Question of the week: Do we have to sell our current home before buying our next home?

Answer: Maybe. Maybe not.

In the piranha-like feeding frenzy real estate market during the pandemic, and following, very few, if any, sellers would accept an offer from a buyer with a contingency.

A contingency being that certain conditions must be filled before the contract is fully in effect; i.e. contingencies give either party an “out.”

The sale-contingency is used by buyers who need the equity from the sale of their current home for down payment on a new home, and/or to eliminate the housing payment so they can qualify for the mortgage to purchase their new home.

Real estate markets that are level or tilted in the buyer’s favor see a decent percentage of offers accepted by sellers that are contingent on the buyer selling their home. In the past, it was not unusual to have multiple transactions lined up on contingencies—I believe the most I had was five homes in a row all depending on the first home closing before the next could then close in order, I remember this as two of the buyers for homes in the chain were my clients.

Over the past decade plus, sellers have rarely been accepting offers contingent on the buyers selling their home.  Simple reasoning, there has been multiple offers on most listings and many buyers are able to make non-contingent offers.

Our current markets have seen a slow down in sales as homes are on the market longer before entering escrow due to slower demand and increasing inventory. A market that is shifting is a market where contingencies come back to the negotiating table. Sellers may not, perhaps should not, discount contingent offers without knowledge of the situation and chances contingent offer will successfully close.

If you need equity from your home, or the elimination of your housing payment, to purchase a new home, the market appears to be heading your way in regards to contingencies.

If you are buying with a contingency of your home selling, there are a few considerations. First, you will not have forever to sell your home. Your contingency will most likely have a “sold-by” date or the seller can cancel the transaction; i.e. buyer must enter escrow on the sale of their home within 10 (or 14, or ??) days from date of acceptance of the offer and close withing 30 (or 40, or ??) days thereafter.

Since this is the case, it would not be wise to list your property for sale at the very top possible price. In a market that is slowing, trying to get “top-dollar” will likely take time, that you may not have.

To avoid a contingency, there are loan programs where the lender loans you funds based on property value and loan balance on your current home for down payment, and funds to purchase the new home. They will enable you to controls the sale of your home, but if it does not sell within a stated time frame, they can (and will) reduce the sales price to get the property sold and be repaid the funds they put forth for down payment and closing.

Depending on your income and qualifying ability, you may be able to purchase your new home without selling your current home, and leverage into the new home, paying down purchase debt after your home sells and you receive the proceeds.

Do you need to sell your home to buy a new one? I don’t know, but a conversation regarding your financial situation and what you are trying to do can answer the question.

To schedule an initial meeting by phone or Zoom, click here for my calendar, please feel free to forward to a friend or family member!

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Rates for Friday February 27, 2026: The conforming rate is flat for another week, investors seem to be taking a moment to digest a lot of speeches, comments, and what-ifs…

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                              5.625%        Flat

30-year high-balance conforming        5.875%        Down 0.125%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

What an exciting end to the Winter Olympics with the United States Men’s Hockey Team defeating Canada in overtime. The last time the men brought home the gold was in 1980 at Lake Placid—the highlight being their win over the Soviet Union in the “do you believe in miracles game.” The story almost was lost however if they did not come from behind to beat Finland in the gold medal.

In a coincidence for me, and about 20 of my high school classmates, I was in the site of this year’s Olympics for the 1980 Miracle team’s win over the Soviets. Every year for the Mardi Gras winter break students and parents at the International School of Brussels would organize ski trips to different areas in France, Switzerland or Italy. In my senior year of 1980 the trip I went on went to Cortina d’Ampezzo, Italy.

The USA v USSR hockey game was on at night for us and it was on a television in the bar where we frequented during our trip (remember—Europe, lower drinking age). We were not really paying close attention to it as, like everyone else, we expected a blowout by the Soviets. But…the noise go a little louder and louder as the Americans were making a game of it. Soon the whole bar was watching, cheering, shouting and when the game was over this table of American students was being congratulated by Italians, Germans, French, Swiss, who were thrilled to see the Soviets being defeated. There were not a few bottles of beer put before us as well.

Walking back to the hotel later, and the next day in town and on the slopes, we were congratulated again and again. Needless to say, we were all very proud to be representing our country in accepting congratulations for the win.

There is an excellent documentary, “Miracle: The Boys of ‘80” on Netflix I encourage everyone to watch as it captures more than just the game—the national and internation moods, economic and social issues—that heightened the meaning of the men’s victory.

One final note, lost in all the excitement for the men’s win is the United State’s women’s team also beating their Canadian opponents, also in overtime.

Question of the week:  We want to build on our property…

Answer: There are a lot of questions that can finish this sentence.

What kind of building?

Where?

How?

What?

Last March we covered changes in California laws for property owners building accessory dwelling units (ADU) on their properties. That is one type of building that has become a lot more common around the state, and nation.

What has come up more often in conversations I have had with clients is building on vacant lots or pieces of land—not just those impacted by wildfires, but land obtained through inheritance, a purchase for future second home or retirement, and other circumstances. In these cases the objective is to construct a home on the property.

If building on a vacant lot or parcel, perhaps the first step is to ascertain if the property has electricity, water, and sewage; the latter may take the form of pipes to a utility network, or an on-site septic tank.

If the property does not have any electrical or water supply to the property, construction will be more challenging until these systems are operational. As well, obtaining the connections can be time consuming and expensive.

Moving forward, the next question is “what do we want to build?” Which raises the question, or should, “how are we going to use this dwelling?”

Will it be a permanent home, a vacation home, a hunting cabin, a rental, short or long term, will we retire there, entertain…?

How the dwelling will be used is paramount to conversations with architects, contractors, landscapers, designers. As well, it can determine how you build the home.

If for yourself and family, you will like want higher quality fixtures, finer details and design, than if the dwelling will be used more by non-family members/tenants.

Construction is, obviously, the highest cost of the project. What type of material you use for everything from roofs, to flooring, to plumbing fixtures, to landscaping, can quickly increase your costs from budgeted to “what the heck?”

For most families, the primary driver of building, whether an ADU, a get-away cabin, to a family compound with multiple dwellings, is “how much can we afford?”

Ideally, before meeting with any professional to start the process, you meet with a lender to determine your financing options and capabilities. From this conversation you will then be able to determine how “grand” you can make your new property.

Increasingly, many families are bringing their costs down considerably, whether for ADUs or traditional built houses, using manufactured housing.

We will pause here while some readers roll their eyes, become immediately resistant, put on the banjos from “Deliverance” and tell their favorite joke about Okies or West Virginians*.

For too many, their image of manufactured homes is mobile homes from the park by the river. Those dwellings are indeed manufactured homes. However, over the past several decades, the manufactured housing industry has re-labelled many of their dwellings “modular homes,” or “prefab(ricated) homes.” These homes can have style, elegance, and comfort, for considerably less cost than building a new home from the ground up on site with new materials. (Google “upscale manufactured homes” and take a gander.)

Prior prejudices about manufactured homes aside, consider the total costs project time can be up to 40-50% less.

There are several options to finance building projects, depending on the total funds needed.

If you own developed property, depending on your equity, you can refinance or get an equity line for funds.

Construction financing is available in a few different forms, the basics being the same for most programs.

Completed plans and costs from a contractor will be needed as an appraiser will do a before-and-after assessment of the property. The lender will then lend up to a certain loan-to-value of the finished project.

If there is a loan on the property it will need to be paid off as part of the loan.

Simplifying the numbers.

You have purchased a one-acre parcel of land in Plumas County for $80,000 using your equity line on your primary residence that has a small cabin with electricity and water to the dwelling and a septic tank. You want to build a vacation home that will be used by you and your family.

You have plans for a 4-bedroom, 3-bathroom, 3500 square foot home. The cost is approximately $500,000 to complete the project. The after-value appraisal is $750,000.

The underwriter has reviewed your financial information, calculating your debt-to-income ratios, including your total housing payment for current and new properties, funds in reserve and credit report for a $500,000 loan.

You qualify for the transaction, the underwriter then reviews the costs to build and the after-value appraisal, and approves the loan.

The loan is funded, with some funds being disbursed to cover costs incurred or needed to start the project. Moving forward, the lender will release more funds at different stages of completion and inspection to ensure those stages were complete.

When the project is finished and a certificate of occupancy is issued, the lender releases the final amount of funds required, and if any funds remain are applied to the principal balance of the loan. At this time the loan converts to a 30-year fixed, or whatever terms for which you applied.

There is more paperwork and steps for a construction/renovation loan, however, the lender also acts as an accountability factor in that the contractor cannot get paid until work is complete and signed off by the lender’s inspector.

If putting an ADU on an existing property, construction/renovation financing may also be available; an option to consider vis-à-vis a cashout refinance or equity line options.

*What’s the difference between a tornado in Enid, Oklahoma and a divorce in Wheeling, West Virginia? Someone is losing a mobile home.

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Rates for Friday February 6, 2026: First Fridays are always great here in Bixby Knolls neighborhood of Long Beach as the restaurants and stores have special deals that align with a monthly theme, and the sidewalks and businesses are full of happy people. They are also the scheduled release date for employment data for the prior month from the Department of Labor. This Friday the theme in Bixby Knolls is Black History Month. The Labor Department data was not released due to the partial government shutdown, data is expected on Wednesday. Rates flat, again, which is nice.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                              5.875%        Flat

30-year high-balance conforming        6.00%          Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

For the first time in a decade (Broncos, Panthers 2016) that I have very little interest in the Super Bowl. I would like to see Sam Darnold win, not because he went to the school up the freeway from us, but because of his NFL journey. I also would like to see the Patriots win with their first year coach and seemingly great guy quarterback—however would not like to feed the millennial and Gen-Z Patriots fans who grew up with winning teams and have an arrogance and smugness about them (apologies, no-apologies to Patriot-Red Sox-Bruin-Celtics fans reading this).

Since I am wanting the Seahawks more than the Patriots, the Patriots will win as I am 1-6 for teams I want to win in the playoffs winning this season.

Patriots 24 – Seahawks 21

Question of the week:  What would you do to soften housing market?

Answer: Last week we answered “What is impact of President Trump having $200B of mortgages being purchased?” The gist being that it puts downward pressure on rates.

This, of course, is good for homebuyers as lower rates mean lower payments mean higher loan amounts for which they qualify.

There are other measures Trump has proposed, or has indicated he may propose, to make home-buying more affordable are ban large intuitional investors (defined as owning more than 100 properties) from buying single-family residences, having Fannie Mae and Freddie Mac offer 50-year mortgages, capping credit card interest rates at 10%, allow portable mortgages (homeowner can take current mortgage at 3% to new home purchase), and first-time homebuyers (generally defined as not owning a primary residence in the past 3-years) being able to penalty- and tax-free withdrawal funds from the 401(k) or other retirement funds.

All of these proposals have positive and negative aspects, as almost everything does, which means depending on who you are reading, watching or listening to a particular idea is even better than sliced bread, or the worst, most horrible idea ever that will lead to starvation and more homelessness.

A challenge that Trump did bring up in his, let’s say interesting, speech in Davos this week at the World Economic Forum, is very true.

“I am very protective of people that already own a house,” Trump said. “Every time you make it more and more and more affordable for somebody to buy a house cheaply, you’re actually hurting the value of those houses, obviously, because the one thing works in tandem with the other.”

“…because the one thing works in tandem with the other.” In other words, supply and demand. The over-riding issue in home affordability has been supply; with the primary reason for lack of supply being the historically low interest rates during the Covid-19 pandemic. The low rates spurned a surge in homebuying pushing prices higher and higher and higher. Those who already owned were refinancing their homes, dramatically lowering their payments, or if keeping their payments the same, dramatically accelerating the pay-off of their mortgages.

Higher rates are supposed to cool demand and flatten, or shrink, home prices as demand dries up with fewer families able to qualify to purchase a new home. As we have seen, the opposite has happened—prices have gone up.

Because supply has shrunk more than demand.

For many years I have defined certain areas, mostly waterfront, such as on the water in Seal Beach, Balboa Island in Newport, the “walk streets” in Manhattan Beach, as D&D areas. By D&D I mean Death and Divorce, as those events were the most likely reason a home would be put on the market.

The broad real estate market, especially in Southern California, is mostly a D&D market.

Many readers of the WR&MU refinance their homes during the pandemic, down to rates at, near, or below 3%. Those who want to move as their family has outgrown their home, or their home is too big for empty-nesters, or to move closer to jobs, are not doing so because they will not, or cannot, trade their 3% mortgage for a mortgage over 6%. Unless they have to, most are not selling their homes.

The significant lack of move-up sellers is the huge hole in the supply market.

So, while many of Trump’s proposals and suggestions have some, or a lot, of negative aspects, the approaches are almost all on the buyer’s side to increase the ability to purchase a home, and not so much about making homes cheaper to purchase.

Supply can be expanded in many parts of the country because they have the land, and friendly government regulations, to build more housing. These conditions are not as prevalent in Southern California, so what actions can be taken to increase supply, without significant harm to homeowners? I.e. increase supply at a moderate rate to level prices, but not tank them?

My solution: use the tax code. My proposal has a lot of opposition, which you can guess and I will reveal below if you happen to be stumped.

Raise the capital gains exemptions for the sale of your primary residence, which have been the same amount, i.e. not indexed for inflation, since the 1997 Taxpayer Relief Act was passed.

Individuals selling their primary residence can claim $250,000 exemption from capital gains and married couples can claim $500,000.

Here is how it works.

Capital gains on the sale of primary residence is calculated by subtracting the acquisition cost of the property plus any home improvements from the sales price less costs of sale.

For many elderly individuals, and couples, who have been in their home for a long time, the exemption still creates a very large tax bill. In my conversations with many of my older clients, they are very hesitant to sell because they do not want to pay hundreds of thousands of dollars to the federal and state governments. Eliminate, or greatly reduce, the taxes they will have to pay to down-size and more homes come on the market.

It is not just older homeowners who face this pay-the-tax-or-sell dilemma. Many California working couples face the same quandary as the state taxes capital gains as ordinary income, which could put their taxes in the higher 9-103% brackets.

If a spouse dies, the surviving spouse has two years to retain the $500,000 exemption, after which it drops to $250,000. That is a significant increase in tax liability for staying in your home after your spouse has passed away.

If the primary residence capital gains exemption was indexed for inflation from its inception in 1997, the individual exemption would be $500,000 and the married couple exemption would be $1,000,000.

Index the primary residence exemption to inflation, with a retroactive one time increase to 1997. As well, extend the married couple deduction to five years from two.

The primary argument against this proposal is it benefits a small, mostly geographic, percent of the population, who have a significant amount of wealth—even though tied up in equity—who benefit from a higher exemption. They will pay less in taxes, reducing the amount of revenue received by states and the federal government.

As of July 2025, the median single family home sales price ten states and the District of Columbia is greater than $500,000; at that time the national median price was $370,523.

Asking putting through a tax exemption that is higher than the median sales price in 40 of 50 states is a big ask.

But…what are the benefits? More homes, especially in high price areas, will come on the market as a result of the higher exemptions. Increasing supply at the top end of the market trickles down stream, opening up lower priced markets as current homeowners move up.

As well, especially in California, states will collect transfer taxes on sales, as well as increasing the amount of property assessments. A couple that purchased their home pre-1978 in California when it was assessed at $40,000 and is now valued at $1 million. Because of Prop 13 they have been able to retain their original tax base and have to sell because their incomes have not kept up with property value increases. Their current tax rate is about $1100 per year.

If they sell the property the tax base will be about $12,500 per year, plus whatever assessments for various school bonds, parks, etc.

If a couple purchased a home in 1978 for $40,000 and sold it for $1,000,000 in 2026, assuming improvements, etc of $300,000, their capital gains tax after exemption could reasonably be $45,000. The state regains that about in less than three years of property taxes, then gains $11,400 per year—on that one property.

We have seen that tax breaks for certain industries increases business for those industries, otherwise why would they happen? The same is true if a home is treated like a business, lower the capital gains being taxed and more homes will be sold. Increasing inventory and softening the market, not drastically, but some. And that is a start.

Have a question? Ask me!

Data = No Rate Change. Government agencies released some catch-up-from-the-shutdown data this week for GDP and inflation. The numbers do not support the Federal Reserve cutting its benchmark rate at its next meeting. The first revision to the 3^rd quarter of 2025 showed the economy having strong growth, up 4.4%, pushed by an increase of 3.5% in consumer spending (65-70% of our economy). Rates, as a rule, drop in slowing, or negative, growth economies.

Further supporting no change, is the numbers for inflation in November (delayed reporting due to October shutdown) from the Fed’s preferred metric, the Personal Consumption Expenditures. Prices rose 0.2% in November, consistent with prior month’s 0.2% rise. Year-over-year prices rose 2.8%, above the Fed’s 2% target they have been chasing since it was at 2% in March 2021. The core index (energy and food stripped from data) was also consistent with prior reading, growing 0.2% in November, and up a tick from a year ago at 2.8%. Rates, as a rule, increase with inflation.

Workers continue to see higher wages, with personal incomes increasing 0.3% in November, out pacing inflation. However, spending increased 0.5%, mostly due to holiday traffic on-line and in stores; consumers either borrowed more or dipped into savings to make up the difference between their spending growing more than their income. Spending cannot outpace earnings for long. Since it is easier to cut spending than increase earnings, if the data trend continues spending will slow, which will slow the economy.

Rates for Friday January 23, 2026: Rates are not just determined by economic data, politics, international relations, natural disasters, and other events that impact buying and selling of goods and services also determine rates. Pricing in no rate change by the Fed, plus geopolitical news this week, has resulted in rates inching up for the second week in a row.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS FOR PURCHASE TRANSACTIONS:

30-year conforming                              5.875%        Up 0.125%

30-year high-balance conforming        6.00%          Up 0.125%

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

Great news for Rams fans, of which there are many in the WR&MU readership, and those who get 3 & 4 in the squares pools from Oz the Mentalist.

Question of the week:  Is your deed correct?

Answer: When you own a home you have deed, typically a Grant Deed from the prior owner, that is your proof of ownership.

If you have a mortgage, in California there is also a Trust Deed, which places a lien on your property with the lender as beneficiary for the amount of the mortgage.

Over the years our lives change, marriage, divorce, re-marriage, death, inheritance, sale, purchase, refinance, kids, some of these occur while you own a home and can result in a need to change the title of ownership for your home.

“Title” is the legal description of the owner(s) of the property.

Title is determined by the legal status of the individuals, or entities, that will own the property, and what may occur upon the death of any individual on the title.

Individuals taking title are either single, or unmarried. Single means you have never been married before, unmarried means you have.

John Doe as an individual, never married.

John Doe as an unmarried man, was married and either divorced or a widower.

If more than one person owns the property, there are several ways to hold title, some overlap where owners or married or not married.

Spouses and domestic partners can take title as

          Community Property which is equal ownership between the spouses or domestic partners. If one party dies probate will be required to determine who will own the property, either the spouse/partner, or if they had children from prior relationship, do they have a right to title?

Community Property with Right of Survivorship, similar to above, but with transfer of full ownership to surviving partner, avoiding probate.

Joint Tenancy with Right of Survivorship, equal ownership and survivor inherits full title—similar to community property and parties do not need to be legal partners. For instance, if John Doe and Jane Deere are in a long-term relationship, but not domestic partners, depending on either’s prior marital status, they can take title as John Doe, an unmarried man, and Jane Deere a single woman, as joint tenants with right of survivor ship.

For unmarried partners, besides joint tenancy, other options for unmarried partners, or multiple owners title can be

Tenancy in Common in which each party can have a different percentage of ownership, as long as the total is 100%. Each owner can freely transfer their title, depending on other agreements, and there is no survivorship. From example above, John and Jane can take title as tenants in common, each with 50% ownership and will their share to other beneficiaries. If John’s brother Jack and his wife Jill will be purchasing the property, which is a duplex, John and Jane, the title may read: John Doe, single man, with Jane Deere, an unmarried woman as joint tenants with right of survivorship as tenants in common with a 50% interest with Jack Doe and Jill Doe, as husband and wife with a 50% interest as community property with right of survivorship.

Many individuals, and married couples or domestic partners, wisely have trusts. Trusts will have the property listed as an asset of the trust and will detail the disposition of the property upon the death of one, or both, parties. If Jack and Jill have a trust, they can take title as Jack Doe and Jill Doe, as husband and wife and trustees of the Jack and Jill Doe Family Trust.

What happens if Jack and Jill do not have a trust and get divorced with Jill keeping the home? The divorce decree will state that Jack is to transfer title to Jill. He does this by signing a Quitclaim Deed. If he does this after the divorce is finalized it will read Jack Doe, an unmarried man, quitclaims to Jill Doe, an unmarried woman, all rights, title and interest. If they are still married, they would be titled as married man and married wife.

Quitclaim deeds also occur when a couple get married. Take our original example, John and Jill get married, Jill is taking Doe as her last name. They will sign a quitclaim in which John Doe, an unmarried man, and Jane Deere and unmarried woman, quitclaim to John and Jane Doe as husband and wife as…however they decide to take title, likely as community property with right of survivorship.

When a spouse passes away, depending how title is taken, there is either automatic transfer of ownership, or the property will need to go through probate. Either way, to transfer ownership for proper title, the surviving spouse should record an affidavit of death with death certificate with title change to unmarried man or woman.

In the case of a death with a trust in effect, the trust may be restructured to an individual trust for the surviving spouse, and a new deed recorded showing title in the name of the trust.

Relationships change, either willfully or not, and these changes may require a change in title for property, otherwise a death or other relationship down the road may put a “cloud” on title that can be costly to resolve.

Some examples I have seen. A client was purchasing a new home, not going on title but very active in the process was his younger girlfriend. She was very involved, being at every meeting we had, including when I was taking the loan application—in the way back days of handwritten applications. When I asked if he had been married before, he was quieter than normal for a moment, and said, yes, in fact he was still married.

Room, quite a small interview room at a real estate office, became a bit tense. Girlfriend, “what? I thought you were divorced!” Turns out they never completed the divorce. I explained to him that since he was married and California is a community property state, his wife would have to sign a quitclaim as to her interest otherwise she would automatically have a claim to title.

The wife agreed to sign a quitclaim deed, but wanted some money to do so. I was a notary at the time and we all met in the same small interview room so I could notarize the quitclaim deed as he passed her a cashier’s check for, as I recall $5000. The wife and girlfriend never took their eyes off each other and I could not wait to get out of the room.

Reverse mortgage client had been a widow for 30 years and the title was never changed, still showed husband and wife as joint tenants with right of survivorship with her deceased husband. She had lost the death certificate. We needed title to obtain a copy of the death certificate and facilitate transferring title to our client in order to close.

It is not just purchase transactions where title is established, refinances can also necessitate title changes, or a lot of work to be done to ensure title is correct before closing. In the middle of divorce, we refinance to obtain funds to payout the spouse’s portion of the equity. Spouse needs to sign a quitclaim deed to relinquish title, but won’t do so unless the funds are provided. The divorce is not final yet as there are some items still being negotiated, spouse quitclaims as married to husband who is married. Loan approval is delayed due to numerous co-owned properties and getting proof of who owns what, who owes what on the properties, etc. The divorce agreement and finalized, we are not made aware that has happened and just before fund find out that they are now both unmarried; new loan documents and deeds are drawn for signing and recording.

If you have had any changes in our marital status, created or dissolved a trust, had a spouse or partner pass away, make sure the title to your home reflects the proper language to ensure you have clean title to your property.

Have a question? Ask me!

Rates for Friday November 7, 2025: With no major economic data forthcoming due to government shutdown, investors are trying to read weak tea leaves and adding more importance than they otherwise. This week it is weak consumer sentiment that caused rates to rally after rising in earlier in the week; flat from last Friday is the result.  

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:

30 year conforming                                            6.00%  Flat

30 year high-balance conforming                      6.125%  Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

It was enough, plenty, never too much, but close. The final two games of the World Series filled this lover of baseball fully, enough to hold me over until pitchers and catchers report to spring training in about three months.

For decades I have nurtured memory of what was, to me, the greatest* World Series in my memory, the seven game classic in which the Cincinnati Reds beat the Boston Red Sox in 1975. While it will always be with me, the Dodgers seven game victory this season was great baseball for all fans and ranks number one* for me.

*On a pedestal by itself is the 1980 Philadelphia Phillies win over the Kansas City Royals in six games, their first World Series win in their history, sitting slightly below is 2008 when they beat the Tampa Bay Rays.

Congratulations to the Dodgers and all baseball fans on a great, great World Series.

Question of the week:  What is the benefit of putting less money down?

Answer: Having more money.

Since the beginning of the WR&MU we have used 20% for a purchase transaction (and a 740 FICO score) for the rates posted below. The 20% down payment is used as it is the one most commonly used by the industry when calculating rates.

That said, I have always been a fan of buyers putting less money down, if possible, to purchase a home. Primarily because I believe in “leverage,” or OPM, Other People’s Money for major purchases as I can do more with the cash savings than can be done with it in an illiquid asset.

Equity, or the amount of value in your home, is the difference between what the home is worth and the amount of the mortgage.  For instance, if you have a $800,000 home and owe $640,000, your equity is $160,000.

Your equity, if you have a mortgage, grows in two ways.

First, very incrementally through monthly mortgage payments as a small percentage of the payment pays down the principal. Taking our example above, assuming a 5.875% mortgage, the monthly payment would be approximately $3785 per month. After 5-years of payments ($227,100) you will have paid down a little over $45,000 of the principal. That is about 5.5% of the purchase price of the home, or a little over 1% equity growth per year through mortgage payments.

Second, considerably more impactful on equity growth, is the value of the home (over time in most markets).  Using our $800,000 purchase price, if the average market price increase is 4%, after five years the home is worth about $975,000; an increase in equity of almost 22%.

We have established that equity growth is dependent more on the housing market than paying down a mortgage. This shows that owning a home is more important than the amount of your mortgage to increase equity.

I term equity in a home, “dead money.” It does not increase the value of your home, nor does it generate any return on value—i.e. no interest or dividends. You cannot spend equity, you cannot eat equity, you cannot grow equity other than paying down your mortgage or having other similar homes in your area increase in value.

To obtain the equity in your home it will cost you money and time. Either you sell your home and pay fees for agents, escrow, title, taxes, etc. Or you obtain a mortgage, 2^nd mortgage, or HELOC, all of which cost money and a process that will take time before the funds are available to you.

If you have money in a savings account it will grow due to compound interest. Or, if you have money in an investment or retirement account, over time it will likely increase through dividends, interest, and markets going up. Unlike accessing equity, accessing these funds, which are either fully or very liquid, can happen quickly, and, depending on where they are parked, very cheaply or at no cost.

If you can purchase a home with less money down, and yes with a higher monthly payment, after closing you will have less equity and more money left in your accounts.

Here is the math on a $800,000 purchase with 20, 10 and 5 percent down scenarios for borrowers with a 740-credit score. Note the rate on all options is the same, 5.875%*, and mortgage insurance is added to our calculation.

*It is surprising for most that a loan with a higher down payment has the same rate as a lower down payment. This is because the 10% and 5% loans have mortgage insurance which cover a significant amount of the losses in a foreclosure, while a 20% down loan has no mortgage insurance and the lender will lose more money in a foreclosure. At times the lower down payment loans have lower rates than 20% down.

The final column is important; MOs RECOUP is the number of months it will take the buyer putting 20% down to save back the extra money they put into the purchase divided by their monthly savings due to a lower loan amount and no mortgage insurance.

The math 20% down buyer puts down $80,000 more than the 10% down buyer. His monthly payment for the loan is $643 less per month than the 10% down buyer, which is his savings for the extra $80,000 down.

The 10% buyer, at the end of the transaction will have $80,000 more in the bank, and will pay $643 more per month.

Divide $80,000 by $643 and the result is 124. If the 20% buyer puts $643 per month into the bank, it will take him 124 months, over 10-years, before he has saved the $80,000 he put into the home ten years before.

In the meantime, the 10% buyer has the $80,000 he can use as he wishes, use to do any repairs or remodels without having to take out another loan, use to supplement his monthly payment difference of $643 per month, put into a savings or investment account, start a college fund for children, donate to the 3-legged dog society, whatever he desires.

Provided both homeowners keep their homes for an extended period of time, the 124 months will likely get extended even further.

Because the 10% loan has mortgage insurance, the chances are very like that the MI will be able to be removed from the loan in the future once conditions are met (24 consecutive payments made in a timely manner and equity of 25% or higher). When this occurs the difference between the two payments are $168 less per month.

Secondly, assume in 5-years, but perhaps sooner, rates drop to 5% and both homeowners decide to refinance. Remember, more equity does not mean higher value, so both homes, assuming 4% growth per year in value, are worth $975,000.

The 20% borrower has a balance of $594,000 on the mortgage, at 5% the monthly payment is $3190 per month, a savings of $595 per month.

The 10% borrower has a balance of $669,000, which puts their loan-to-value at 69% percent so they do not have mortgage insurance. Refinancing lowers their payment to $3590 per month, a savings of $892 per month.

The 20% borrower is paying $400 less per month than the 10% borrower, with $40,000 left on the months-to-recoup calculation, instead of 64 months left on the original savings, it is now 100 months—extending the total time to recoup the original extra $80,000 down from over ten years to almost fifteen years.

I always tell my clients, it is not my money being spent, I am not making the payment, I am not living in the home, and I will not be the one benefiting from more or less cash in the bank, nor a higher or lower mortgage payment. That said, my advice if you can afford it and qualify for the home you want, put less money down for larger benefits in the long run.

If you, or someone you know, wants to do the math on your home purchase, please contact me and I’ll pull out my calculator.

Have a question? Ask me!

We had some economic news this week. For the first time since the government shutdown, meaningful economic data released today. September’s Consumer Price index increased at a slower the expected rate, up 0.3% for the month as opposed to 0.4%, which would have matched August’s CPI growth. Year over year CPI is 3.0%, slightly higher than August’s 2.9%. The September CPI number is important as it is the final month used in the average to calculate the Cost of Living Adjustment (COLA) for next year’s social security payments. The average for July, August and September CPI data shows SSI payments next year should increase by 2.8%. The CPI data, being lower than expected makes if very likely the Federal Reserve will lower its benchmark interest rate for the second month in a row next week.

Rates for Friday October 24, 2025: Even though CPI was bit lower than expected, investors have pretty much priced in a drop in the Fed rate next week, as a result, rates are flat from last Friday.

FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:

30 year conforming                                            5.875%  Flat

30 year high-balance conforming                      6.125%  Flat

Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.

As we wrap up the baseball season with the World Series between the Dodger and Blue Jays, I start looking at the calendar for when pitchers and catchers report to spring training next year.

In the meantime, despite knocking my Phillies out, I am very much a Dodger fan—not just because I really do like them, just not as much as my Phils, but because I will never be able to root for the Blue Jays because of 1993.

No, I did not watch the clip.

Note that Phillies phans insert the same middle name for Joe Carter than Red Sox fans use for Bucky Dent.