Solano Real Estate Scene: Upper end of Solano real estate market healthy
With interest rates for 720-plus FICO scores nearing 3.5 percent average nationwide, refinancing to a lower rate and pulling cash out to remodel or consolidating debt is what is dominating the mortgage news headlines around Solano County, California and the U.S.
Real estate sales in Northern Solano County are steady, but according to Brian Stumbaugh of Stumbaugh Realty Advisors, inventory for affordable homes below $420,000 continues to be a challenge for buyers and real estate agents.
Stumbaugh listed a 1,296-square-foot, three-bedroom, two-bath home built in 1975 in South Vacaville a couple of weeks ago at $389,000 for a seller moving out of state for a job relocation. He received six offers after exposing the home to the full force of the market and accepted an offer for more than $400,000. All six offers were lender-qualified and not contingent on a sale of another property. The five disappointed buyers and their hard-working agents are back out there searching for an affordable home.
There are currently 320 sales pending and 650 active listings in Solano County.
The upper end of the market is healthy and if the home is priced right, these homes are selling because jumbo financing guidelines have loosened over the past five years and loan products have become more abundant, especially for buyers with good FICO scores and qualifying debt ratios.
A buyer can purchase a home in Solano County with only 5 percent down, up to a loan amount of $850,000 with a minimum FICO score of 680 and up to $1 million with a 720-plus score, making it possible with a seller closing costs credit for a buyer to purchase a home for $1 million with only $50,000 out of pocket.
PMI costs for high FICO score buyers are 50 percent less expensive than it was just 10 years ago. PMI companies now offer risk-based pricing, meaning a 760-FICO score client can get a 95 percent Loan-to-value loan with a PMI factor as low as 0.29 percent, while a 680-FICO score client may be looking at 0.69 percent.
Ten years ago, PMI for 95 percent loan-to-value conventional loans ranged from 0.78 percent to 0.92 percent regardless of FICO scores, debt ratios or the number of borrowers on the loan. This PMI improvement and this 95 percent option is extremely helpful for young professionals who have lots of income, lots of student loan debt and minimal savings to purchase their executive-level home now rather than later in life.
Gift funds are now allowed, which was not possible for most of my career on a 95 percent loan-to-value transaction. This low down-payment option also helps move up buyers who want to buy first and sell their departing residence later.
From a financing standpoint, this real estate market is as good for qualified buyers as it has ever been in my 40 years in the business.