The Mortgage Pre-approval “Edge”

Mortgage pre-approval advantages


When you obtain a mortgage pre-approval, it means that a lender has approved you for a loan amount for a specific purchase price, before you have found the property you want to buy.  The pre-approval tells you and the buyer the loan amount you are able to afford. It also demonstrates your credit worthiness to the seller. By having a mortgage pre-approval, it reduces the timeline to close your loan. This moves you one step closer to home ownership.  Getting a mortgage pre-approval gives you a substantial edge when shopping for a new home.


Getting a pre-approval makes you a more powerful buyer. You show you have the actual financial resources to close a deal and can take that money elsewhere if the deal is delayed. You have better bargaining power than other buyers bidding on the property who aren’t pre-approved. Also, by being pre-approved, it reduces surprises during the closing process and results in a quicker closing.


The seller benefits when a buyer is pre-approved because they have the confidence that the buyer can actually close the deal. Because of this, it minimizes the time their house is “off market” because of a financing contingency.  Pre-approval also reduces the uncertainty of whether a buyer will qualify for a loan. The seller will also benefit from a quicker closing.


Mortgage pre-approval carries far more weight with a seller than a loan pre-qualification. With a pre-qualification, a “soft” credit pull is utilized. This process only asks what the buyer’s income really is. It is an estimate of the buyer’s qualification. With a pre-approval, a “hard” credit pull is performed and income is officially verified. The loan is underwritten before the offer is made. Learn more about the differences between pre-approval vs. pre-qualification HERE.

Pre-approval means that the lender is making a commitment on the loan or that the lender has received the following information from the buyer:

  • The last 30 days of pay stubs
  • The last two years of signed tax returns
  • The last two months of bank statements that shows sufficient funds to close.
  • A verified photo ID.


As your real estate professional agency, Sound Investment, Inc. can suggest local trusted mortgage professionals who can assist you with a loan pre-approval and put you in the driver’s seat when looking to buy a new home. Contact us to learn more by CLICKING HERE. Or call us at (510)-244-0081

Negotiate a Mortgage Buy-Down

Negotiate a mortgage buy-down


An option to consider to deal with higher mortgage rates would be to negotiate a buy-down with the seller. In a “softer” market, the seller may accept an offer to buydown the interest rate for the first two years. That would allow the buyer to purchase at today’s prices, with much lower payments for the first two years.

This is an interesting alternative if you are currently a prospective homebuyer. A lot has changed in the past year. Most notably, mortgage rates have more than doubled. This results in an affordability gap that has taken approximately 15 million buyers out of the market. Therefore, inventories are growing. This is not because more people are deciding to sell their homes. It is because it is taking longer to sell properties because less people are qualified.


Buyers are wondering when the market will return to normal. In reality, mortgage rates at three and four percent are not be common over the years. For example, the average mortgage rate between April 1971 and November 2022 is 7.76%. Predictions for mortgage rates in the third quarter 2023 range from 4.5% for Fannie Mae, 5.0% for Mortgage Bankers Association, and 5.2% for Freddie Mac. You can see additional 2023 mortgage predictions at Forbes Advisor.

This does create an opportunity for prospective buyers in today’s market. The slowing of housing sales, (down 34% from December 2021), has changed the environment buyers were experiencing in 2020 and 2021. Instead of having to pay a premium over the list price, many sellers are willing to negotiate on price. Without the competition from multiple offers, buyers can expect to include contingencies in their offers. These can be for financing, appraisals, inspections, and possibly, the sale of a home currently under contract.


Some buyers who are confident that mortgage rates will come down soon have opted to purchase now with an adjustable-rate mortgage. This can lower the rate by about one percent for the first period which can be five years. When mortgage rates returned to acceptable, the borrower could refinance to a fixed-rate mortgage.

On the other hand, buyers can opt for asking for a mortgage Buy-Down. See this example below with a standard, conforming, fixed-rate loan. The buyer must qualify at the note rate, but the payment for the first year is 2% less than the note rate. After that, payment for the second year is 1% less than the note rate. The difference in the first two years must be paid in advance at closing. In the case of this example, the seller paid the difference as a result of contract negotiations.


2023 mortgage Buy-Down Chart

During this period of lower payments, if the rate comes down, the buyer can refinance the property. If the rates come down at the end of the first year, the lender is required to reimburse the borrower for the remainder. This can be applied toward the cost of refinancing.

Temporary rate buy-downs have been available for decades. Their main purpose is to help a borrower get into a home with lower initial payments. Lenders across the country are talking about them now is because they provide a reasonable and viable alternative for buying a home at today’s prices. Buyers avoid larger initial payments that result from the current higher mortgage rates. It especially makes sense if you believe that rates are coming down soon.


If the mortgage rates return to a more attractive rate, there may be considerable pent-up demand from the mortgage-ready buyers who were priced out of the market. This could lead to another seller’s market where high competition results in prices above list price and sellers not willing to accept contingencies. So purchasing now may be the wiser thing to do.

A qualified real estate agency, like Sound Investments, Inc. can give you more information about buy-down negotiations. We can explain how you can negotiate with the seller to obtain this type of loan. Call us at (510)-244-0081, or contact us by CLICKING HERE.

What the 2023 Gift Tax Exclusion Increase Means

2023 Gift Tax Exclusion Increased


The limit for a “Tax-Free” gift in 2023 is now increased to $17,000. This means that both parents can gift up to $17,000 to each of their children without having to pay the Gift Tax. In addition, they can gift $17,000 to their married children’s spouses without paying taxes. You can learn more about the Gift Tax Exclusion at Kiplinger by CLICKING HERE.


Assume a mother and father of an adult married child both gift the maximum. The total value of the net gifted amount to the younger couple would be $68,000. A gift of this size can go a long way towards helping the couple put a down payment on a new home.


$68,000 can go a long way towards funding the downpayment on a new home. And in this manner, the parents can actually see their children make good use of an inheritance while they are still around. Additionally, if used as a downpayment on property, the gift allows the children to tap into equity that will likely grow in value over time. So the initial $68,000 bestowment can significantly increase in value over time.

Furthermore, whether the younger couple plans to pay back their parents or not, the gifted amount is not a loan. That means their credit score also is not negatively impacted.


Because of these factors, the increase in the Gift Tax Exclusion is another reason to consider purchasing property now. You can take advantage of lower prices. And, you can maximize the benefit of funds you were already planning to give to your children.


If you would like to see how a gift could impact your children’s ability to purchase a home, contact us at Sound Investments by CLICKING HERE. We can calculate different scenarios and show you how much your initial gift can grow in value over time.

Pet Ownership Impacts on Housing

Pet ownership affects home sales and purchases


Pet ownership significantly impacts a large portion of home sales and rentals. A whopping 63% of all households in the United States have a pet or are planning to get one. 48% of U.S. households would be willing to move to accommodate their pet. Furthermore, 18% of recent home buyers said it was very important that their new neighborhood be convenient to a veterinarian’s office and/or had outdoor space for their pet(s). 68% of National Association of Realtors (NAR) members said that the community animal policies influenced their clients’ decision to rent/buy in a particular community. These statistics come from a study conducted by NAR in April 2020.

Pets affect housing transactions


What does this mean for home sellers? Things like having a fenced-in yard, large enough outdoor space and pet-friendly flooring can be key in helping to get your property sold. And if the sellers currently have a pet on the property they wish to sell, it is important to take the animal(s) out when showing the property. They should also replace anything that shows pet damage and clean the property to remove any animal scent. These same points apply to landlords seeking people to rent their property. Landlords should understand that a ban on pets can substantially reduce the number of eligible renters interested in their property.


On the other side of the equation, prospective buyers must be upfront with any pet-related requirements. Take the example of an unfenced property needs to be fenced-in. Buyers should be made clear within the purchase contract how the fencing will be accomplished. Also be explicit about who will be responsible for the cost of that upgrade. Also, they should get specific information about the community’s animal policies. They cannot assume the housing development or rental property owners share their same ideas on pet issues. Buyers / renters should also make sure they understand and budget for any pet fees. The NAR 2020 Study showed that median annual pet fee for family homes, townhouses, condos and co-ops is $300. For rental units the price was $400. Of course, this fee varies greatly with location.


Your best bet in handling any pet ownership impacts or requirements is to work with a reputable local real estate agent or broker. They will know what is reasonable for sellers, buyers and renters in that particular market and property. People generally feel very strongly about their pets so utilizing their expertise will help the process go easier and possibly prevent a very difficult and emotional situation from occurring. If you are looking to buy, rent or sell a home in the San Francisco Bay Area, Sound Investments, Inc. can help you to explain and handle pet-specific requirements. CLICK HERE to contact us or call us at (510)-244-0081.

Waiting for Mortgage Rates to Drop

Don't wait for mortgage rates to fall.

Waiting for mortgage rates to drop before you buy a home may not be a good decision. If you are correct, and the rates do come down by two percent, the savings you benefit from a lower rate will most likely be offset by the appreciated price increase. For example, as of 12/8/22, the 30-year fixed-rate was at 6.33%. This is close to the highest level since mid-2008. If the rate drops to 4.7% in three years but the price increases by 5% a year, a $400,000 home today, will cost $463,050 three years from now.


An increasingly, popular option that more buyers are considering is to purchase the home today with an adjustable-rate mortgage that could give them a 5.00% rate for five years. Then, refinance to a fixed rate when rates come down. Not only will the buyer have lower payments with the ARM, but the buyer will also own the home, and benefit from the appreciated prices which will build equity in the home and increase their net worth.


Mortgage rates have increased over 3% in the first three quarters of this year. Some would-be buyers are wishing they had a do-over so they could get into a home at a lower rate. The current differential between the fixed and adjustable rates could lower the monthly payment. The lower adjustable-rate could save a buyer $300 a month during the first period of five years. At any point during that period, they could refinance at a better interest rate should it become available. However, if the rates do start trending down, the homeowner might decide not to refinance because the rate on the ARM would have to go down at the next adjustment period to reflect the lower of rates in the market.


Mortgage rates have been low since the housing crisis that caused the Great Recession. The government kept them low to build the economy. Then, the Pandemic threatened the economy, and the government spent a tremendous amount of money to bolster it which led to inflation which is what is causing the rates to increase currently.


When inflation is under control and back to acceptable levels, the rates should lower.
Home prices are a different situation. The recent rise in mortgage rates has caused home prices to moderate because it affects affordability. Inventories are still low and there is a pent-up demand for housing from purchasers unable to buy during the pandemic.
This coupled with millennials reaching household formation age and insufficient home building to keep up with demand for the last decade, prices are expected to continue to rise. The rate of appreciation could even increase when rates come down which would also affect affordability and demand.

Buyers who feel they missed a window of opportunity to buy before rates started increasing should investigate financing alternatives.

Cash Now… Loan Later Potential Pitfalls

The Main Pitfall of Cash Now, Loan Later Purchases

Some homebuyers opt to pay cash now and get their mortgage loan later. Cash purchases are more common now due to low inventory and multiple offers. See some reasons why HERE. Buyers who pay cash for a home but expect to get a loan later need to be aware of IRS rules. You can lose your mortgage interest rate deductions with this type of cash purchase. If a buyer intends to get a mortgage later, there are important things to be aware of.

Most lenders are not concerned about whether the homeowner wants to deduct the interest. They want to make a good loan that will be repaid. So if a buyer qualifies for the loan, they won’t worry about making sure it fits the mortgage loan deduction window. A new loan must be established within 90 days of the date of purchase to qualify for interest deductions.

Qualified mortgage interest, which is deductible, is based on the acquisition debt used to buy, build or improve a principal residence. The maximum mortgage amount of interest deduction is $750,000 of acquisition debt. When cash is paid for a property, the acquisition debt is zero. Zero acquisition debt means no mortgage interest deduction. After the window of opportunity, the only way to increase the acquisition debt is to make and finance improvements to the home.

Therefore, if you are considering paying cash for a home, it’s best to consult your tax advisor. Contact Sound Investments, Inc. Our owner is also a tax professional who can help explain the ramifications of this type of purchase.

Are You Well Positioned to Buy?

Position yourself for buying


If you are looking to buy a new home, it is critical that you are well positioned to buy. Right now, some buyers are becoming discouraged. They feel that there are not enough homes on the market, especially, in certain price ranges.  When they do find something they want, there may be multiple offers and they end up losing to another buyer. If you experience this, you may choose to wait until the market changes.  This is understandable. However, your wait may be very long, and it may end up costing you more.

Inflation is affecting all sectors of the economy; prices on food, cars, and electronics are going up as well as housing and mortgage rates.  Home prices rose 20.2% year over year in May 2022 over 2021, according to a recently released CoreLogic report.  The advantage for current homeowners wanting to move up is that their current home is now also worth more which will help pay the increased price for a larger home.


And while it is true that housing inventory is at very low levels, over six million homes sold last year. For buyers, the problem was that available homes sold fast and there was a lot of competition for them. This certainly isn’t as easy as if there were four to six month’s supply of homes for sale. But, once you purchase a home, these same dynamics will be working in your favor to build your equity with appreciation.


Successful buyers separate themselves by being well positioned to buy when the new listings hit the market.  They arm themselves with the following:

  • Working with a trusted real estate professional
  • Pre-approved by a local lender
  • Developed a plan to write a competitive offer
  • Determined their limits financially and emotionally.

Remember, six million people bought homes last year and you can be among the fortunate ones who buy one this year.  Be committed to what it takes in a highly competitive market.  Surround yourself with a competent and confident team that will produce the results you want.

For more information, download our Buyers Guide and schedule an appointment with us to get the facts about the best plan to get you into a home this year.

Avoid These Common Buyer Mistakes!


When buying any property, you want to avoid making these common buyer mistakes. Like driving a racecar, buying a home can be a very fast but complex process. And like racing, if you make a mistake, you can easily miss your chance to grab the position you want. Buying a new home is an emotional process. However, you if you don’t use your logic and the right information, it becomes much harder to get the home of your dreams. Let’s look at some tips about mistakes to avoid when you buy.


Manage your credit score and make sure it is as high as you can make it. It’s important to know your credit score when you are looking to finance a new home. And keeping it as high as possible by avoiding bad financial practices is critical. Remember, borrowers with the best credit scores get the lowest mortgage rates.

Don’t look at new homes without being pre-approved for a loan first. Because the real estate market is so competitive, it is unlikely that your offer is accepted if you aren’t already pre-approved. It is also very likely that you will lose the opportunity to bid if you need to take the time to get a loan approval.

While we are on the topic of mortgage loans, do your homework! Shop around for the best mortgage rate available. Rates and fees are not the same from all lenders. Regardless of your credit score, different lending institutions will often offer different mortgage rates. Find the best one for you. You real estate agent can help you do this.

It is unwise to spend your entire savings to purchase a home. Hidden and unexpected homeowner costs can leave you vulnerable in emergencies. 


Research the neighborhoods you want to look in. Find out about schools, crime statistics, access to amenities and emergency services. These will affect both how happy you will be while in your new home, and how much value you’ll receive when it’s time to sell. Also find out what recent “comparables” in the neighborhood sold for. This will give you a realistic idea of what range of prices you can expect.

Good schools affect your property value positively.


Never waive the right to inspection. Waiving the right for inspection may make your offer look better, but you give up protection from unexpected problems and expenses. Be wary especially is the seller is eager to accept your offer only if you waive inspections.

Not working with a real estate professional is a big mistake some buyers make. Purchasing real estate is an extremely complex process. If you don’t believe us, you only have to go through all the documents and requirements someone else has on purchasing their property. You can see that without inside knowledge to the terms, language and processed involved you can easily get lost and confused. A real estate expert has the knowledge to guide you successfully through the process.

Remember. With a reputable real estate professional on you side, you can easily avoid these common buyer mistakes and others. For more information on how this is done, you can contact us at (510)-244-0081. Or Click Here to send us a message. Sound Investments, Inc. is here to help you!

Skills Needed in Today’s Real Estate Market  

Skills Needed in Today's Real Estate Market

Why Skills Are Needed

In today’s ultra-competitive real estate market there is only 1.7 months supply of inventory. Compare this to the 6 months supply in a balanced market. Moreover, the average home is getting 4.8 offers per sale. It is more important than ever to have the right person “champion” your cause when purchasing real estate. And that’s why there are high-level skills needed in today’s real estate market.

Sellers’ and buyers’ objectives are different and, in many cases opposing in nature.  Sellers attempt to get the most money for their home. They also want to minimize expenses and avoid any issues that could cause delays.  Buyers want to be treated fairly and have an opportunity to buy the home of their choice. They also want to take advantage of the protections of normal contingencies for things like mortgage approval and inspections.

In most situations, there are two real estate agents involved in a single sale.  You want your champion to be the most capable person available. Furthermore, you want them to have the skills needed in today’s real estate market

What Type of Skills Are Needed in Today’s Real Estate Market?

There are skills that agents need in today’s market. One of the most important is the ability to conduct negotiations.  Regardless of which side of the fence you’re on, your agent needs to be skilled in negotiating on your behalf.  Remember, every part of the contract is a negotiation. This starts with the price then continues to the other financial complex financial and transaction agreements involved with the purchase.  What’s a reasonable amount of earnest money?  Can the sale be “as is” yet still allow buyer inspections so you cqn be fully aware of what you’re buying? Will the buyer provide a CLUE report for the property? [Read our post about CLUE Reports. Then click here to learn more about CLUE Reports.]

The buyer wants to negotiate the best terms possible with the seller. They are depending on their agent to work for them to get them.  The home inspector is hired by the buyer to determine the condition of the home. The inspector and will point out what repairs are necessary. Your agent will help you negotiate who pays for those repaires.

Your lender hires an appraiser to determine the value of the home. This is because the loan will be secured by the property.  Recent sales can be used as comparables. But they trail the market. This becomes a challenge in rapidly appreciating markets, especially, when there are multiple offers. 

Consider Legal, Ethical and Personal Aspects of the Sale

And since multiple offers are the norm currently, agents must know how best to handle them based on the seller’s or buyer’s perspective.  There are legal and ethical procedures that must be followed. But an agent’s experience can contribute to creating a more favorable outcome.

The skilled and experienced negotiator understands that every transaction is different because of dealing with individuals, their families, their needs, and their emotions.  The role of the third-party negotiator can be invaluable to the success of the transaction. This is not only based on their experience but the juxtaposition to the principals and their objectivity of trying to reach a compromise.

Let Sound Investments be your skills champion. Click here to see what we can provide for you when looking to purchase a new home or other property.

Using a CLUE Report

Get a Clue Report

What is a CLUE Report?

Have you ever heard of using a CLUE Report when purchasing a new home? People purchasing a used car have most likely heard of CARFAX vehicle history reports. These help them avoid buying a car with costly hidden problems.  Buyers are less likely to know about CLUE Reports. These reports disclose some of the repair history of properties,

Lexis Nexis C.L.U.E. (Claims Loss Underwriting Exchange) is a claims history database that enables insurance companies to access consumer claims. These reports go back for the previous seven years when they are underwriting a risk or rating an insurance policy.

An insurance underwriter could identify a previous claim for substantial damage to a property. They can then find out about repair history before assuming the risk as a new insurer.  Similarly, a buyer benefits from knowing about former claims that may affect property value or possible, future repairs.

How Can a CLUE Report Help?

A CLUE report can discover insurance claims on a home. A buyer could check to see whether the repairs were done properly.  These reports are not directly available to potential buyers. However, their property casualty insurance agent could order a report during negotiations with the seller. A clean CLUE Report can be a condition of a successful contract of sale. 

With a CLUE Report, a buyer could pinpoint issues they were concerned about. They could address those things with the inspector during the inspection period.  Also, the CLUE Report could detect items that may not be visible during a home inspection.

In some cases, a listing agent might suggest a seller share their CLUE Report. This would show the buyer acting in the spirit of full disclosure to potential buyers.  Even if there were claims. if the repairs were done properly it could help to achieve a successful sale.

Obtaining a Report on Your Property

A current homeowner can request one free CLUE report every twelve months online or by calling 888-497-0011.  You can also send an email to [email protected].  You will need to provide your first and last name, social security number, driver’s license number and state in which it was issued, date of birth, current home address and phone number.  For more information, see Lexis Nexis Consumer Portal.

If a buyer doesn’t have a property casualty insurance agent, your real estate agent can recommend one.