by Tim Storm | Dec 11, 2019 | Uncategorized
You saved for your down payment, but what about the closing costs? How do you even know how much closing costs will be when you buy a home in southern California? All too often potential home buyers will focus on saving for the down payment, not realizing that they'll also need to figure out how to get the closing costs paid.What Are Closing Costs?According to Trulia,“When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.”For those who buy a $250,000 home, for example, that amount could be between $5,000 and $12,500 in closing fees. Keep in mind, if you’re in the market for a home above this price range, your costs could be significantly greater. Closing Costs range from 1% to 2% of the purchase priceThe amount of money you will need to close on your purchase will be made up of the down payment, closing costs, and prepaid expenses. The combination of closing costs and prepaid expenses will typically range between 2% and 3% of the price for homes purchased in Southern California. There is a difference between Closing Costs and Prepaid expenses. Closing Costs are "Non-Recurring", meaning they are directly connected to this purchase transaction. Prepaid Expenses are "Recurring", meaning once you own the home you will continue to have these expenses. Below is a list of the typical closing costs involved in a purchase transaction.Appraisal (can range from $450 to $600 or more. Type of property, location, value,...
by Tim Storm | Jun 19, 2017 | FHA Home Loan
Canceling FHA mortgage insurance seems the be the first thing Orange County FHA borrowers want to know about after they have bought their home. FHA mortgages offer very attractive interest rates and with less demanding qualification requirements to allow first time home buyers and borrowers with less than perfect credit the opportunity to get into the real estate market. FHA allows Orange County home buyers to get a mortgage with a down payment as low as 3.5% as well as allowing borrowers to refinance without appraisal. The only real caveat to FHA mortgages is that the Mortgage insurance premiums are typically higher than other mortgage programs. Since FHA is essentially an insurance policy to lenders due to the higher risk potential borrowers, the higher insurance premiums are an essential aspect to the program. Types of Mortgage Insurance Premiums FHA has two different types of Mortgage insurance premiums, or MIPs, that are required as a part of an FHA mortgage. The first of these MIPs is the Up Front Mortgage Insurance Premium which is paid at closing. This premium is 1.75% of the loan amount and is financed into the loan amount. The second of these MIPs is the annual mortgage insurance premium. This is paid monthly as a part of your monthly loan payments. Rates for annual MIPs on a 30 year fixed rate term have ranged between .55% and 1.35% since 2008. Currently the annual mortgage insurance rate for 30 year fixed FHA loans is .85% for down payments less than 5%, and .8% for down payments more than 5%. Canceling MIPs With Conventional loan programs it is possible...
by Tim Storm | Jan 17, 2017 | FHA Home Loan
In December of 2016, FHA released an official statement announcing the increase of the 2017 FHA loan limits. This is the FHA loan limit increase in Orange County, CA since 2006. What is an “FHA loan limit”? The Federal Housing Administration (FHA) sets a limit, effective each new year, of what a buyer can borrow within each state county. They calculate this limit based on the average price a home is selling for in that area. That means that in places like Orange County the limit will be significantly higher than in a county with lower housing prices like Riverside County. This does not mean that you cannot purchase a home at a higher sales price, just that you as the buyer, will be responsible for coming in with the difference between the loan limit and the purchase price. What does this mean for Orange County Buyers? This is an encouraging change for many prospective Orange County home buyers that have the income, satisfactory credit, appropriate debt-to-income ratios but may not have the savings for a conventional loan program. The FHA loan limit for Orange County is now at $636,150. That is up $10,650 from last years limit of $625,500. As housing prices increase in this popular area it is a welcome opportunity. Let’s take a look at the median house prices in a couple of in demand cities to see how this new limit will be impactful: (Taken from Zillow 1/12/17) Costa Mesa: $725,200 Huntington Beach: $754,500 Santa Ana: $682,600 Anaheim: $553,900 Cypress: $624,400 Irvine: $776,600 Laguna Niguel: $790,500 Placentia: $661,300 Garden Grove: $545,200 Tustin: $670,400 Now look at the highest purchase price for the new loan limit, with the traditional 3.5% down: Purchase Price: $659,222 (<–Anything higher...
by Tim Storm | Jan 12, 2017 | FHA Home Loan
The U.S. Federal Housing Administration (FHA) announced that it is cutting annual premiums for Mortgage Insurance from 0.85% to 0.60% What is an FHA mortgage? FHA, which is a part of the Department of Housing and Urban Development, exists to fulfill the mission of providing homeownership opportunities to creditworthy buyers that may be overlooked by conventional lenders. FHA is a great option for Orange County first-time buyers, borrowers with lower to moderate income, or borrowers with less than perfect credit scores. With FHA loans, Orange County home buyers pay mortgage insurance to protect FHA’s funding in exchange for down payments as low as 3.5 percent. The lower premiums will come after FHA’s Mutual Mortgage Insurance Fund has recovered from the hit it took in the aftermath of the housing bust. “After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” Housing and Urban Development Secretary Julián Castro said in a statement What does this mean for Orange County Home Buyers? The planned cuts will lower the FHA annual premiums (monthly) from 0.85% to 0.60% of the loan balance, allowing FHA to get back on track in helping borrowers to realize their dream of owning a home. There are two types of mortgage insurance to consider. The first is the Upfront Mortgage Insurance Premium (UFMIP), which is a one time fee built into your loan amount (LA). The second, is the Mutual Mortgage Insurance (MMI) that is a monthly fee paid on top of your monthly mortgage payment. Let’s compare the current MMI to the new MMI available at the end of Jan 2017, assuming an Orange County...
by Tim Storm | Dec 15, 2016 | Conventional Loan
A common request amongst Orange County home buyers is to get a loan with no mortgage insurance. But unless they have a down payment of 20%, or qualify for a specialized program like a VA loan, then understanding what PMI is and why it is beneficial to home buyers with less than 20% down is important. What is PMI? If you are entering into a Conventional loan and are going to be paying a down payment of less than 20 percent, the lender will require you pay Private Mortgage Insurance, or “PMI”. Having borrowers pay mortgage insurance protects lenders in the case that the borrower forecloses. Private Mortgage Insurance will usually vary between .2% and 1.5% and depend on your credit score and down payment size. Obviously, the better the credit score the lower the PMI factor. Also, the bigger the down payment percentage, the lower the PMI factor. It makes sense that a borrower with 15% equity and a FICO score of 740 will pay less for PMI than a borrower with 5% equity and a 620 FICO score. For example, if an Orange County first time home buyer is putting 5% down on a purchase price of $500,000, they will have loan amount of $475,000 (after their $25,000 down payment). If the PMI factor is .62%, then the monthly PMI would be $245, which will be part of the monthly mortgage payment. ($475,000 x .0062 / 12 = $245). Paying for PMI There are several potential ways that you can pay for PMI on your loan. The most common way to pay for PMI is through a...
by Tim Storm | Jul 8, 2016 | Uncategorized
HomeReady is the newest home loan program offering from Fannie Mae and can save Orange County home buyers money. It’s designed to provide financing to creditworthy lower income borrowers in minority and low-income neighborhoods. It provides several benefits to borrowers like a reduced down payment, lower Loan Level Pricing Adjustments (LLPA’s), and reduced monthly Private Mortgage Insurance (PMI) premiums. Loans made through HomeReady can also be potentially refinanced up to 97% of the loan value. Eligibility for the HomeReady Loan Program There are some basic eligibility requirements for the HomeReady program, but for those that are eligible HomeReady offers quite a bit of flexibility in getting your loan application approved. HomeReady does not allow the borrower to own another home at the time of the new loan, but not require the borrower to be a first time buyer. That’s right, this program not not restricted to only first time buyers. An online Home Buyer Education course is required to be completed prior to closing. One of the coolest things about the HomeReady program is that it allows unconventional ways to establish a credit history. So for an Orange County home buyer with limited to no credit, providing alternative credit ( for example submitting proof of making a utility bill on time for 12 months) can be used in place of not having credit on the credit report. HomeReady also allows for the pooling of income from family members to help qualify the loan. Income limits still need to be met. Down Payment Requirement for HomeReady Home Loan Program The down payment requirement with HomeReady is lower compared to...
by Tim Storm | May 27, 2016 | Uncategorized
In Orange county, the FHA loan program is extremely popular amongst first time homebuyers compared to other mortgage programs. What many Orange County home buyers don’t always realize is that the FHA program can be the best home financing option for move up home buyers as well. Reasons for this include flexibility in underwriting guidelines, credit, and down payment. When is FHA Better Than Conventional Financing? FHA allows for approved lenders to provide loans with very low down payments to borrowers with less than perfect credit scores. The minimum down payment required is 3.5% of the loan amount and can be provided to borrowers with a credit score as low as 580. The FHA loan limit in Orange County in 2016 is $625,500. This means an Orange County home buyer can use FHA financing to buy a home up to $648,000 with only 3.5% down, which is better than any other Conventional loan program. The only program better than that is VA. (You would need to be a qualified active or retired military Veteran). The FHA program also has many other beneficial aspects for potential borrowers. Interest rates with an FHA loan are much lower than a majority of other programs. FHA also allows the down payment to be a gift from a source like a family member or charity. Because interest rates and loan pricing tends to be better with FHA than Conventional loans, it is easier for Orange County FHA lenders to cover the closing costs using a lender credit (which involves increasing the interest rate). If a borrower were to experience an extreme financial hardship, FHA...
by Tim Storm | Jan 14, 2016 | Conventional Loan
There are many common perceived hurdles to homeownership in Orange County, CA. However, studies have shown that many of the obstacles mentioned are perceived, not real. A recent study by Fannie Mae, What Do Consumers Know About The Mortgage Qualification Criteria?, revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage. Let’s break down three such challenges. Down Payment Perceptions Many Orange County renters believe that the lack of a big enough down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report: 40% of all renters don’t know what down payment is required 15% think you need at least 20% down An additional 4% think you need at least 10% down The Reality There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA actually allows $0 down payment up to a purchase price of $625,500 in Orange County. According to the National Association of Realtors, the typical down payment for a first time buyer is 6%. Credit Score Perceptions Many Orange County renters believe they do not have a high enough FICO score to move forward with the purchase of a home. According to the Fannie Mae report: 54% of all renters don’t know what credit score is required 5% think you need at least a 740 credit score The Reality Many mortgages are closed where the borrower has a FICO score less than 700. According to Ellie Mae, the average credit score on a closed FHA purchase is 687 and the average...
by Tim Storm | Jan 7, 2016 | Conventional Loan
There are many benefits to homeownership in Orange County, CA. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage. Rents have increased quickly over the past few years in Orange County, CA which is leaving many renters feeling trapped. They feel as though they have missed out on low prices and are not sure whether to wait for prices to drop again (will that happen any time soon) or move inland, like to the Inland Empire (Riverside or San Bernardino county). Don’t Become Trapped Renting in Orange County Jonathan Smoke, Chief Economist at realtor.com recently reported on what he calls a “Rental Affordability Crisis”. He warns that, “Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.” This is especially true in Orange County. The Joint Center for Housing Studies at Harvard University recently released their 2015 Report on Rental Housing, in which they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare. It’s Cheaper to Buy Than Rent In Smoke’s article, he went on to say, “Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into...
by Tim Storm | Jan 6, 2016 | VA Home Loan
VA loan limits for 2016 in southern California were recently announced, and are mostly unchanged from the limits for 2015. The VA loan limit for Orange County in 2016 will be $625,500. Los Angeles will be the same. And while the $625,500 is great for most VA borrowers, it is important to know that it is possible to get a VA loan as high as $1,500,000, because $625,500 is the $o down payment 100% financing limit, not the total loan amount limit. VA 100% Financing Loan Limit When we say that the VA 100% financing loan limit for Orange County is $625,500, we mean that a California Veteran can purchase a home in Orange County for a price as high as $625,500 with No Down Payment. And in many cases the lender can even price the loan with a “lender credit” that will cover the closing costs so that the Veteran won’t funds to close. This works out to be an awesome loan program for those that are eligible. What about the Jumbo VA Loan Program? A Jumbo VA Loan occurs when a Veteran purchases a home for higher than the 100% financing limit (and wants to get the maximum loan amount possible. ) A small down payment is required equal to 25% of the difference between their “higher” purchase price and the 100% financing limit ($625,500 in Orange County). For example, if a Veteran purchases a home for $675,500, or an even $50,000 above the 100% financing limit, then they would need a down payment equal to $12,500. The resulting VA loan would be $663,000. The actual down...
