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Posts Tagged ‘Ingrid Pierson’

Thinking of Buying a Home? Tip 7 of 10 to Help.

Wednesday, May 11th, 2011

Today I’m posting tip #7 of a 10-part series on things you need to know before you start your house hunt.

TIP #7. Choose your loan, before you shop for your home.

There are two main types of loan categories; Conventional Loans and Government Loans. The loan options available to you will be determined by:

  • Down Payment
  • Loan Amount
  • Loan to Value or need for Mortgage Insurance
  • Credit Score
  • Property Type

Down payment: If your assets allow a down payment of 10% or more, then a conventional loan may be a worthwhile consideration. The mortgage insurance (MI) costs will be lower and it may be possible to remove the mortgage insurance earlier than on government loans.

Loan Amount: If your loan amount will be $417,000 or lower and you are buying in the continental US, an FHA, VA, USDA or Conventional loan are all options for you. If over $417,000, then your transaction would fall into whats called a JUMBO loan. September 2011 is the latest that FHA loans may be funded up to the $417,000 loan amount. We will have to wait and see what the new maximum loan for FHA will be after that date.

Loan to Value: If your down payment will be less than 10%, then you will want to look at securing a government loan like FHA, VA or USDA. FHA still requires a 3.5% down payment, all of which could be a gift, or a combination gift/grant, etc. VA requires no down payment from qualified Veterans with full eligibility. USDA also provides 100% financing, however, the property must be located in a less populated or rural area.

Credit Score: Credit scores play an important role in your options for home-loan financing. The better your credit score is, the better your loan pricing and options will be.

Property Type: Not all loans are available for all types of properties. Most notably, condominiums. Condos need to meet certain requirements for both FHA and conventional loans. The approval requirements are quite stringent. Some condo’s meet FHA standards, some Fannie Mae, some both or some VA. Most condos will not be in an area that conforms to USDA requirements.

For all of the above reasons it is wise for buyers to start early with an informed lender before beginning their home search. It is important to work with a lender that will help you understand all options available to you. Getting pre-approved first, is as much about finding the right loan options available to you, as it is about satisfying the home sellers that you have the necessary financing in place to successfully and quickly close your home loan.

As always, I am here to answer any of your home-loan questions!

Photo of Ingrid Pierson

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

Thinking of Buying a Home? Tip 6 of 10 to Help.

Monday, April 25th, 2011

Today I’m posting tip #6 of a 10-part series on things you need to know before you start your house hunt.

TIP #6. Meet with a qualified lender to review program types BEFORE choosing a home

It is important to know what type of loan(s) will be best suited for you and your family’s needs before going home shopping, to avoid disappointment.

Essentially there are two types of loans; Conventional and Government. From there, they break down into sub categories. The conventional loans fall under Fannie Mae, Freddie Mac and RFC (Jumbo) guidelines. Government loan categories include FHA, VA, CalVET and USDA. These programs all have different types of mortgage insurance for loans with down payments of less than 20%. Conventional loans work with private mortgage insurance companies, government loans utilize government mortgage insurance (FHA) VA guarantee Fee; USDA government Mortgage insurance, CalVET – Guarantee Fee.

Each of these loans has different requirements. Some, such as USDA, have geographical restrictions. The loans also have varying property requirements. For these reasons alone, it is critical that a buyer knows which type of loan they are pre-approved for before house hunting, since some properties may be excluded due to condition or location.

It is therefore wise to know which loan type will work best for you and your family, and then have a “back up” loan or program that would also work, IF your primary loan is not an option. But, if as a first-time homebuyer you really only have one option, say 100% VA financing, then you will want to ensure clear communication between your lender and your real estate agent on that loan program type. Understanding the property types and specific nuances required for your specific loan program, will help your upfront negotiations on your home purchase to ensure it will be successful and make your home-loan dreams a reality.

As always, I am here to answer any of your home-loan questions!

Photo of Ingrid Pierson

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

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

Thinking of Buying a Home? Tip 3 of 10 to Help.

Monday, February 7th, 2011

Today I’m posting tip #3 of a 10-part series on tips you need to know before you start your house hunt.

TIP #3. Down Payments

In most cases, to purchase a home you will need a down payment. Down payment requirements vary, depending on the loan type. Most conventional loans currently require 10 – 15% down, depending on the location of the property. FHA home loans require 3.5% down and VA home loans will still allow a veteran to buy with ZERO down payment.

One reason for finding a knowledgeable lender, especially if you are a first-time homebuyer, is so you can become educated on the options best matched with your personal and financial situation. Those options could include down payment assistance in the form of a silent 2nd or a grant. It always helps to work with a lender that is knowledgeable in first-time homebuyer financing. Someone used to “writing” large loans with substantial down payments may not be “up to speed” on the grants or silent second loans available in your area.

A silent 2nd is a loan that has a fixed interest rate. The interest is calculated only once at the beginning of the loan. On a silent 2nd there are no monthly payments due. The entire amount is due at the end of the 30-year loan or when the loan is paid off through refinancing or selling the property.

A grant is money that is given to a buyer for their down payment and is forgiven over a certain period of time. Most grants are forgiven over a five-year period – 20% per year. If you were to sell within the five-year time frame, you would have to pay back the grant on a prorated basis.

Currently, in California there are two grants available:

1.) The first grant can make up the difference of 3% of the down payment or closing costs for an FHA or VA loan.

2.) The second grant is available only to first-time homebuyers and can be used for down payment, closing costs, or upgrades to the home.

Both grants have income limitations (restrictions on how much income you can have, based on household size).

Often, city governments will have federal funds to be used in their affordable housing programs. Mostly they fall in the silent second category. They are not always administered by the city, but by a separate entity. In California, Mercy Housing fulfills many of those functions.

Additionally, gift funds are an acceptable source to pay for your down payment or closing costs. This is another reason to reinforce why it is important to communicate with your lender. Inexperienced lenders may assume that your funds are coming from one source, when they will actually be coming from a gift. Be sure to discuss this option with your lender up front. It will be important (and required) to document the sourcing of your funds.

Because funds must always be documented for your down payment, cash from your piggy bank is not acceptable. So if you’re inclined to cash your pay check and pay cash for groceries, utilities and other purchases, my advice is to keep as much in the bank as possible. Redepositing monies saved at home is not wise and can delay a loan and the time needed to close.

Finally, always be sure to have a frank discussion with your lender upfront about the cash necessary to buy a home, so there will be no surprises in the 11th hour. Remember, an earnest money deposit, as well as a home inspection, will be a part of your sales contract. They will need to be paid in advance of closing, but will be applied towards the final closing dollars.

Photo of Ingrid Pierson

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