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How Do I Know What I Can Afford to Buy?

by Todd Jones

If you're looking to purchase a home, then one of the first things you need to figure out is what you can afford.  If you're renting, then you probably have a pretty good idea of what you have been able to afford up until now.  If you own a property, you know what you're paying now.  You just need to also figure out if you can adjust your budget to pay more towards an increased mortgage.  You may also be wanting to downsize and pay less per month.

Whatever the case, below you'll find a mortgage calculator to help give you a good idea of what the monthly payment will be.  If you want to bookmark the calculator without having to come back to this blog entry, then you can go HERE.

Remember, this is only a guide.  I cannot over-express the importance of consulting with a Mortgage Broker to guide you through this process.  In today's market, the most challenging thing about buying a home is getting the loan.  It is imperative that you consult with a qualified, intelligent, and helpful loan broker.  If you need a recommendation, I will be happy to help.

If you don't have a large down payment saved up, don't be discouraged.  You may qualify for an FHA loan which only requires 3.5% of the purchase price for a down payment.

Enjoy the calculator and please feel free to reach out to me if you need assistance.

NOTE: Todd Jones is a licensed Realtor in the state of California.  The information expressed here and on his blog is intended for the state of California.  Please not construe any information on this blog as legal advice.


This is a very easy to use Mortgage Calculator.  This will give you an idea of what your monthly payments will be.  Of course, the best thing to do is to consult with, and to get pre-approved by a Mortgage Broker.

 

 

Definitions:

  • Purchase Price: The Price you Intend to Pay for the Property.
  • Down Payment:  This is the Amount of Cash that you will put down on the property.  Remember, that you'll also need to have additional cash for closing costs, and some cash reserves.  For more information on this, be sure to ask your Mortgage Broker.  I am happy to help as well.
  • Loan Type:  Pick one of the three.  There are several other options that a Mortgage Broker can explain, and these are the three most common.
  • Monthly Payment:  The monthly payment includes the Principal, Interest, Taxes, and Insurance.  This is commonly referred to PITI.  If you're purchasing a condo, it will also include the HOA dues.
  • Advanced Link:  Click on the Advanced Link to see the following: Property Tax, Homeowners Insurance, and HOA Dues.  There is also a check box to indicate if you should include PMI (Private Mortgage Insurance).
    • Property Tax:  In the Los Angeles area, the property tax is estimated at 1.25% of the Purchase Price.
    • Homeowners Insurance:  You will have to obtain hazard insurance if you're getting a loan from a bank.  Depending on the area, and size of the home, this can vary greatly.
    • PMI or Private Mortgage Insurance:  Whenever you purchase a home and put down less than 20%, most lenders require that you have PMI (there are some exceptions).  This is included in your monthly payment.  With FHA loans, you will pay some upfront mortgage insurance and monthly insurance.  A Mortgage Broker will be able to guide you through this.
    • HOA Dues:  When purchasing a condominium, or some other types of communities, you will be required to pay Homeowners Association Dues (or HOA Dues).  This is a very important cost to consider, because every dollar you spend on HOA Dues subtracts from every dollar that you can spend on a mortgage.  Most HOA Dues include the hazard insurance, so you may not have to purchase additional insurance.

DOs and DON'Ts of Buying a Home

by Michelle Hille

Here's a guest blog entry By Michelle Hille @ www.newhomesource.com

Buying a home is a huge process that could take a lot of time. Just building up to the point that you believe that you are ready for a house is a big step in life. Obviously there are plenty of things that you must do before you can buy a home, but first we need to explain the don’ts of home buying.

  • Don’t hold information from your advisor whether meeting with your real estate lawyer or your agent. They are there to help you and the more complete the information you give them, the better they can do their job.
  • Don’t change your financial situation. That means when you are in the process of applying for a mortgage do not make any major purchases on credit like a new car! Even new appliances like a refrigerator, washing machine, or computer can trigger more scrutiny by the bank.
  • Don’t change careers right before you buy a home. The bank wants to see that you have a stable income by looking at statements for the past two years. The only people who would be able to get away with changing careers are people who are moving to a higher paying position in the same field with a very stable income that is not dependent on bonuses and commission. The mortgage underwriter could very easily deny your loan if they believe your income is not stable enough.
  • Don’t get emotional and buy the wrong house. This is the worst thing that could happen to you. Be very logical about your needs and wants in your home and don’t buy a home off a purely emotional reason.

These are a few things that you need to make sure you don’t do when it’s your time to buy a home. But all these DON'Ts are fairly simple to follow and by following these guidelines you are sure to have an easier time of buying and enjoying your new home.
 

What is a Short Sale?

by Todd Jones

A lot of people ask me, "What is a short sale?" A short sale is basically a home that is over encumbered. What does that mean? It means that you owe more than what you can get for it on the open market. So, as an example, let's say you have a house that you've bought for $500,000 and it's now worth $400,000 in this market.  So what happens is, if someone really needs to sell their home, due to some kind of hardship in their life, (they've lost their job, one of the spouses isn't working, someone's sick, or something unexpected) and they need to sell their home, then they can approach the bank with the help of a real estate agent an attempt to do a Short Sale.  Essentially, they're asking the bank to forgiveness the amount they are short. That's why they call it a Short Sale.

I always joke that they should really call them long sales, because it seems to take forever to get them approved. I had one that lasted a full six months. And my seller had a huge hardship. They were actually bankrupt. I don't know why the bank didn't move faster, but they didn't. It took forever to get it approved, and we did eventually end up selling the home to the original buyer.  Over the past few months, the approval time is getting shorter, so it makes buying or selling a Short Sale a whole lot easier.

Now you'll see homes that are listed for certain prices and you might look at the price and think, "wow, that's an incredibly low price. And, a lot of times this is done to generate a quick offer.  Consider that if you had a home that you wanted to sell quickly, what is the best and quickest way to get offers? To list it for a low price...right? If you list it for a low price, you're going to have people swarming around your home wanting to make an offer.

Now, remember, a short sale means that you have to ask the bank to forgive how much you're short, and there could be a second or a third loan involved here, so it becomes quite complicated. Now if you're short a big amount, and you had to get the bank to approve what they're going to forgive, right, that price that is being asked may not be the real price.

So let's say, for example, the home was purchased for $500,000, and it's now worth $400,000. So the listing agent might list the home for, say, $360,000 thinking they are going to generate a lot of offers. And guess what? They will. They're going to get all kinds of action on that home. And let's say they get a full priced offer at $360,000 and it gets accepted and the buyer is excited. The seller is excited because they finally get to move on with their life but the bank now has to look at it and basically give their blessing.

Now the bank is not a party to the purchase agreement. It's still the buyer and the seller, but since there is that shortfall, the bank has to approve it because they're the ones (excuse the term) taking it in the shorts.  When looking for homes, you may see a short sale price that is very low. I encourage you to be cautiously excited because it's still got to get approved by the bank.

The bank won't give you an approved price unless you have a bone fide offer. That's why you'll sometimes see a low price for a short sale—because if the bank won't even talk to the seller (or their Realtor) until they have an offer.

No after an offer is received, the Seller, with the help of their Realtor, will have to present that offer to the bank along with what they call a short sale package.

A short sale package is going to require the Seller of the home to submit a bunch of information, because the bank wants to make sure there is a true hardship.  The bank is going to want to see bank statements. They're going to want to see financial statements. They're going to want to see tax returns. They're going to want a letter telling them why you have to sell. Their thought is that if you can afford the home and stay in it, if you can still make the monthly payments.  To the bank it doesn't matter that the home's not worth what you bought it for.

A true hardship could be many things. It could be a divorce. It could be a death in the family. It could be a job transfer or an illness.  After the package is put together and sent to the bank, then waiting begins. So remember, it takes a bit of time and you need to be patient.

So you wait and you wait and you wait, and then you get a response from the bank saying, "Okay, yes. We will approve the short sale."

This wold be fantastic, if it happens. But most of the time the bank will counter back and say, "You know what? We're not going to approve that price. We sent out two real estate agents to do what's called a BPO or broker price opinion. They filled out this long form with pictures of local comparable sales and sent it back to us.  And we believe your home is actually worth $400,000 in today's market. We're not going to forgive it $140,000, down to the $360,000, but we will forgive the debt up to $100,000, down to the $400,000.

And at that point, the agent goes back to the original buyer and says, "Okay. They won't approve $360,000 but they will approve $400,000. Would you be willing to take it?" And here's the crazy thing. Even though you've waited anywhere from 30 to 90 days to get that answer, the bank wants your response within usually 48 to 72 hours. Isn't that crazy? You wait that long but they want a really quick answer after they've responded.

So now we have an answer from the bank and what happens, probably nine times out of ten, the original buyer has already found another home. They waited and waited, but couldn't wait any more. They needed a place for their family. They found a home. They're probably already living in it. The silver lining is that the Seller (and their Realtor) now know what the bank is willing to approve, so you can now have a somewhat normal Escrow.

This is where you may see in the description of the Multiple Listing Service, "bank approved price." And that's how we know. Because somebody else played the waiting game, but lost interest, or maybe they couldn't get financing, or whatever. But now there is a bank approved price.

So if you're looking through the Multiple Listing Service and you've found a short sale and you've heard, "Oh, don't go for short sales. They take forever," but you see in there bank approved, then go for it.  And if you're in Southern California, more specifically, the Los Angeles area, then definitely call me and I'll be glad to help you with the purchase.

Now, if the offer was written properly and everything goes well, it's important to know that all the contingency periods don't start until you get written approval from the bank. So don't worry about your contingency period, because as long as the offer is written well, then all the contingencies start the day you get written approval from the bank.

But remember, more than anything, you're going to need patience. If you don't have patience, I would not recommend short sales for you.

Why It's a Great Time to Buy During the Holidays

by Todd Jones

Buy a house...now...at the end of the year?  I know it may sound crazy, but it could be one of the best times of the year to buy.  You see, if a Seller is motivated to sell, then they are probably having some heart palpitations about right now.  In their mind, they may not see any offers until February, or worse yet...Spring.  That means that any offer that they do receive now will be strongly considered.  Even if it's not quite what they were hoping for.  And property taxes are due this time of year as well, and this could be causing additional stress to the Seller.  If their cash is tight, and they are able to get their home into Escrow, they may just accept the late payment penalty and have all the property taxes paid through Escrow to relieve their cash flow pressures.  So if you're looking for the "great deal," now could be the time to get it.

Couple these facts with the historically low interest rates we are experiencing, and it could just be the perfect storm that we'll look back on and ask, "why didn't I buy 10 homes?"

Obviously this all depends on the motivation of the Seller.  If they don't need to sell and have plenty of equity, then you'll probably just get a fair deal on that home.  And for a Short Sale, the time of year doesn't really matter so much; the same thing goes for a foreclosure (REO).  But for a Seller that was hoping to already be somewhere else by the Holidays, this is a great time to present them with a less attractive offer than they had hoped for.

So as you're shopping for that special Holiday gift, maybe you should consider a really large gift for yourself...a home.  If you would like a list of the homes that fit your criteria, just send me an email or give me a call, and I'll be happy to help.

Seven Easy Ways to Help Your Local School

by Todd Jones

Can you believe the summer break is over? Me neither! But it is, and with the end of summer there will be new challenges when heading back to school. Unfortunately, a rise in Foreclosures and a decline in property values means less tax dollars, and therefore, less money for the schools.

I like to meet challenges like this head on. It’s also an opportunity to build a stronger community in our schools. I have come up with seven ways that you can help out this year. If you don’t have kids in school, don’t stop reading. You can help too.

1) Teaching Supplies–Most teachers use much of their hard earned money to buy supplies for the classrooms. All those cute decorations, tools, visual aids, etc. all come out of their pocket. Find out where they like to shop for the supplies, and if you can afford it, get them a gift card for that store.

2) Join the PTA–Most Parent Teacher Associations have a membership drive at the beginning of the year. Whether you’re a parent, grandparent, cousin, sibling or just a friendly neighbor, those PTA dues (usually very little) go a long way to help the kids. You can sign up relatives that live out of the area too.

3) Volunteer–There’s always something going on at the school that can use some free help. The great thing about this is that you can help as your personal situation allows. For example, if you have a very busy work schedule, just try to find one hour a month to do something at the school. If 30 people volunteered for just one hour, the school would have 30 hours of help.

I’m not talking about anything outside your skill set either. I helped open car doors in the morning at my kids’ elementary school. It’s certainly not brain surgery, but it helps keep the morning safe and only last about 20 minutes in the morning before I went to work.

Some other opportunities are: be a room parent, help to sell snacks after school, assist at the school carnival, be the person that runs the PTA web site, or if you love Facebook, then set up a Fan Page and help build the community online. The opportunities are endless and the more involvement, the better for the kids…even if it’s only an hour a month.

4) Buy a Candy Bar–or wrapping paper, or a candle, or greeting cards, or whatever the children are selling…even if you don’t really need it. Those fund raisers are great for the school and the kids love winning the silly little prizes they get for selling stuff.

5) A Kind Word–The school staff and teachers usually only hear from parents when there is some kind of issue. For every nice thing they hear, they must hear 10 more negative things. You’ll make such a difference by simply saying something nice. And don’t just do it the first day of school. Keep the kind words coming all year long.

6) Student Supplies–You know how there is a list of supplies for each child to buy at the beginning of the year? Well, during these tough times, there is probably a child in your class whose parents will have difficulty purchasing those items. If you have a little extra cash, consider buying double of what your child needs. Give the extra set to the teacher and let them know that it’s for anyone who can’t get their supplies. The teacher will know who needs help. And if there’s no one in need of help, the supplies won’t go to waste. The teacher can use them as backup supplies, or when a child forgets, loses or breaks their own stuff.

7) Know Your Child’s Teacher–Get to know you child’s teacher. You don’t have to be best friends, but it would be great for you to have open communication with him or her. Be sensitive to the busy times. The morning and pickup time probably isn’t the best time to have lengthy conversations. But a quick “hi” and attending the parent/teacher meetings will be invaluable. And if they have some helpful critiques about your child, don’t take it personally. School isn’t just for learning the ABC’s…it’s also a great place to learn social skills that will serve them the rest of their life. I know you’re child is a perfect angel…mine is too (wink wink), but just in case they have a devilish day, the teacher can really use your support to back them up when your child needs a little social adjustment.

Keep in mind, the more you participate, the more it helps your kids–and as a whole, our society. On the local level, a good school helps property values stay high (I’m a Realtor, I had to mention it). I can think of several communities that have been less affected by the decline in home values, partly due to the schools (think South Pasadena, Carpenter Avenue, Colfax Elementary, South Pasadena, Calabasas, etc.) Living in a nice, friendly, safe community is attractive on many levels and a good school reinforces this kind of neighborhood.

These are seven ways you can play your part in helping your school. Pick one or pick them all. And the great news is that some of them require absolutely no money at all. I would love your thoughts and your ideas, so please feel free to add any more you can think of as a comment to this post.  And feel free to repost!

Todd Jones, Proud Parent and local Realtor.

You Can Eat Healthy and Help Your Local Farmer

by Todd Jones

You’ve heard it all your life:  “eat your veggies.”  Well I’ve started to eat my veggies and help local farmers at the same time.  Whether you live somewhere near me (Studio City) or in another part of the country, chances are that there is a farmers’ co-op somewhere near you.

Every Tuesday at my kids’ elementary school (Rio Vista Elementary), a group called CSA California distributes fresh veggies and fruits from local farmers.  I get about 25 pounds of produce for $25 dollars–a real bargain when you price the same naturally grown veggies at the local grocery store.  In addition to feeding my family some healthy food, I am also saving a trip to the grocery store (and with two kids, that’s immensely helpful).  It’s fun to see what they have each week as the produce varies based on the harvest.  It’s also a good way to broaden your “veggie horizon” as you will undoubtedly get something in your bag you’re not accustomed to eating.

If this program piques your interest, you can see all of their Los Angeles locations at: http://csacalifornia.org/pul.html

When you’re serious about buying a home, it is very important to get Pre-Approved for a loan. In the past a pre-qualification was fine, but with the current challenge of getting a loan, it is imperative that you get pre-approved.

A pre-qual was really nothing more than a lender taking a little information over the phone, briefly running the numbers, and then issuing a letter stating that you have been pre-qualified for a loan.  It really isn't worth the paper it's written on.  In today's market, many deals are falling out of Escrow because the buyer cannot get financing. This is why most listing agents (the agent representing the Seller) require a pre-approval letter from a lender before they will even consider an offer. A pre-approval is when the lender actually pulls the buyers credit, reviews bank statements, tax returns and any other related documents. This way, they have a much better idea of the Buyer’s buying power.  It's also a good idea for the Buyer, because the Buyer will know what they can and cannot afford.  It can be frustrating to look for properties in one price range when you can actually afford something less.

If you need a recommendation for a lender to get pre-approved so that you know exactly what you can afford, please email me or call me at 818-324-2665.

Where Exactly Are the Studio City Boundaries

by Todd Jones

When I first moved to Studio City, I was immediately confused when I started receiving mail.  About 70% of the time, the mail had North Hollywood listed as the city.  I knew this couldn’t be correct since I drove by the “Studio City” sign every time I came home.  Things got even more confusing when I would call a company to buy something (this was before Internet orders—not that long ago).  The order taker would inevitably ask me for my ZIP code and then proceed to ask me if I lived in North Hollywood, Studio City, or Toluca Lake.  What?!  Toluca Lake?  I was no where near Toluca Lake.

It wasn’t until I became a Realtor that I finally figured out what was going on.  I run into homeowners confused by this quite often, so I wanted to clear the air.  The City of Los Angeles has long been made up of many neighborhoods with names like Hancock Park, Whitley Heights, and the like.  But the boundaries were not always firm or even known by their own residents.  In the late 1990's the City of Los Angeles developed a system of Neighborhood Councils* to help the residents contribute to the development and success of their neighborhoods.  Thanks to this system, we now know the exact boundaries of each neighborhood.  It’s important to remember that Sherman Oaks isn’t really a city and neither are Studio City or Encino.  They are all part of the separate, and distinct Neighborhood Councils.  They have nothing to do with the ZIP Code either.  The ZIP Code is something that the post office has for mail delivery and just because your mail says Van Nuys, it doesn’t mean you live in Van Nuys.  That just happens to be the name of the post office that delivers your mail.

I’m a visual guy, so it helps me to see this kind of thing on a map.  Fortunately the City of LA has a way to look it up, but it’s a bit clunky and hard to find the button that will actually reveal the map.  If you want to see several of the local maps, I’ve put them all on one web page, so just go to LACouncilMaps.com to see exactly where you live.

By Todd Jones, Studio City Resident for 15 years and a local Realtor.
Todd can be reached at todd@ToddJonesHomes.com


*The LA Department of Neighborhood Empowerment web site states: “Neighborhood Councils are city-certified local groups made up of people who live, work, own property or have some other connection to a neighborhood. Neighborhood Council Board Members are elected or selected to their positions by the neighborhoods themselves.”

 

The Glee Project Gives a Local School a Year of Music

by Todd Jones

For anyone that will listen I like to sing the praises of what I call the “other elementary school in Studio City.”  Rio Vista Elementary is situated just on the boundary between Studio City and Toluca Lake, and this little school of about 400 students is a gem to the children who attend it.  A wonderful principal, excellent teachers, and involved parents mostly contribute to this wonderful school.  And like all schools in the LAUSD, Rio Vista has felt the wrath of budget cuts.  But these cuts can sometimes lead to an unexpected blessing.

In early April of 2011, three of Rio Vista Elementary’s fifth-graders were asked to participated in a new show for the Oxygen network called “The Glee Project.”  In the show, contestants competed for a grand prize—a seven-episode role on the hit TV show Glee.  From 40,000 applicants, the show aired with 12 finalists, ages 18 to 21 for the coveted prize.  In each episode, one of the contestants was eliminated and every one of the 10 episodes had a theme with a cast member from Glee.  The theme of the episode with the Rio Vista fifth-graders was called “Generosity.”  In the show the four final contestants were to mentor four fifth-graders.  (There was one other fifth grader from another school.)

One of the consequences of budget cuts is the elimination of programs like PE and music.  That’s where the non-profit organization called Education Through Music-Los Angeles (ETM-LA) steps in.  This organization’s mission is to bring music back into schools.  Rio Vista’s fourth and fifth graders—and a total of 4000 kids throughout Los Angeles—enjoy instruction in guitar, recorder, and the basics of music.

The producers of Glee have done a few things with ETM-LA in the past, and when The Glee Project was preparing their Generosity episode, the producers apparently thought it would be a good fit to have the final four contestants be generous with their talents and mentor the musically inclined fifth-graders.  The results were magical.  Even though the older contestants were supposed to be giving to the younger children, it seemed that the contestants themselves were the most touched.  The younger kids were even teaching their mentors a few things about music.

And the magic didn’t end with the August 14th airing of the show...now Rio Vista Elementary will receive some generosity too.  A check of $15,000 was presented to the school on behalf of Oxygen Media to ensure that every child, pre-K through fifth grade, will receive music instruction from ETM-LA for the 2011-2012 school year.  A gesture that principal Mr. McClay graciously accepts.

In times of budget cuts and financial distress, it’s wonderful to see this kind of generosity expressed to our children.

If you missed the episode, you can catch it here.  And if you want to learn more about Eduction Through Music-Los Angeles, you can find them at etmla.org.  To see all the links in one place, just go HERE.

The Glee Project is produced by Ryan Murphy Television and Embassy Row with Ryan Murphy, Dante Di Loreto, Michael Davies and Shauna Minoprio serving as executive producers.


Written by Todd Jones
Proud parent of one of the fifth graders on the show.
 

Should I Buy a Home Now?

by Todd Jones

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

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