FAQ: Homes with Non-Permitted Additions are Eligible for Conventional Financing

On Friday, the Bureau of Labor statistics will release its March employment report. As the economy sluggishly moves forward, the BLS report has become something of a primary barometer for the character and extent of the U.S. economic recovery.

Beyond the correlation between employment and economic strength, the monthly reports have also taken on added importance as a measuring stick for the Federal Reserve.  Over the past few years, markets have moved not only based on what the employment situation suggests about the economy, but also on what the employment situation suggests about possible Federal Reserve action (given the data).

The Fed helped juice the economy – and hold down mortgage rates – with its stimulus program quantitative easing, and has closely watched indicators (like employment) to decide when to scale things back. The “tapering” process has started and been three three straight reductions, even despite poor employment data in December and January.

We will update you on the full employment report next week. For now, we are going to post about a topic we have been hearing quite a bit about lately: non-permitted additions.

After the real estate bubble popped and the economy fell into recession, many homeowners decided against leaving their homes and “trading up” or investing in new property, and instead focused on improving what they already had.

As new home construction has declined over the past 5 to 7 years, residential additions and alterations have increased – and some of the work done hasn’t been permitted. What does this mean for current buyers and sellers? Will lenders accept non-permitted additions and alterations?

The broad answer is “yes”: lenders will accept properties with non-permitted additions and alterations, but there isn’t a single set of rules to follow for obtaining financing for such properties. What works for one loan, might not work for another.

Any questions about home loans in California? We are The Mortgage Experts: ask us anything! We have a loan program to fit every need. Call 805.543.LOAN or email us today.

Monica Chudgar, an appraiser and realtor, gives an example. “I appraised a home that converted the garage to a second unit with a full bathroom and kitchen. The lender didn’t want the stove in there, so the owners removed the stove and took a picture. After that, the loan went through fine.”

The most important consideration that lenders take for non-permitted additions is the quality, or “workmanship”, of the completed project.

“There are liability and insurance issues,” said Daniel Podesto, co-owner of Central Coast Lending. “When a lender agrees that the property is in acceptable condition, they can be held responsible to some degree.”

Lenders want to make sure that they are financing a safe, fully-functioning property. This is where “workmanship” comes into play.

“The concern is about the quality of the improvement,” said Podesto. “Was the project done by a guy without experience? Or was the improvement completed the right way by somebody with skill?”… READ THE COMPLETE ARTICLE HERE.

New Listing! 2931 Juniper Ave. Morro Bay


Desirable down slope North Morro Bay home with forever, panoramic views of the
Rock and Ocean. This is only the 2nd owner of this spacious home which has been
lovingly cared for. Single level living upstairs if necessary with LR, Dining
area, kitchen and bedroom on first floor. Large family room with fireplace,
spacious Master bedroom and additional bedroom easily accessed by wide stairway
to 2nd floor.


New Listing! 6860 Vineyard Dr. Paso Robles


Excellent location on exclusive Vineyard Drive among vineyards and wineries. This lovely home and guest home have privacy and beautiful views. Main house is 2324sqft with 2 bedrooms, library/office, and 2.5 baths. The enclosed courtyard, 330sqft of covered patios and soaring entry make this home spacious, bright and perfect for entertaining. The gourmet kitchen with granite counters, island and bar seating and the wine lounge with fantastic view open to dining room with built in storage. Beautifully designed guest home completed in 2008 is 600sqft with 10ft ceilings and an additional 300sqft of covered patios. Charming details include the kitchenette with granite counters, fireplace, custom storage areas and bedroom with doors to patio. A 15KW generator can run the home and 17gpm well in emergency. Lots of storage and office/workshop in detached 3car garage. RV parking with 50amps. Possibilities to expand homes as well as convert to vineyards. 8acres walnuts. Templeton Schools



New Listing! 6210 Hawk Ridge, San Miguel


This is a Custom Palomar home in Independence Ranch located on top of the hill
with Beautiful Views of the surrounding Vineyards, Wineries and Sunsets from
your Private Sun Deck. This home is Immaculate and Move In Ready condition
featuring a large Master Suite, two additional bedrooms and two full bathrooms.
The spacious living room boasts a Cozy Raised Hearth Fireplace, Formal Dining
Room, Family Room/Library, Large Laundry Room and Butler’s Pantry. There are
Metal Stables and Barn plus a Tack Room. The Corral/Pasture is almost two acres
with extensive Post and Rail Fencing throughout the property. This is a turn key
property for horse lovers, including two tractors and all of the equipment plus
a flatbed trailer. Hawk Ridge Place Road has been approved for paving within the
next few months. No problem with water, sellers have one well and two large
tanks with a booster pump. Plenty of room for your Toys and Animals. Hook ups
available for your RV!


Housing Market Slows as Mortgage Rates Rise

New Federal Reserve Chairman Janet Yellen and the Federal Open Market Committee (FOMC) voted last week to reduce quantitative easing (QE) by another $10 billion. The Fed is now purchasing $55 billion in bonds per month, including $25 billion mortgage-backed securities.

This is the third “taper” announced since the Fed – then under Ben Bernanke – first began the process near the end of 2013. Through its QE programs, the Fed had helped mortgage rates drop to the lowest levels on record. Less QE will mean higher rates.

The “tapering” process comes at a transitionary period for the real estate market.

During 2012 and 2013, the housing market broke out of its prolonged post-bubble slump. The Fed had helped juice mortgage rates to record lows. Home prices had dipped over 30% from mid-2000 highs.

The conditions were extremely affordable for folks to jump back into the housing market. Many borrowers took advantage of the opportunity and refinanced to a lower rate, thus reducing their monthly payments and/or saving thousands off interest payments.

Many buyers (including first-timers) also took advantage of the unique window of affordability to purchase a home.

A year later (and with Fed tapering in full swing), the 30-year fixed is over 1.0% higher and home prices are up between 10% and 20% from bottom. Demand for housing has dipped in the face of less affordability.

The latest report from the National Association of Realtors noted that the pace of home sales across the U.S. had slowed by 7.1% over the past year. The median price was up 9.1% during the same time.

The “supply” of homes available for sale rose to 5.2 months (up from 4.9 months), which suggests that demand for property has dropped slightly.

All in all, the housing market has slowed. Here are a few reasons why:

1) Less affordability.

2) Less maneuverability. Existing owners who refinanced in the last several years are reluctant to move out (and up) from their record-low rates. As Dina ElBoghdady writes for the Washington Post, “A healthy turnover of homes is critical to a robust housing sector, enabling critical first-time home buyers to enter the market and existing homeowners to move or trade up.”

3) The normal real estate cycle. Many interested buyers / borrowers already took care of their real estate activity for the next 5 to 10 years.

Though the market has slowed, buyers have many options for achieving homeownership, or to add an investment property to their portfolio. Central Coast Lending offers creative solutions for borrowers to obtain affordable mortgage finance for any type of property. (Learn about non-QM mortgages here).

For example, Adjustable Rate Mortgages (ARMs) are becoming more popular as fixed rates increase. Inside Mortgage Finance estimated that ARMs “accounted for 11.7 percent of mortgage originations in the third quarter of 2013,” wrote Pamela Yip for DallasNews.com. ARM activity is up from 9.8 percent the previous year.

Central Coast Lending offers a jumbo loan program requiring just 10% down and no mortgage insurance. For the program, the 3-year fixed ARM starts at 2.875% (3.078% APR) and the 5-year fixed starts at 3.625% (3.834% APR). (Please see the bottom of this article for full pricing details). In comparison, the 30-year fixed rate starts at 4.375 percent (4.432 percent APR) for one point in closing costs (see here for more rate updates).

After their initial fixed period, the ARM rates adjusts for the remainder of the 30 years based on the LIBOR index, which reflects the cost that banks pay to borrow.

Give us a call at 805.543.LOAN for a free pre qualification session.

New Listing! 5307 Cascabel Dr. Atascadero


Nestled among California Oak trees with wonderful views, this west Atascadero
home offers a private drive way and 2400 square feet of beautiful living space
with four bedrooms* and three baths. Notice the Knotty Pine ceilings with
Spanish pavers throughout the home, two decks and an outdoor patio featuring a
built-in Santa Maria grill — perfect for indoor outdoor living. Picture
yourself watching the morning sunrises and ending your day enjoying the warm
evenings on your 2.6 acres — California living at its best! *per tax

New Listing! 111 Coral Court, Pismo Beach


111 Coral Court, Pismo Beach, CA The only thing blocking your view is the ocean!
Walk through the front courtyard complete with fire pit and large fountain into
this 3000 sq ft 4 bedroom, 3 bath home with amazing ocean views from every room.
Fireplace,new stucco, roof, paint, remodeled kitchen with beautiful granite
counters and stainless appliances. The huge rear deck is new and has
unobstructed views from Point Sal to Avila Beach. The Master bedroom is located
on the entry level with 3 large bedrooms and full bath downstairs. Storage
galore throughout the house and this is truly one home you don’t want to

New Listing! 2260 Malvern St., Cambria


Cambria charm at it’s very best! This well cared for single-level home offers
spacious living, an abundance of natural light and picturesque mountain views to
the east. Stunning conservatory style skylight and brick fireplace in living
room illuminate character and quality throughout, while the private outdoor hot
tub adds even more sweetness to this home. Indoor laundry is conveniently
located just off the kitchen, with ample storage throughout. New dual pane
windows, as well as new sliding doors which allow easy access to the numerous
rear decks. Sale includes 3 adjoining vacant lots to the south (APN
023-383-028), totaling just over 10,000 square feet of land.