Archive for the ‘CalHFA’ Category

Thinking of Buying a Home? Tip 5 of 10 to Help.

Monday, March 14th, 2011

Today I’m posting tip #5 of a 10-part series on things you need to know before you start your house hunt.

TIP #5. Understanding Interest Rates

Interest rate options can come with pricing differences. Those differences are called “points”. A point is a fee charged by the lender, typically a percentage of the loan amount. Most buyers, when inquiring about rates, are looking for a rate quote at “par” pricing. This is the lowest interest rate at any given point-in-time, where the lender only charges 1% for the Origination Fee and there are no further “point” costs.

The rate on a real estate loan can be bought up or bought down based on investor or bank pricing over and above the 1% for the Origination Fee. For example: If a buyer does not have quite enough cash to close, the lender may agree to rebate the 1% Origination cost, by offering a slightly higher interest rate. This is acceptable to the lender since they expect to recoup the rebate over the life of the loan. In the same way, if a buyer wants a lower long-term rate, pricing from the lender can accommodate the rate buy-down through the charging of discount points. So that paying the lender a premium upfront, will result in a discounted note rate for the life of the loan.

Most buyers, especially first-time homebuyers, don’t buy the rate down for the long term. Sometimes, however, a seller will offer to credit the buyer up to 6% of the purchase price (FHA/VA limit) towards closing costs. This could potentially help by lowering the qualifying house payment. In this market most sellers are not willing to agree to such high closing credits. The exception can be found in new home communities, where a new home is move-in ready and a previous buyer “fell out”. In these cases some exceptional opportunities can be found!

Whether buying the rate down is something you weren’t initially planning to do, take some time to think through and calculate the benefits for your individual situation. If you are buying this home and planning to live there until it is paid off, then the investment of some extra cash upfront, for a lower rate over the life of the loan, would make sense. Additionally, these points are tax deductible in the year paid. But, since many folks really don’t plan on being in their home until it is paid off, keeping the extra cash in the bank could be more sensible. This is especially true for first-time homebuyers who can expect to have additional expenses in the first year of homeownership.

Not all lenders offer or allow permanent rate buy-downs. For instance, CalHFA already offers some of the lowest interest rates for first-time homebuyers, therefore paying additional points is not an option. Also, the one-half percent down-payment program, offered to any homebuyer who meets county income limits, has a set price with no option to buy the rate down.

If you are trying to determine if buying the rate down on your next home loan is the right option for you, contact me today. I can help you calculate the benefits for your individual situation, so you will feel confident you are making the right financial decision.

Photo of Ingrid Pierson

Ingrid Pierson
(530) 885-1545
Licensed – NMLS # 233666

Thinking of Buying a Home? Tip 4 of 10 to Help.

Thursday, February 24th, 2011

Today I’m posting tip #4 of a 10-part series on things you need to know before you start your house hunt.

TIP #4. Cash to Close

Buyers typically tell me they have a certain amount of money ($5,000, $10,000, etc.) to put down on their new home purchase. After learning this amount, I always ask, “Is this the total amount you have to invest towards your home purchase, or is it just the amount you have designated for the down payment.” This is important for buyers to understand, because they will need to have funds designated for closing costs.

When you talk to a lender, you want to make sure to let them know how much in total you have to invest into your new home purchase. This along with your income and debt, will determine how much house you can afford.

Let’s separate the two; down payment and closing costs.

  1. Downpayment refers to the required investment amount for the loan program used for your purchase. Examples:
    • VA – No down payment required for Veterans with 100% entitlement.
    • USDA – Zero down payment required in qualifying areas
    • FHA – 3.5% down payment required
    • Conventional – 5% minimum down payment required
  2. 2. Closing costs are charges for services related to the closing of your real estate transaction. They include but are not limited to:
    • Lender Fees – Origination (typically 1% of the loan amount), admin, appraisal, inspection, credit report
    • Mortgage Insurance – Some pre-paid some financed
    • Title Policy Issuance Fees – Charged by title companies to insure the chain of title for the buyer (CLTA) and for the lender (ALTA).
    • Escrow Fees – Charged by the company acting as the neutral third party in the transaction. Commonly referred to as an Escrow Company.
    • Fire or Home Owners Insurance – (Possibly Flood Insurance if it is determined that the property is in a flood plain.)
    • Recording Fees – Paid to the local county recorder’s office. These fees are charged per page of your loan document.
    • Drawing Fees, Notary and Over Night Delivery Fees – All part of the escrow transaction.

Your lender should be able to give you a summary of what to expect for total costs including both recurring and non-recurring closing costs.

A knowledgeable lender will know how to help you cover some of these fees through grants. Grants can provide you extra money to cover closing costs, if you meet certain income limitations for your county. For more information on downpayment and downpayment assistance click here.

Some restrictions do apply, so contact me for more details.

Photo of Ingrid Pierson

Ingrid Pierson
(530) 885-1545
Licensed – NMLS # 233666

1% Down??? Yes – DAP is Back!

Wednesday, September 15th, 2010

The down payment challenge in today’s market for first-time homebuyers isn’t new. It takes time to save 3.5% of the purchase price of a home for the down payment, and in some cases, even more is needed to be saved for the closing costs if the seller isn’t ready or willing to assist. Now, thanks to CalHFA, a new program is available just in time for the fall selling season! This will help both buyers and hard hit new home sales communities, where buyers can find some of the best buys.

The CalHFA FHA 30-year fixed rate government insured loan program, requires that you have not owned a home for the past 3 years, and has income restrictions based on your household size. The income limitations are based on the HUD median income for moderate income households and varies per county. Their are also sales price limits which also vary county by county, and the program is available throughout all of California. Example: Sacramento and Placer sales price limits are $522,000.

This program differs from previous CalHFA programs, in that with partnering with FHA and the CHDAP 2nd, buyers only need to have 1% of their own money available for the down payment. This makes a substantial difference. Example; $300,000 sales price… 3.5%= $10,500 1% = $3,000.

You’ll want to allow a little longer escrow time, as the loans will need to go to CalHFA for final underwriting. This will not be your quick close transaction, however, with a little patience you can benefit from some very attractive interest rates and the low down payment benefit. Additionally, a HUD or Fannie Mae Homeownership Education Class will be required. The classes vary in cost, averaging around $50.00.

The CalHFA loan program is a great option for those buyers that felt “let down” when the government homebuyer tax credits expired. With this new program you have a new window of opportunity, let’s make the best of it. Happy house hunting!

Photo of Ingrid Pierson

Ingrid Pierson
(530) 885-1545

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