Buyer Guidelines
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Shopping for a home? Here are a few pointers to keep you on track and help to make one of the biggest financial investments of your life a smooth and rewarding process. First #1 Talk to a lender. Get pre-approved for a mortgage. It's important to know how much you can afford when shopping for your new home. Remember, you'll also have to have money on hand for the good faith deposit, closing costs, HOA fees, taxes, insurance and other annual, monthly, and day-to-day expenses that need to be placed in the housing budget. Second #2 Search for a home. Shopping can be both fun and exasperating. Yes the old saying still applies "success is 90% persperation and 10% inspiration. You will find the home of your dreams and it can be a bit of a challenge, but preparation is key, and knowing where you want to live and how much you will have to pay to live there are major hurdles to overcome in acquiring the home of your dreams. Make sure to stay focused on the most important qualities you want in a home. Storage may be at the top of your list or yard size may not be that important to you. Will you want to have room for your family to grow in or will this be a starter home only thereby allowing you to relax and enjoy the time you spend in the home until it's time to move on to a new location or larger lot. Deciding on major features will help to streamline your search and lessen the time spent looking at properties that don't meet your most important criteria. Third #3 Make a sound and reasonable offer. If you've found the home of your dreams, buy it. Home values are based on the real estate marketplace at a particular point in time. Of course sale prices are negotiable, but unless there are major improvements or conditions that will be costly to fix or replace, making an offer that is well-planned and thought out will save you time and money and put your offer first on the sellers acceptance list.
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THE HUD HOME BUYING GUIDE U.S. Department of Housing and Urban Development Office of Single Family Housing 451 Seventh Street, SW Washington, DC 20410-3000 www.hud.gov espanol.hud.gov HOW MUCH HOME CAN YOU AFFORD? Before you start shopping for a home, you need to know what kind of home to shop for. To determine that, of course, you’ve got to figure out how much you can afford to pay each month. Fortunately, there’s a pretty simple formula for coming up with this number. It’s the FHA ormula that many mortgage lenders use. The FHA has found that most people can afford to budget 29 percent of their gross monthly income to housing expenses, depending on total debt. Buyers with no debt can budget as much as 41 percent of monthly income to housing. No need to reach for your calculator–we’ve done the math for you. The two charts on the opposite page should tell you everything you need to know. The first chart tells you how much 29 percent of your monthly income is. Find your annual income, or a figure close to it, in the column at the left. Then read across to find out how much your monthly gross income is, and finally, what 29 percent of that figure amounts to. This is approximately how much you can spend on total housing costs each month. The second chart tells you how much your monthly mortgage might be based on a home’s selling price. Remember to keep in mind that the monthly figure from this second chart is based on a 30-year fixed mortgage and includes monthly principal and interest payments only. Taxes and insurance – which vary from community to community – are not included. So if 29 percent of your gross income is, say, $604, that doesn’t mean you can pay a $604- per-month mortgage. You need to look at a mortgage somewhat below that, to leave room for taxes and insurance. Be sure to ask your lender to help you estimate how much your total costs will be. Annual Gross Income Monthly Gross Income 29% of Gross Income $ 15,000 $ 1,250 $ 363 20,000 1,667 483 25,000 2,083 604 30,000 2,500 725 35,000 2,917 846 40,000 3,333 967 45,000 3,750 1,088 50,000 4,167 1,208 |
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Step 1 - Enter Search Details
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According to the California Housing Finance Agency (CalHFA)
What You Should Know Before Buying a Home (Homebuyers interested in applying for financing should contact one of CalHFA's approved lenders. ) - Before you start looking for a home, get pre-qualified for a loan. Banks, credit unions and mortgage bankers make home loans; mortgage brokers process them. The lenders will take an application, process the loan documents, and see the loan through to the funding stage.
- If you have marginal or bad credit, consult your lender. You may be able to qualify for a loan depending on how long ago and what reason(s) caused the bad credit. A lender should be able to advise you on whether your credit history will prevent you from qualifying for a home loan.
- You will need a down payment. Down payment requirements vary depending on the type of loan. Many down payment assistance programs exist. These programs may loan or grant you the funds necessary for the down payment. Consult with a lender about programs available in your area.
- You will need funds for closing costs Closing costs are charges for services related to the closing of your real estate transaction. They include, but are not limited to:
- Some loans have "points" and some do not. A point is a loan origination fee equivalent to 1% of the loan amount. Together with the interest rate they constitute the yield on your loan for the lender. Some lenders charge a higher interest rate to compensate for charging no points. It is important to comparison shop lenders to make sure your loan is at a competitive yield.
- Should you select a mortgage with a fixed rate or an adjustable rate? The answer to this question depends on whether mortgage rates are at a high or a low point when you purchase, and on how long you plan to live in the home. If rates are high, an adjustable rate might be attractive since subsequent rate drops could reduce your monthly payments. Additionally, lenders may offer a low rate during the first few years of an adjustable mortgage to make it appealing to you. If interest rates are low you might want to take a fixed rate to protect yourself against the possibility of rising interest rates.
- Be aware of the two main types of loan categories.
- Conventional Loans. Conventional mortgage loans are available with fixed or adjustable interest rates. Some loans may require mortgage insurance.
- Government Loans. These include Federal Housing Administration (FHA) fixed and adjustable rate mortgage loans, and Veterans Administration (VA) fixed rate mortgage loan
- If you are a low or moderate income homebuyer, there are special programs designed to help you. These loans are available through private lenders, as well as local and state housing agencies, like the California Housing Finance Agency (CalHFA). Most lenders specializing in real estate mortgage loans are aware of these types of loan programs.
- Why might I have to pay mortgage insurance? Mortgage insurance protects the lender from potential loss if you should default on your mortgage loan payment. Generally, conventional loans that require larger down payments do not require mortgage insurance. Mortgage insurance is always required on FHA mortgage loans.
- Many organizations offer home loan counseling to prospective homebuyers. These organizations provide classes for homebuyers to cover the steps to homeownership. They will cover home selection, realtor services, lenders, loan programs, homeownership responsibilities, saving for a down payment, and other important pieces of information. Many first-time homebuyer programs require homebuyers to attend this type of class to be eligible for selected programs.
CalHFA does not lend money directly to consumers. CalHFA works through and uses approved private lenders to qualify consumers and to make all mortgage loans. CalHFA purchases closed loans that meet CalHFA's requirements. The fees consumers pay could be different depending on the lender and the program. |
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