will start backing mortgages with a 50 percent debt-to-income ratio, up from the current 45 percent. That can be big with a county median now $543,500, up about 10 percent from last year.

“If you want to buy a home and that home you wanted was a little bit beyond your capacity last month, it may be a little bit within your capacity this month,” said Mark Goldman, a loan officer and real estate lecturer at San Diego State University

Credit: ABC Channel 10 News
By: Jonathan Horn
Posted: 6:04 AM, Jul 28, 2017
Updated: 8:06 AM, Jul 28, 2017
Read Full Article


New Site Calculates Monthly Home Payments

Article Originally Posted on ABC 10
By: Jonathan Horn

SAN DIEGO (KGTV) – If you rent in San Diego, what you pay your landlord could be high enough to double as a mortgage payment.

Now, a new real estate website shows you just how far your monthly payment would go.

Zillow’s new website, Realestate.com, looks at all sorts of things that go into a monthly payment, such as your property tax estimate and homeowners insurance.

However, as San Diegans continue to look for homes, the question is: how accurate is it really?

At first, loan officer Mark Goldman was skeptical.

“Estimated should be bold, and underlined, and flashing,” said Goldman, of C-2 Financial.

He calculates complex mortgage payments every day using his trusted Excel spreadsheet. It includes property taxes, HOA fees, mortgage insurance and closing costs.

Realestate.com does the same with all those costs. It lets renters see how far their monthly landlord check could go to paying down a mortgage.

“I always ask the borrower what is a monthly payment for them, and a lot of times it’s unrealistic,” said Goldman.

That’s because your monthly payment goes up or down depending on how much cash you have for a down payment.

In a statement, Zillow Group says the website isn’t risky by emphasizing monthly payment. That’s because all homes start with a 30-year-fixed mortgage rate, so unlike a car loan, the payment can’t be lowered by extending the time to pay it back.

Goldman plugged in 10 percent for a $550,000 condo in North Park and adjusted the interest rate to 4.25 percent.

It would cost about $3,800 a month total.

Goldman plugged the same numbers into his Excel spreadsheet, and the result was very close.

“Based on this sample of one, I think this is a pretty reasonable estimate,” Goldman said.

Goldman said the website can’t tell all, but it does empower first-time homebuyers, and that’s a good start.