Category Archives: Laguna Beach Real Estate

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Conforming Vs. Jumbo Loans as Sales Shift to Higher Priced Homes

Laguna Sales Activity remains strong and shifting to higher priced homes.

Homes selling for over $1m typically require jumbo loans (or cash) versus the conforming loans.

What is the difference?

First the Shift of Sales to Higher Priced Homes

  • October sales remain at a strong pace with 23 homes closing so far and 29 going into escrow.
  • The dynamic part of the sales activity is the significant shift to higher end properties.
  • This month, 8 of the closed sales were between $1m and $2m and 9 were over $2m (which is double the average of 3 or 4 sales for 2011)
  • Also this month, 17 of the homes that went into escrow were between $1m to $2m, and 7 were over $2m.
  • It’s a big shift that seems to be taking hold.
  • Oct. Sales: Client Short Page

Conforming vs. Jumbo Rates

Basically, mortgage loans are categorized into three groups which determine interest rates: Conforming, Super-Conforming and Non-Conforming or Jumbo. Read on for more detail………

Conforming Loans:

The rates that you see published by the media always pertaining to “conforming” loans. These are loans that meet the criteria set forth by the two Government-owned agencies known as Fannie Mae and Freddie Mac plus HUD which oversees FHA loans. These rates always pertain to loan amounts of $417,000 or less. Loans sold to these agencies by all lenders account for 99% of all mortgage financing in the U.S. today. They are called “Conforming” loans because they conform to the guidelines established by these governmental agencies.

Interest rates for Conforming loans are determined by the supply and demand for Mortgage-Backed Securities (MBS’s) which are traded in the financial markets all day long just like stocks and bonds. Therefore, the rates for these types of mortgages change every day and throughout the day. Neither the Fed nor Lenders set these rates.

Super-Conforming Loans or High Balance Conforming Loans:

These are loans also governed by Fannie Mae, Freddie Mac and HUD but they allow larger loans in certain designated “High-Cost” markets. The limit in Orange and Los Angeles Counties is $625,500 – recently reduced from $729,750. Interest rates for these loans work in the same manner as rates for the smaller conforming loans described above with the exception that loans between $417,000 and $625,500 are always about .25% higher in rate than loans of $417,000 or less. Again, the rates are changing all the time and are not set by the Fed or by individual lenders.

Non-Conforming or Jumbo Loans:

This category describes loan amounts above $625,500 that are not saleable to Fannie Mae or Freddie Mac. Accordingly, there are far fewer lenders offering true jumbo loans. In general, the underwriting criteria and guidelines are stricter than they are for Fannie Mae/Freddie Mac and each lender is free to set their own rates and terms. However, in order to remain competitive I don’t see much variation between all of the lenders offering this type of financing. Interest rates are typically about .75% higher than they are for the loan amounts of $417,000 or less. Lenders usually adjust these rates daily also.

How to Finance More Than the Conforming Limit and Still Get the Low Rate:

Suppose you need to finance $800,000 yet you want the Super-Conforming Rate? Sometimes we can use what we call a “Piggy-Back” loan where we make a first mortgage for say $625,000 and simultaneously close a Home Equity Line of Credit (HELOC) for the rest – in this example $174,500.

Extension of Loan Limits of $729,750 Dead for Now

Despite efforts by Realtor and Mortgage trade organizations to fight for an extension of Fannie Mae, Freddie Mac, and FHA conforming loan limits, Congress failed to extend the $729,750 loan limits and allowed them to expire Sept. 30.  This means the maximum loan amount that Fannie, Freddie, and FHA will buy or guarantee is $625,500, and anything above that amount will be non-conforming requiring a jumbo loan.  As explained earlier, these loans typically carry a higher mortgage interest rate and require a higher down payment and therefore a higher monthly payment.

Our Government had a perfect opportunity to help homeowners and buyers by extending the loan limits. It just makes no sense to me that they would ignore something that could help so many people and do it without adding to our national debt. The California Association of Realtors estimated that this would affect as many as 30,000 potential home sales in California.

Mortgage Rates This Week:

What a difference a week makes. It was only a week ago that the media jumped all over the Freddie Mac report that rates had hit the lowest point ever in the preceding week. Unfortunately, those lowest rates only lasted about a day. We’ve had a steady stream of small increases in Mortgage pricing ever since thanks to last Fridays stronger than expected Employment Report, improvement in the Greek and European Debt crisis and a rising stock market. Today we are getting a little bit of relief in part to an oversold bond market, a good response to today’s auction of 30-year Treasury securities and PIMCO’s announcement yesterday that they are buying more Mortgage-Backed Securities. PIMCO is the world’s largest bond trader.

You can always visit the “Daily Mortgage Lock Advisory” on Rick Cerreli for current news about mortgage rates. Just click here:

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Laguna’s ‘Coffee Nazi’, a $400k Village Condo, and record low rates

Interesting People in Laguna Beach – A Continuing Series

If you’re at all familiar with Laguna you know it’s full of characters.

Well one of the more well known infamous characters is Jean Paul aka ‘The Coffee Nazi’ the owner of Jean Paul Goodies located by Pavilions in North Laguna.

For coffee aficionados, Jean Paul arguably offers the best coffee in town, but you better be on your toes or you’ll be banned to Starbucks for the rest of your life.

Similar to Seinfeld’s ‘Soup Nazi’, Jean Paul has very high standards that his customers must adhere to or you’ll warrant a ‘get out’ rant. Heaven forbid you ask for non fat milk. You quickly be ‘told’ to take your business elsewhere. And that’s being nice.

I‘m to the point that I even stay in the car, and let a friend go in, and I can swear he looks for me in the car and his stare send shivers down my spine and I slouch down so he can’t see me.

That said, he’s achieved a following of customers that are willing to maintain his required decorum and you’ll see them hanging in front of his store.

Well, see for yourself in this popular YouTube video. You can’t say you haven’t been warned.

Link here ‘No Coffee for You':

A Laguna Village Condo, a couple blocks from town, for less than $400k

If you’re looking for a relatively inexpensive weekend or vacation retreat condo in Laguna it doesn’t get much better than this.

In fact over the last 4 years there hasn’t been a condo for less than this price except for a couple 400 sqft condos.

Check out the video of the place.

MLS listing: Client Brief Report + Photos
Printable Map

It’s a single bedroom, no garage and it doesn’t have an ocean view. However, its move-in ready, clean, private and an unbelievable central location.

Rates Below 4% – Really? – From Rick Cirelli of RTC Mortgage

Yesterday the headlines across the country screamed “Mortgage Rates Below 4% for First Time” and my phone rang off the hook with people saying “they lowered the rates, lock me in”!!!!

I actually locked a few deals in at 3.75% with no points last week so yes, rates did hit an all-time low. But, let’s examine the headline and what it really means.


Every week Freddie Mac releases a report announcing the average rate for loans originated Monday thru Wednesday of the previous week on a 30-year fixed rate mortgage that is owner-occupied for an amount less than $417,000.

Things to Know:

  • Average implies that about half the people got a lower rate and half got a higher rate.
  • Points: Many of the articles fail to mention that most people paid a point or some fraction of a point for that published lower rate. Last week’s average point paid was 0.8%. On a $400,000 loan that’s $3200. Loans for 0-points were at a higher rate.
  • Not everyone gets the same rate. There are many factors that affect your rate. Credit Score and Equity are the two main factors but there are others. The best rates go to those with a combination of 40% equity or down payment and credit scores above 700.
  • Rates change every day and throughout the day. By the time you read the news, it is Thursday of the following week. So, you can assume that rates have changed numerous by the time the average figure is reported.
  • There is no “they”. Mortgage rates are not set by the Fed and they are not set by the banks or lenders that originate mortgages. Rates are determined solely by the supply and demand for Mortgage-Backed Securities that are created by Fannie Mae, Freddie Mac and Ginnie Mae and bought and sold in the financial markets along with other securities such as stock and bonds. These agencies account for 99% of all Conventional and FHA mortgages originated in the U.S. by all lenders.

So, remember that while the headline attracts readers, it’s only an average, and its old news by the time you read it.

Mortgage Rates This Week:

I hate to spoil the party but rates have risen slightly since last week’s Monday-Wednesday average rate of 3.94% with 0.8 points was reported. So don’t expect next week’s Freddie Mac report to show lower rates than this week.

The spoiler was today’s monthly Employment Report. On the first Friday of every month the Government releases the official Employment numbers for the previous month. While the rate of Unemployment was unchanged at 9.1%, the number of new jobs created was higher than expectations. This caused a sell-off of Mortgage-Backed Securities this morning forcing rates a little higher.

How Do You Get the Best Rate?

First of all, you have to deal with a mortgage professional with the experience and knowledge of how mortgage rates work. We subscribe to services that alert us to the trends and patterns of MBS trading and help us determine the best time to lock in your rate. The banks are too big to manage this type of service whereas independent mortgage brokers can not only keep their eye on the moving target of interest rates but they also deal with multiple lending resources to find the most competitive terms to fit your needs.

Secondly, if you are refinancing and wait for the headlines, you will be too late. Make your application and get your loan processed. Once you are in the system I can watch the rates and take advantage of the dips which sometimes last only a few hours. Mortgage rates are just as volatile as the stock market these days and the average borrower has no chance of timing the market to take advantage of opportunities when they occur.

You can always visit the “Daily Mortgage Lock Advisory” on my website for current news about mortgage rates. Just click here:


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Mortgage Rate Update: Another All-Time Low!

Mortgage Rate Update

Yesterday 30 year mortgages had one of its best days in over a year. The Fed at one of their pre-scheduled FOMC meetings did what markets were expecting, plus more. The view prior to the FOMC policy statement at 2:22 yesterday was that the Fed would institute “Operation Twist” as it has been dubbed, selling shorter dated notes and replacing them with longer term notes and bonds to drive down long-term rates. The amount of shifting was expected to be about $300B, the Fed said it will be $400B. The Fed however surprised markets with the announcement it would turn back to buying Mortgage-Backed Securities (MBS’s) with principle pay downs on MBSs it now holds and instead of investing back into treasuries as it had been doing, investing in more MBSs. The reaction was swift in the mortgage market as MBSs soared in price and interest rates dropped.

The possibility of default by Greece and concern of an international recession have also helped to drive down rates this week in the MBS markets.

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‪Orange County Real Estate‬ Mortgage‪ Pre-qualification ‬vs‪ Pre-approval with RTC Mortgage‬

A “Pre-Approved Buyer” Has the Advantage!

The Pre-Approval process is one of the most important but often neglected parts of the home buying process. A pre-approval should always be obtained before a buyer even begins to shop for a home, no matter how well-qualified he or she thinks they are. Today’s mortgage qualification guidelines are full of potential traps that can prevent even a seemingly well-qualified buyer from being approved. A qualified mortgage expert can help a buyer in many ways if the pre-approval process is started early.

Pre-Approval vs. Pre-Qualification

First, let’s define the difference between a Pre-Qualification and a Pre-Approval


A mortgage loan pre-qualification is simply an estimate of how much house you can afford and how much money a lender would be willing to loan you. This usually involves verbally providing information on your income, assets, debts, and a potential down payment amount to a lender. That lender would then provide you with an estimate of how much you could afford to pay for a monthly mortgage. There is no cost or commitment on either side. This estimate is just helpful in helping you figure out if buying a home is a viable option, and if so, what your price range would probably be. But, the lender did not verify your credit, income or assets, and it may not be worth the piece of paper that it is written on.


Getting pre-approved means that you have a tentative commitment from a specific lender for mortgage funding. In this case, you provide a qualified lender with actual documentation of your income, assets, and debts. This process requires an application and a credit report. Your loan application with credit information should be input into the Fannie Mae/Freddie Mac automated underwriting System to obtain an Approval. These Approvals are accepted by all lenders. If there is any doubt about your qualifications, the lender should also review it with an underwriter.

Once pre-approved, the lender will issue a letter of commitment, stating how much money they are able to lend for a home purchase. With a pre-approval in hand you can start your shopping. Real estate agents and sellers will take you much more seriously when they see you have your mortgage funding in place.

It is important to understand, however, that even a pre-approval is still not a guarantee that you will be approved for a mortgage loan.  The funding will only be given when the property appraisal, title search, and other verifications check out on the home you have chosen to buy.

The pre-approval only takes a day or two once you provide the income and asset documentation.

What You Need for Pre-approval:

  • Most recent paystubs covering a 30-day period
  • W-2s for the two previous years
  • If self-employed, personal and business tax returns from the last two years
  • Two months of bank statements for each Bank, Investment & Retirement account
  • Loan documents on your current home (if applicable)

Benefits of Pre-Approval:

  • Allows time to improve credit scores and structure your financing to obtain a better rate. Sometimes just 1-point in your credit score can affect the rate or even disqualify a buyer
  • Strengthens your offer – particularly helpful when there are multiple offers
  • Sellers will be more likely to immediately accept your offer, because you are giving the seller peace of mind that their home is sold and it’s OK to take their home off the market
  • Enjoy a Faster Closing Period – The lender can speed up the entire processing procedure. Appraisals can be ordered immediately. The process that typically takes about 30-days can be shortened to just two or three weeks, which comes in handy if a seller needs to quickly move and can’t decide which offer to accept
  • Saves everyone time – the Buyer, Seller, Realtor and Mortgage Lender

As you can see, a pre-approved buyer has the advantage when shopping for a home. Just make sure that you are being pre-approved by a knowledgeable, reputable mortgage professional that has taken the time to review your documentation, run your credit and provide advice to structure your financing with the best possible terms for you.

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Mortgage Update: How Rate-Locks Work


The volatility and improvement in the financial markets this week makes me want to talk about Rate Locks today.

The Basics:

First of all, understand that mortgage rates change every day and throughout the day. Lenders allow us to lock in our borrowers interest rates in order to protect them from potential increases in rates between the time they make application and the time the loan closes. At the same time, a rate lock protects the Lender and allows them to manage their pipeline of pending loans to try to minimize losses from loans that don’t close. So, it’s a two-way street in that once a rate is locked the Lender can’t raise the rate before the loan closes or the lock expires and they also won’t lower it if rates eventually fall (see the paragraph about exceptions near the end of this article). It should be understood that a Lender will lose money when a rate lock is broken because they “hedge” their pipeline by buying securities that move in the opposite direction of interest rates. They also incur a cost when they substitute one loan for another in their pipeline.

Rate locks are always for a finite period of time. Most lenders will offer a rate lock in 15-day increments, i.e., 15, 30, 45 & 60 days. The longer the lock-in period the higher the cost because the lender is at risk for a longer time period when guaranteeing a rate.

When Can the Rate Be Locked?

A rate can be locked anytime during the process. In a “purchase” transaction it can be locked in once the buyer and Seller have a signed purchase agreement and escrow is opened. On a “refinance” transaction it can be locked in once the borrower has me an application and signed an “intent to proceed” with a Lender or mortgage broker.

Since rates can change daily, timing is all-important. It’s not always best to lock in the rate at the time of loan application. An experienced mortgage broker has resources that track the movement of Mortgage-Backed Securities and receives “alerts” when the time is best to lock in. It’s not a perfect indicator of when to lock but an experienced mortgage broker will manage his pipeline according to closing dates, the lenders he has chosen to work with the best interest of the client always in mind. The big banks on the other hand tend to lock all loans at time of application which is not often the best time to lock.

Can a Rate Lock Be Broken?

As a general rule, a rate lock is a commitment for both the Borrower and the Lender. But, sometimes there are extenuating circumstances such as the substantial decrease in interest rates such as we just experienced. When that happens, Lenders may allow us to “negotiate” the rate to the market-rate or somewhere between the market rate and the locked rate. The lender has to evaluate how much it will lose if it negotiates the rate and the borrower has to evaluate whether it’s worth the hassle of starting over with another lender. Each lender has the ability to set its own policy for rate negotiations and most lenders won’t negotiate the rate until the loan is ready to close. You can’t expect them to negotiate every day as the markets change. A rate negotiation is usually a one-time opportunity.

I welcome your feedback:

Mortgage Rate Update: Rates are at an All-Time Low!

In all my years I don’t think I’ve ever seen such volatility and swift movement in the mortgage market. There are so many factors at play – a weakening U.S. economy; multiple European countries in financial trouble and then the down-grade of U.S. debt by S&P.

The Fed met this week and promised to keep rates lower for the next two years. The Fed is essentially out of bullets that they believe will help revive the economy and lower unemployment. There are a number of analysts believing the Fed will do another round of quantitative easing later this year. I believe what Bernanke did is to assure investors rates will stay low and that putting money in treasuries won’t provide much, if any, return on parking money. Investors will continue to look for any potential to earn some profits and that makes stocks more attractive. Bernanke’s decision will keep interest rates low and likely keep the stock market from collapsing. I think it was an excellent strategic decision by Bernanke and the Fed.

Important Note: The Fed does not control mortgage rates. Most mortgages are sold to Fannie Mae and Freddie Mac and then bundled with other mortgages and re-sold as Mortgage-Backed Securities. These securities are traded in the financial markets just like stocks and bonds. Volatility will continue as the price of these securities goes up and down in reaction to the day-to-day political and economic events.

You can always find out what’s driving the movement in interest rates and whether to lock ro float by following the Rate Lock Advisory that is updated on my website every day:

Mortgage Interest Rates for Fixed and Variable Rate Mortgages*

Rates as of Thursday, 11th August, 2011:

Mortgage Interest Rates August 2011

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Laguna Beach Real Estate from the Rooftop Lounge on The Hotel La Casa del Camino

The Roof Top bar and restaurant is the only place in Laguna that you can get a 360 degree view of Laguna Beach Real Estate along the coastline and hillsides.

While I recommend you to visit the Roof Top, and see the view, as well as, the great bartenders and beautiful cliental, I’ll show you in this video what to expect.

1) North Laguna

North Laguna -We start our tour by looking up the north coast of Laguna.  At the far end we have three luxury gated communities; Irvine Cove, Emerald Bay and Smithcliffs. Here Laguna Beach real estate for sale can range from $3m to $30m.

The rest of North Laguna is made up of a series of communities, such as Emerald Ridge and the Tree Streets, which have a wide array of different architectures, views and ocean coves.

North Laguna is very popular since it provides a quick access out of town since you don’t have to drive through the village of Laguna.

North Laguna Beach homes for sale

2) The Laguna Village

Next we have the Laguna Village which is comprised of the downtown area with tons of restaurants, galleries and boutiques that sit on the beautiful Main Beach.

The downtown real estate in Laguna Village area is made up of cute beach cottages made in the 1930s that typically go for $1m to $3m.

Laguna Beach Village homes for sale

3) Mystic Hills

Above the Laguna Beach village on the hillside is Mystic Hills.  This community is made very popular due to its big ocean and Catalina views, as well as its quick access to schools and the village.

While Mystic Hills, the Laguna Beach real estate for sale has every type of architecture imaginable. It’s unique to have a large amount of contemporary and modern homes that are quite spectacular.

Mystic Hills homes for sale

4) Top of the World

Way up at the top of the hill is the community of Top of the World.  It is a relatively flat area since it is not on the hillside.

This Laguna Beach real estate is popular with families due to its flat properties and many of schools and parks are located there.

Top of the World homes for sale

5) Temple Hills

As we move south we have one of the original hill side communities of Temple Hills.  Since it splits Laguna in down the middle it has all sorts of magnificent ocean and Catalina views.

Below Temple Hills there is the popular southern part of the Laguna Village which includes the Roof Top and the Casa del Camino hotel. This is quite popular since people who live here don’t have to drive to get around town and the awesome beaches at the end of each road.

Here the Laguna Beach Real Estate for sale can range from $1m to $6m.

Temple Hills homes for sale:

Lower Temple Hills homes for sale

Upper Temple Hills homes for sale

Southern Laguna Village around Oak St.

6)  As we move south past Blue Bird Canyon we come to Summit Ridge and Arch Beach Heights.  Arch Beach Heights is a unique community and is one of the more affordable areas in Laguna with a huge panoramic ocean views.

The Laguna Beach real estate for sale in Arch Beach Heights ranges from $700k to $3m

Temple Hills and Blue Bird Canyon homes for sale

Arch Beach Heights homes for sale

Below, is the Woods Cove community that cozies up to the ocean and its spectacular coves.  Again this is popular since you can walk everywhere.  Real Estate Laguna Beach in Woods Cove ranges from $1m to $4m

Woods Cove homes for sale Woods Cove, Laguna

7) Alta Vista

As we look further south there is the hillside community of Alta Vista. It is unique since the hillside goes steeply down into the water offering beautiful white water coves below. The road is a little crazy to drive but the ocean and coastal views are incredible.

Laguna Beach Real Estate for sale here ranges from $1.5m to $5m

Alta Vista homes for sale

8)  And lastly we look past the Surf and Sand Hotel to South Laguna Beach and its beautiful beaches.  Besides the world famous Montage Resort there are some great communities like the gated Three Arch Bay and Crown Royal.  These are true gems of Laguna Beach Real Estate.

South Laguna Beach homes for sale

But it’s all about the water and art in Laguna. With all sorts of water sports like surfing, stand up paddling, skimming and diving you can keep yourself busy during the day and it the galleries and restaurants like the Roof Top at night.

So come on down to the Roof Top, have a maito, and meet the locals and out of towners and check out these views.

And don’t hesitate to give me a call when you’re in town. You have to admit it’s one of the best places in the world.

Sean McCracken
Surterre Properties — Ecobroker Certified
Phone: 949-290-5317

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A 360 Degree View of Laguna Beach from the Rooftop Lounge on The Hotel La Casa del Camino

You’ve never seen Laguna Beach like this before.

Check out this 3 minute video from The Rooftop Bar, which is on top of the Casa del Camino Hotel in Laguna Village.  You’ll get a 360 degree view of Laguna showing where the different communities.

This was done with a local videographer Cory Sparkuhl, who did a great job.

I hope you enjoy it.

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North Laguna Beach (Part II)

North Laguna Beach Communities Continued

Last week’s newsletter covered the Tree Streets in North Laguna, which are at the most southern end of North Laguna.

This newsletter will look at some of the other areas of North Laguna.

Folks like North Laguna and will pay a premium for living here since, not only does it have the Laguna charm and views, it is situated so that you don’t have to go through the village and its traffic in order to commute out of town.

This issue will look at North North Laguna, Emerald Terrace, Crown Point and The Coves. To view more pictures these area’s homes, shops, streets, landmarks, parks and views click on this link North Laguna Beach

North North Laguna:

This community is between the Pavilion shopping center and Emerald Bay. The Coast Hwy and High Drive are its other boundries.

Unlike the tree streets community in South North Laguna , which is relatively homogenous with single family residences North North Laguna is made up a everything from condos, apartments, and single family residences of every shape and size. It attracts many of the town’s renters as well as long time residents.

The streets are typically on steeper hill sides and have more ocean views.

Emerald Terrace:

Emerald Terrace borders Emerald Bay and goes from the Coast Hwy to way up on the hillside. The custom homes in this area are breath taking in size, architecture and views. The view of the bay in Emerald Bay is extraordinary and reminds you of the coves along the Italian Riveria.

The homes are priced at a premium but not at the premium level of Emerald Bay. Then again they don’t have access to the Bay’s beach.

Crown Point:

Crown Point is on the ocean side of the Coast Hwy between Emerald Bay/Smithcliffs and Crescent Bay. This is an unusual area with condos/ apartments, older single family homes and historical beauties.

Did you know there used to be an airport landing strip located here until someone crashed into Crescent Bay. If there is anything you should read in this newsletter is the story of one of Laguna’s most colorful lady character that used to live there, Pancho Barnes. From a 3 day Hollywood party host in Laguna, to the first female stunt pilot to the lady who owned the bar/brothel outside Edwards Air force Base featured in The Right Stuff movie, she has an incredible story and movie. You got to read this

The Coves:

The Coves in North Laguna are on the ocean side of the Coast Hwy and runs from Cresent Bay along the coast past Shaw’s Cove and Hiesler Park. You have everything here from $10m Oceanside homes, to Laguna classic cottages, condos and apartments.

Watch this video that goes along Cliff St along The Cove community all the way to Las Brisas and onto the Coast Hwy with its shops, restaurants and art galleries.