Ed Gillespie, Loan Officer ~ Mortgages for greater Sacramento

If you are considering buying your first home, you may be able to do so with only a ½% down payment!

FHA requires a 3.5% investment of your own funds when using FHA financing for a home purchase. But, beginning March 1, 2012, the California Homebuyer's Downpayment Assistance Program (CHDAP) is offering downpayment assistance of up to 3% of the purchase price or appraised value, whichever is lower. That means you would only need ½% of your own funds to purchase a home!

Are you eligible for 100% financing through VA? Searching for properties in an area eligible for 100% USDA financing? You can use the CHDAP program for closing costs, too!

As with all loan products, the CHDAP program has guidelines. Give me a call at (916) 849-9200 to see if you qualify!

With home prices and interest rates at record lows, this dowpayment assistance program adds one more reason why now is a great time to buy a home!

For more information on CHDAP, FHA, VA, Conventional, Jumbo and USDA loans on properties anywhere in California, give me a call at (916) 849-9200!

“No Closing Costs” Loan? Think Again.

I recently had two clients opt to use an online lender rather than me for their financing. The reason? They believed they were going to get a VERY low interest rate AND pay “no closing costs”. That’s right. Gonna buy a home with nothing more out of pocket than the down payment!

I explain to clients that, with extremely rare exceptions, the only way to avoid or minimize closing costs is through the lender credit associated with the interest rate. The higher the rate, the higher the borrower’s credit for closing costs.

Face it—the title company doesn’t work for free. Impounds must be prepaid. The hazard insurer doesn’t give away free policies. These costs must be paid, either directly by the consumer at closing or via a lender credit associated with the rate.

So where are home buyers getting the idea that they can buy a home bringing in only the amount of the down payment while getting an extremely low interest rate?

Let’s look at CashCall as an example. As of today, their Web site reads:

Today's Advertised Special - "No Closing Costs"

3.99% / 3.99% APR

Today's low 30 year fixed rate as of 01-06-12

Apply Online or Call Now!

Click for loan assumptions Click for No Closing Costs disclosures

Great rate! And no closing costs!

But notice there’s a link to closing costs disclosures. The disclosures say:

'No Closing Costs' loans

The following Fees are covered on a 'No Closing Costs' loan.

On purchase transactions the 'No Closing Costs' option covers the cost of the appraisal fee, credit report fee, flood certification fee and tax service fee. The borrower is responsible for paying all title fees, escrow/closing fees, notary/signing fees, prepaid interest, property taxes, state mortgage taxes, insurance, mortgage insurance and recording fees.

Uh-oh. Looks like you are paying closing costs after all!

But there is more in those disclosures:

Please note that for the 30 Year No Closing Costs 3.99% and 10 Year No Closing Costs 2.99% advertised rate specials, the following pricing adjustments apply: Loan amounts from $300k to $417k priced as shown. Loan Amounts $250k-$299,900 add .135 to rate. Loan Amounts $200k - $249,900 add .26 to rate. Loan Amounts $150k to $199,900 add .385 to rate.

So, unless you are financing $300,000 or more, you aren’t getting the advertised 3.99% rate.

The lesson here is not to trust your largest financial transaction to a person working in a Web site’s call center. Find a reputable person in your state who can be reached during and after business hours by cell phone. They will provide you a no fine print rate quote customized to your specific financial situation.

What It REALLY Costs to Get a Mortgage

Recently, I have had a few clients be shocked at closing cost quotes I have given them. On each, I went back and checked my numbers very carefully and, yes, the quotes were right! The client just didn’t realize that there were many costs associated with a home purchase!

No one wants any unpleasant surprises that involve money! So, here is some information on closing costs to help you better prepare for a home purchase.

In addition to a down payment, home buyers should anticipate these possible costs:

Home Inspection

An inspector will review the mechanical, electrical, and structural aspects of your home then provide a written report.

Condominium/Home Owners Association-related Fees

These may be required if you purchase a home in a condominium complex.

Well and/or Septic Certifications

If the property has either of these systems, a buyer will want professional testing to ensure they function properly.

Pest Inspection

A qualified professional inspects the property, looking for termites and other pests and pest damage then submits a report.

These costs are common in a purchase transaction:

Credit Report

This fee covers the cost of a three bureau credit report which shows each borrowers’ credit history. The borrowers will be provided a copy of their credit report.

Appraisal

An appraisal is a professional opinion about the value of your home, prepared for the lender. The appraisal is usually paid for up-front by the borrower. And, in a few cases, more than one appraisal may be required. Buyers receive a copy of the appraisal.

Title and Escrow services, such as title search and insurance, so buyer and lender are sure that no one else has any lien, claim, or encumbrance on the property; recording the Deed and mortgage with the County Recorder; Notary for signing services; and, preparing documents necessary to close a real estate transaction.

Lender’s Origination Services

For services involved in the creation of a mortgage loan, such as loan processing and the underwriting of the loan.

Property Taxes

Payable to the County. The amount collected depends upon the month of the year the property sale closes.

Insurance

Lenders typically require the first year of fire and hazard insurance be paid up front. Flood insurance will be required if the house is in a flood hazard area.

Impounds (also call Reserves)

Prepayments of funds, held in an account, to cover annual charges for homeowner’s insurance and property taxes which will be paid by the lender on the borrower’s behalf. Sums will be added to the impound account each month from the monthly mortgage payment.

Prorated Mortgage Interest

Depending upon the time of month a loan closes, this per diem charge may vary from a full month’s interest to a few days interest. Future interest payments will be made through the monthly loan payment.

Supplemental Property Taxes

The buyer will be billed by the County for these, by mail, after the sale closes. Supplemental taxes that are assessed due to a change in ownership.

The amount of closing costs varies, depending upon the amount of the mortgage and type of loan (i. e., VA, FHA, USDA or Conventional). A mortgage professional can provide an estimate of costs when a potential buyer completes the prequalification process.

What if you don’t have enough money for closing costs? Consider a gift from a family member or participating in a down payment assistance program.

Related Posts:

Shopping for a Hazard Insurance Policy

A Lesson about Hazard Insurance in California

Making Sure Your Cash to Close Comes from the Proper Source

Help for California Homeowners with Financial Hardships

If you are a homeowner experiencing financial hardship, the California Housing Finance Authority (CalHFA) might be able to help!

CalHFA has a mortgage assistance program called “Keep Your Home California”, a federally funded initiative for low- and moderate-income homeowners who are delinquent or facing default on their primary residence. The program has four components:

Unemployment Mortgage Assistance*

For homeowners receiving California EDD Unemployment, mortgage payment assistance up to $3,000 per month for up to nine months.

Mortgage Reinstatement Assistance*

One time payment of up to $20,000 for principal, interest, taxes, insurance and HOA dues for those who have fallen behind on their first mortgage.

Principal Reduction*

Funds to be matched, dollar for dollar, by the loan servicer (the company to which the monthly payment is made each month) for loan principal reduction. (For mortgages originated before 1/1/09)

Transition Assistance*

One time funds up to $5,000 for homeowners involved in a short sale or deed in lieu of foreclosure.

CHASE Hosts Ontario Event for Mortgage Customers Needing Assistance, November 17-19

For a non-hardship refinance, please call me at (916) 849-9200.