Celso Neves’s Blog Posts

Split Premium Mortgage Insurance

What is mortgage insurance?

When your downpayment is less than 20% on conventional loans the lender has less equity on the house to serve as collateral for the loan. In this case the lender will require that the borrower pay for a Mortgage Insurance (MI). MI is provided by a third-party company and will cover part of the principal (12 to 35% coverage depending on the LTV) in case of default. There are government programs that require less coverage (please see example bellow and ask for more details in the comments).

What is split premium mortgage insurance?

Mortgage insurance can be upfront or monthly or both.

FHA loans require 1.75% upfront premium and 0.85% monthly premium on 96.5% LTV loans (3.5% downpayment). Conventional loans do not require upfront mortgage insurance and the rate for the monthly mortgage insurance is 0.66% for FICO of 720-740. Split premium on conventional loans is when you pay some upfront reducing your monthly premium accordingly.

What is financed upfront mortgage insurance?

FHA loans allow you to finance the upfront mortgage insurance. So, when you buy a house you do not have to pay for it right away, as it is added to the loan.

Please see the table below for a comparison between FHA and conventional.




Property Tax Break for Seniors 55 and older.

Property Tax Break for Seniors 55 and older. In California you can have a great property tax break if you OR your spouse is 55 or older. You can sell your house and buy another house, and transfer the trended base value (used to calculate the property taxes). This is specially valuable if you have lived in your property for a long time.

The assessor can not increase the assessed value by more than 2% a year. Consequently, the assessed value becomes much lower than the property value after many years, and you can transfer that to a new property. There are conditions and limits. Please talk to your Realtor for more details.

Source Los Angeles Assessor: https://assessor.lacounty.gov/wp-content/uploads/2015/02/E-20.pdf

Home-ownership shows slight improvement in California and the US in 2017.

The rate of home-ownership in Los Angeles county has been declining since the data is available: from more than 51.5% in 2009 to less than 48.5% in 2016. By the way, Los Angeles has been trailing California 53.8% and the US 63.4% for the same period. There are signs of improvement in 2017 for California 54.4% and the US 63.9%, however these levels are still comparable to the lowest levels in the last 25 years (see charts bellow).

The rental market in California is very tight also signaling pressure for rents to go up. The rate of rental vacancy in 2016 was 3.6%, the lowest level since 1984, while 2017 shows a little improvement to 4.3%.


vacancy rate

Fixed principal + interest payment for 30 years.

While the property taxes may increase slightly due to the reassessment of the value of your property, your principal + interest payment remains fixed for 30 years. Example: if you buy your house for $400,000 and the county reassesses your home by 3% to $412,000 your monthly payment might increase by $12,50. As a reference, if your rent is $2,000 and rents go up by 3% then your rent goes up by $60.

Assistance for Unemployed Homeowners.

While the number of reasons to own a home abound, many still feel worried to invest in home-ownership based on a fear that they may loose their jobs and consequently loose the house. For those, I have great news. FHA loans include the unemployment assistance.  If you have an FHA loan you may have your mortgage payment reduced or suspended while you seek re-employment.

  1. Home Affordable Unemployment Program (UP): If you are having a tough time making your mortgage payments because you are unemployed, you may be eligible for UP. UP provides a temporary reduction or suspension of mortgage payments for at least twelve months while you seek re-employment.
  2. Emergency Homeowners’ Loan Program (EHLP)
  3. FHA Special Forbearance: If you are having difficulty making mortgage payments because you are unemployed and have no other sources of income, you may be eligible for FHA’s Special Forbearance. FHA now requires servicers to extend the forbearance period, by offering a reduced or suspended mortgage payment for up to twelve months, for FHA borrowers who qualify for the program.

source: https://www.hud.gov/topics/avoiding_foreclosure

First Time Home Buyer Programs.

If you want to buy a house, however you don’t have enough savings, you may be able to qualify with the California down-payment assistance for CA residents. If you think your credit is not good enough, we provide free credit evaluation, and a path for your home-ownership. If you thing the mortgage payment might be too high, there is a Federal Tax Credit (MCC) that may help you lower the impact of the mortgage payment. Special lower interest rate and lower mortgage insurance for first time home buyers may help reduce your payment.

Free, no obligation personal(family) consultation.

Each person(family) has a different situation and expectation. If you want to become a home owner then I want to listen from you. Please contact Celso your Loan Consultant at (562) 704-1651 to schedule a free, no obligation personal consultation.

Sell your “in Need of TLC” listing as a Remodeled Home

The Property Brothers Jonathan and Drew have a lot of success selling remodeled homes. We have a great product that fits perfectly with those buyers that have a dream bigger than their budget.

We have the FHA Standard 203k that allows structural repair and additions with no limits, and the FHA Streamlined 203k that does not require a consultant, but is limited to $35,000 in repairs.

COE of 45-60 days is recommended, but it may be the only non-investor offer you will get.

Please call us at (562) 704-1651 with questions and to schedule a meeting at your office or ours.


The benefit of MCC with Higher Interest Rates

Higher Interest Rates.

Interest rates have been going up since September 2017 and this has been affecting how much buyers will qualify based on their income and credit.

The news causes some worry, however the effect on the payment is not that high. For an example of the effect on the mortgage payment, let’s assume a 95% LTV of a $500,000 house and the interest rates on a 30 years fixed loan at its lowest point in September 5th 2017 of 4%. The principal and interest would be $2,268.

With current rates at around 4.75% the new payment is $210 higher at $2,478.

The Benefit of the Mortgage Credit Certificate.

The Mortgage Credit Certificate is a tax credit of 20% of the interest rate on a mortgage loan that can be applied to the federal tax return of first time home buyers.

Below, the benefit of the MCC. The house price limits in Los Angeles County in a targeted area is $715,872 and on a non-targeted areas $585,713.

MCC - 5percent

Always reach out with questions and to schedule a meeting with us.

Cap Rate and The Gross Rent Multiplier

The Cap Rate – Capitalization Rate – is the rate that the investment returns and it is calculated by: annual net income / cost

Gross rent multiplier is the gross annual rent income divided by price.

It is almost like the inverse of the gross rent multiplier GRM, except that the gross rent multiplier is the gross rent and the cap rate is the net rental income.
If you are looking for a higher CAP Rate then look for a lower GRM.
Assuming that the gross rental income is the same as the net rental income (tenants pay for all expenses):
If an investor bought a 4-plex for $1,000,000 and each unit rental income is $1200 a month, so total income is $4,800 a month, or $57,600 a year ($4800 a month x 12)
CAP Rate : $57,600 / $1,000,000 = 5.76%
Gross Rent Multiplier GRM = 1,000,000 / $57,600 = 17.63
Some people calculate a monthly GRM (and post on MLS as GRM) : 1,000,000 / $4800 = 211
If you are looking for specific cap rate or GRM, then add GRM to your MLS search. Not every realtor add this info though, and some add the monthly in the same field.
The other way you can do is to search by ranges. Different searches with price ranges and rental income ranges.
Some areas have higher GRM. Normally, where home prices per sqft are lower, GRM tend to be lower too. Maybe there is an expectancy that the the home prices and/or rental income will go up faster on higher priced areas.

The Secret is The Law of Attraction

The Law of Attraction is described in the book and movie The Secret by many Gurus, Coaches, and Leaders. It holds the secret for abundance in our lives.

Our lives are the result of our past thoughts, and our future life will be the result of the thoughts that we are having now. We can change our thoughts and change our future into what we desire. Good thoughts generate good vibrations that reflect in good feelings. Let’s make sure we are feeling good, let’s have a plan and an accountability partner. There are no limits to what we can achieve if we just keep it vividly in our minds that we have already achieved it.

Download your free copy here.  Baje su copia en Español grátis. Watch the movie on VUDU free with ads. Also available on Streaming Netflix (by subscription) and audio book at Audible

2018 Loan Limits for Conventional, FHA, and VA.

The news was expected, but I think the increase was more than expected. The average increase is in excess of 6.8% for Conventional and 6.9% for FHA. The new limits are available now for Conventional Loans closing in 2018 and FHA loans with case number issued in 2018.

Above the loan limits shown on table bellow it is considered non-conforming, and called a Jumbo loan. We can offer 5% down-payment Jumbo loan for more expensive properties.




Rents to soar in the next 2 years and home Prices to go up 29.1 % in the next 5 years in Los Angeles-Long Beach-Glendale

I got the report for Los Angeles-Long Beach-Glendale with 29.1% appreciation in the next 5 years and San Bernardino-Riverside-Ontario with 12.09 % appreciation in 5 years.

Additionally, rents in Los Angeles will keep going up for the next 2 years.

Mortgage payments fixed for 30 years sound like good music to my ears.