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If you're thinking of buying a home in California, you might not want to sink everything you have into the down payment.  In fact, it probably makes more sense to keep more money SEPARATE from the house equity, even if you have to pay private mortgage insurance or a higher interest rate.

Banks are asking for higher down payments since the credit crunch started.  Wanna know why?  It lowers the bank's risk.  If higher down payments lower the bank's risk to market fluctuations, than who assumes that risk?

You got it; YOU DO ! 

Consider this article from the Arizona Republic:

Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them pay less than they owed each month and now their loan is $200,000 more than the house is worth.

"We paid $585,000. It was the peak of the market, but no one told us," said Shaffer, a real-estate agent from Colorado. "We would probably have to spend the next 20 years trying to get right on the mortgage. That's crazy."

Housing has become volatile this decade.  The pendulum like economy the information age brought us  has increased that volatility.  While walking away from a mortgage obligation is the last thing you want to do, the comfort of having cash in the bank supercedes the desperate feeling that the bank has all your money tied up the collateral.  If you've noticed, banks aren't keen about letting existing homeowners borrow more through a cash-out refinance.

"Homes have gone from being a place to live to a disposable investment for some," said Jay Butler, director of realty studies at Arizona State University's Polytechnic campus. "It used to be that paying the mortgage was the top priority. Now, it's keeping the credit cards."

He said one reason is some homeowners think that with all the foreclosures, there will be programs to help them when they buy again.

It usually takes three years of perfect credit payments after a bankruptcy before someone's credit score is high enough to buy a home. Recently, people could buy a home again two years after a foreclosure.

Market risk is transferred to the party that has the most money in the investment.  While the profit lies absolutely with the title holder (you) the rsk of a large market drop rests with the lienholder (the bank).  Loan workouts or renegotiations are being pursued by banks in order to save that investment.  A higher loan amount allows the home owner to pursue an arbitrage strategy with the saved down payment money, increasing his liquidity, tax advantages, total return, and ultimately...safety of principal. 

I want to be clear here.  I'm not advocating that ANY homeowner simply "walk away" from a mortgage obligation.  I'm pointing out the logical conclusion that if lower down payment are more risky to banks, then they are safer for the borrower. 

Many San Diego homeowners are facing the prospect of foreclosure.  That doesn't have to happen if you have plenty of equity in your home.  Rising food and fuel prices, combined with a tightening credit environment left San Diego homeowners with few options when trouble came knocking at their door.  The implosion of most sub-prime lenders pulled the rug out from under those folks who suffered "life events".  

The three D's:  death, disability, and divorce are the major contributors to foreclosure.  While the press reports that foreclosures in San Diego are rising because of ARM adjustments, we know that the three D's are far more severe to a famiiy's financial well-being than a higher mortgage payment.

Help is available to San Diego homeowners with a substantial equity position.  The "new sup-prime mortgages" aren't new; they've been available in California for decades; private mortgage lenders.   Private mortgage lenders are wealthy individuals or pension funds that understand San Diego real estate.  They realize that housing prices won't free-fall forever.  Most private mortgage lenders are willing to lend up to 70% of your home's value...

REGARDLESS OF YOUR CREDIT HISTORY

Have you received a Notice of Default on your property?  If you can demonstrate an ability to repay a loan, we may be able to help you out of this temporary situation.  Our private mortgage banking and brokerage specialists will analyze your property, review your finances, assess the risk of the extraordinary event thatput your loan into default and offer a financing solution to restore your good credit.

These loans aren't cheap money.  The lender is taking on considerable risk in these loans and wants to be compensated for that risk.  Rates of 12% are not uncommon.  Fees of 2-4% of the loan amount are not uncommon.  A good rule-of-thumb for the loan amount you'll need is:

1. Determine your pay-off amount for your mortgage. That is best calculated by adding the most recent balance and one monthly mortgage payment. 
2. Add in any foreclosure costs (this can be obtained from the trustee) 
3. Add in any back property taxes.
4. Multiply that amount by 1.05%

This should be the loan amount you request from a private mortgage lender.  If you divide the requested loan amount by the property value, and the number is less than .7, a private mortgage may be available for your San Diego County home.   You should expect a mortgage payment of 1% of the new mortgage loan amount.

We've been arranging private money mortgages for San Diego home owners since 1984.  Yo can contact me at (858)-777-9751 or apply online.

I'm bullish, long-term, on coastal California real estate- that's no secret.  The underlying demographics are still positive for California; more people will be moving in than moving out, over the next 20 years.  Aging baby boomers yearn for warm climes in retirement.  While California has its share of problems, it is still the "promised land" for many Americans.

Southern California is getting hammered.  Housing prices in San Diego County have dropped like a ball off a table.  While tony communities like La Jolla and Rancho Santa Fe have held up, towns like Oceanside have experienced severe declines.  Two "beach towns" we like, in San Diego County, are Oceanside and Imperial Beach.  We're "value investors" and have been since our days on Wall Street.  Benjamin Graham and Warren Buffett "speak" to us.  We regard California beach towns as "blue chip" stocks.  Today, thos "blue chips" are becoming affordable.

My daughter's theatrical debut, at The Star Theater, afforded me a Saturday afternoon in Oceanside.  As I looked out the window of the Jitters Cafe (free wireless), I saw THIS sign.  

I had to snap a picture of it!

While Hollywood HIlls offers a "tour of the stars' homes", Oceanside offers a tour of foreclosed homes.  I don't begrudge the REALTOR a little creative marketing; in this market, a "foreclosure tour" is appealing to value investors. 

Canadians are buying American real estate in droves.The rapid descent of the dollar against the loonie (Canadian dollar), combined with the drop in American real estate prices is bringing more and more Canadian investors across our northern border in search of investment riches.

From the Globe and Mail:

You may want to make that U.S. vacation a regular thing. While Canadian housing prices are inexhaustibly buoyant, the U.S. market is falling hard. The average resale price tumbled 10 per cent across the country in September, and in balmy Phoenix, third-quarter sales of single-family homes were off 23 per cent. A recent report in the Arizona Republic newspaper said one-third of homes on sale in the Phoenix area are sitting empty, many of them owned by investors who need to sell because they can't find renters. Think about it: You can score yourself a nice vacation property in Arizona and help out an embattled American real estate speculator at the same time.

 We're helping two Canadian citizens get mortgage financing in the US,  right now.  One is looking for property to own in Fort Lauderdale while the other is seeking a condo along the San Diego coast.  Here's the interesting thing- while prices in both markets are down 20%, the rise in the loonie makes that home in Miami or that condo in Carlsbad some 30% cheaper to a Canadian investor than it was last year. 

Arizona, Florida and California are on sale, right now, for Canadian investors but we have the Stanley Cup in Anaheim, and that just isn't for sale.

A compendium of articles about how Canadian investors need mortgages from U.S. Banks: 

Black Pearl Marketing Minute: How did Brian Brady get to be Canada’s Favorite American Mortgage Broker?

Why Are Western Canadians Buying Arizona Real Estate?

Canadian Investors Need Mortgages For Arizona Properties

How Canadians Shop For American Mortgages

Canadians Finding That American Mortgage Money Is Scarce

American Mortgages For Canadian Residents: Documentation

Canadian Investors Need American Mortgages

Will Bias Against Canadians Extend to the American Real Estate Market?

Canadians Buy American Real Estate

Canadian Investors, American Real Estate: The Currency Play

Canadian investors have been enjoying the parity between the loonie and the dollar.  I've written about how savvy Canadian investors are snapping up prime California real estate at a 30% discount from last year.  Essentially, the 20% drop in real estate prices, combined with the strong loonie, allows a Canadian investor to buy a million dollar condo in La Jolla for $700,000.

Automobiles are a different story.  The "Mad Ape" voiced his understandable rage at the "new policies" from American automakers:

The North American Free Trade Agreement (NAFTA)….remember that? It seems the North American Auto Industry has not. Or if they did, have chosen to ignore it. You know…the part where barriers can not exist as a protectionist mechanism.

In an October post on this subject, I wrote about how my wife was going to follow in her sisters footsteps and purchase a new auto in the USA. Well she started the process and quickly found out that the same car dealer is now refusing to sell to her because of a new policy that forbids them to sell to Canadians. Say what? WTF? Are these guys for real?

This is completely unfair. Tell me where the auto makers get off inserting blockages into the economic reality of a high Canadian dollar (~$1.07 US). Can you say ‘law suit’ boys and girls?

Mad Ape, you have every right to be indignant.  We Americans are a proud people but we should also be a fair people.  We won the Stanley Cup, fair and square.  The Canadians won the economic advantage, these past few months, as fairly and as squarely as we won that trophy.

There are two definitive facts about the future:  The Canadians will win back the Stanley Cup ( they are more zealous about hockey than we are) and the dollar will eventually gain back its value against the loonie.  Fair, however, is fair.  The Cup stays in Anaheim for one more year and Canadians should be allowed to gain their economic advantage, under the rules the Americans made, regardless of the outcome.

PS-  One might think that an industry, that's getting its ass whupped, might do whatever they could to move the tin- I'm stumped.

A compendium of articles about how Canadian investors need mortgages from U.S. Banks: 

Black Pearl Marketing Minute: How did Brian Brady get to be Canada’s Favorite American Mortgage Broker?

Why Are Western Canadians Buying Arizona Real Estate?

Canadian Investors Need Mortgages For Arizona Properties

How Canadians Shop For American Mortgages

Canadians Finding That American Mortgage Money Is Scarce

American Mortgages For Canadian Residents: Documentation

Canadian Investors Need American Mortgages

Will Bias Against Canadians Extend to the American Real Estate Market?

Canadians Buy American Real Estate

Canadian Investors, American Real Estate: The Currency Play

Can a Canadian investor actually get a mortgage in America?  The answer is yes.  There are higher downpayment requirements and the documentation can be onerous.  For Canadians who wish to buy an investment property, the downpayment requirement is usually 35%.  Canadians who want a vacation home may need as little as 25% downpayment.  Why so much higher than their American counterparts?  Americans can buy property with no money down.  The answer lies in the risk.  Canadians share a common language, common holidays, and a very similar culture ( we both like hockey, basketball, football, and baseball).  Canadians have the ability to "bolt" with little or no recourse in their home country.  That added layer of risk is the reason for the higher down payment. 

Canadian Investors Can Apply For an America Mortgage Here.

A compendium of articles about how Canadian investors need mortgages from U.S. Banks: 

Black Pearl Marketing Minute: How did Brian Brady get to be Canada’s Favorite American Mortgage Broker?

Why Are Western Canadians Buying Arizona Real Estate?

Canadian Investors Need Mortgages For Arizona Properties

How Canadians Shop For American Mortgages

Canadians Finding That American Mortgage Money Is Scarce

American Mortgages For Canadian Residents: Documentation

Canadian Investors Need American Mortgages

Will Bias Against Canadians Extend to the American Real Estate Market?

Canadians Buy American Real Estate

Canadian Investors, American Real Estate: The Currency Play

Canadians are looking to buy American real estate.  The loonie is at parity with the dollar and American housing prices are down some 20% from 2005. That presents quite a bargain if a Canadian is looking for a vacation home in America.  We've talked to over ten Canadians in the past week; most are interested in the Sun Belt (Arizona, California, Florida).

How does a Canadian get a mortgage for American properties? 

Documentation American lenders look for when lending to Canadian citizens: click here for the documentation list

A compendium of articles about how Canadian investors need mortgages from U.S. Banks: 

Black Pearl Marketing Minute: How did Brian Brady get to be Canada’s Favorite American Mortgage Broker?

Why Are Western Canadians Buying Arizona Real Estate?

Canadian Investors Need Mortgages For Arizona Properties

How Canadians Shop For American Mortgages

Canadians Finding That American Mortgage Money Is Scarce

American Mortgages For Canadian Residents: Documentation

Canadian Investors Need American Mortgages

Will Bias Against Canadians Extend to the American Real Estate Market?

Canadians Buy American Real Estate

Canadian investors have been flocking to the California coastline and Arizona desert to buy prime American real estate at a bargain.  The strong Canadian dollar, while inopportune for Canadian manufacturing firms, is giving Calgary investors built in downside protection when they buy American real estate.  I explain that here: 

In January of 2007, a Canadian investor, buying a $300,000 (US)  property in Long Beach, CA, , would have to pay $352,600 (Canadian).  That was based on an exchange rate of $1.17553 Canadian to $1.00000 (US).  Today, the exchange rate has dropped to $.98188 Canadian for one US dollar.  That means that the same property in Long Beach, would costs $294,300.

The vacuum, however, lies in the mortgage financing for Canadian investors.  Mortgage companies require as much as 35% down payment for Calgary citizens buying a vacation home in America.  In some areas (California, Arizona, Nevada, and Florida), that financing is about to be suspended.  The leading bank suspended its loan programs, for Canadian investors, in those four states, as of April 1, 2008.

There's still money available for Calgary residents buying U.S homes- click here to find out where 

A compendium of articles about how Canadian investors need mortgages from U.S. Banks: 

Black Pearl Marketing Minute: How did Brian Brady get to be Canada’s Favorite American Mortgage Broker?

Why Are Western Canadians Buying Arizona Real Estate?

Canadian Investors Need Mortgages For Arizona Properties

How Canadians Shop For American Mortgages

Canadians Finding That American Mortgage Money Is Scarce

American Mortgages For Canadian Residents: Documentation

Canadian Investors Need American Mortgages

Will Bias Against Canadians Extend to the American Real Estate Market?

Canadians Buy American Real Estate

Canadian Investors, American Real Estate: The Currency Play

Canadian investors, seeking American mortgages, may be in for a shock when "shopping".  The American mortgage banking and brokerage system is different than the Canadian banking system.  In Canada, there are 5-7 major banks or lenders and a variety of mortgage brokers.  Both lenders and mortgage brokers, in Canada, are heavily regulated.  Loan programs, in Canada, are fewer than the loan programs offered in the States.  The American mortgage industry relies heavily on the seciritization of mortgage loans.  As such, there are big banks and small mortgage brokers who may very well offer identical loan programs. 

Should Canadian investors then deal only with large American banks?  Ask Canadian investors, with properties in escrow, this past week.  Two major American banks cancelled their loan programs, on April 1, 2008, for Canadian citizens buying properties in Arizona, California, Florida, and Nevada.  I have fielded 5-7 calls each day, since Friday, from frustrated Canadians. 

Consider this question, posed by a Canadian borrower (about a Canadian mortgage):

continued 

A compendium of articles about how Canadian investors need mortgages from U.S. Banks: 

Black Pearl Marketing Minute: How did Brian Brady get to be Canada’s Favorite American Mortgage Broker?

Why Are Western Canadians Buying Arizona Real Estate?

Canadian Investors Need Mortgages For Arizona Properties

How Canadians Shop For American Mortgages

Canadians Finding That American Mortgage Money Is Scarce

American Mortgages For Canadian Residents: Documentation

Canadian Investors Need American Mortgages

Will Bias Against Canadians Extend to the American Real Estate Market?

Canadians Buy American Real Estate

Canadian Investors, American Real Estate: The Currency Play