What to Know About the Mortgage Credit Certificate

First-time homebuyers should take advantage of this little-known program.

I discussed mortgage credit certificates a few years ago, but now we have so many millennial first-time homebuyers that I thought it was a good idea to remind you about them. Be sure to ask your lender if they’ve been approved by your state and local governments to sponsor you for the MCC. 

So what does the MCC do for you? Suppose that you pay $20,000 in annual interest. With the MCC, Los Angeles County allows a tax credit of up to 20% on that amount. If the credited amount has already been deducted from your paycheck, you’d get a refund back.

 

Many people who do qualify for the MCC aren’t 

aware it even exists. 



To be eligible for the MCC, your FICO score has to be above 620. For a two-person household, you can earn up to $135,000 and still be eligible. For a three-person household, you can earn up to $153,000. Most first-time buyers in Los Angeles who can afford to buy a home are also eligible for the MCC—that’s great news that you should share with any millennials and first-time buyers you know who are thinking of buying a home. Many people who do qualify for it aren’t aware it even exists. 

If you have any questions about the mortgage credit certificate, don’t hesitate to reach out to me. In the meantime, stay safe!

What If Your Appraisal Price Doesn’t Match the Contract Price?

You have a couple of options when your sales price differs from your appraised value.


What happens when there’s a difference between your home’s sale price and the appraisal value? This

conundrum comes up a lot when there are big increases in property values over a short period.

Well, we have a couple of ways to address the issue:


    1. The agent can submit a rebuttal. Your agent can compile a list of comparable sales and send it

        to the appraisal company to show them why the appraised value was formed in error. Appraisers
        aren’t perfect, and increased business can add pressure to their jobs, causing them to make
        mistakes. However, most rebuttals aren’t accepted, except in the cases of short sales.

    2. Try to negotiate. If the rebuttal isn’t successful, it’s time to try negotiating. Most of the time, buyers
       in our market have to come up with the difference between the appraised value and the sales price,
        so a good negotiation tactic is to cut that difference in half—especially in the case of FHA loans.
        The reason that sellers must yield half of the difference is that the appraised value will stay on the
        record for 120 days. If you don’t sell to the FHA buyer, you’ll be locked into that appraised value for four
        months.

This conundrum comes up a lot when there 

are big increases in property values 

over a short period.

If you’d like more details on how to navigate this issue, don’t hesitate to reach out to me. I love to

respond to your questions. Hope to hear from you soon!

How Do SBA Loans Make Commercial Property Cheaper?

Here’s what you should know about the SBA loans in the new stimulus bill.

You all know by now that I’ve been following the financial world for the last few years. Today I have a piece of information that I’m excited to share with you, and I hope you share it with your friends and family. 


With the new COVID-19 stimulus package, SBA loans are here. Traditionally, it carried a 2.3% rate on a guaranteed fee, but that has now been cut in half to 1.5%. The origination fee has been eliminated as well. When you close a loan, SBA will also pay your first three months of your mortgage.


Why is this so exciting? Buying property for yourself or your business will end up costing less than renting if you take advantage of these rates. With the SBA loan at 2.5% over 25 years and 3.5% fixed for 25 years, the two-blend rate is roughly 3%, for conversation's sake.



   The payment on these loans is fixed for 25 years.   



Here’s a real example of the savings you could see on an industrial building: Let’s say you found something for $210 per square foot and finance $189 per square foot of the purchase after putting 10% down. After a 25-year amortization period at 3%, the cost ends up being 90 cents per square foot. That’s pretty much the rent you’d be paying right now for this kind of building.


Now an example of a commercial property: Let’s say it’s $400 per square foot and you finance 90% ($360 per square foot) after a 10% down payment. That will be a payment of $1.71 per square foot, which is considerably lower than the $2-per-square-foot average for rent. The payment is fixed for 25 years and the rate will stay the same.


Finally, let’s compare apples to apples by talking about the net lease, which covers the insurance on the building. On top of that, I always talk about appreciation in California, which is roughly 6% per year. Let’s say your industrial building goes from $210 to $250 per square foot, a 15% increase. The magnified return from your down payment on this is 1500%.


If you have any questions for me about this topic or other real estate questions, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.