Patty Manzi's Tri-Valley Real Estate Blog

I talk to lots of people about buying homes.  Not long ago I was talking to a newlywed couple and they mentioned they wanted to buy a house and they were saving for a down-payment.  I then asked them what else they were doing to prepare for the home purchase.  They looked at me with a most quizzical expression and asked “What do you mean”? 

While a down-payment is a necessity, it takes much more than a down-payment to buy a home.  Buying the home is the goal and to accomplish this goal you must have an ‘Action Plan’ to get there!  What do I mean by action plan?  I mean there are many steps that must be taken along the way prior to the home purchase.  For example:

• Do you know what your credit score is?  This is an important factor in obtaining a loan.   You must have a minimum credit score to qualify for a loan.  Your credit score is based on your payment history (on time & delinquent) and how much debt you have. 
• Have you seen a copy of your credit report? This is very important.  You can download a free copy of your credit report every year from each of the three credit bureaus.  This report contains a list of your creditors, balances, payment history, and personal information.  It is a good idea to get this report and verify that the information is correct.  There could be outdated or incorrect information on your report that negatively affects your credit score.  You can contact the credit bureau directly to dispute or correct information.  This may take some time so factor that into your timeline of your action plan.
• Have you spoken with a lender about how much house you can afford now? Another very important step.  A lender will meet with you and get a picture of what your financial status is and advise you of where you need to be prior to purchasing a home.  The lender can also advise you of what documentation will be required to qualify for a loan (pay stubs, tax returns, employment verifications, etc.)
• Have you educated yourself about down-payment assistance programs that might be available to you? Your lender can assist you with this information.  There is also a great organization called the Tri-Valley Housing Opportunities Center.  The Tri-Valley Housing Opportunity Center  (TVHOC) provides home-buyer pre and post purchase education, income and asset development education, information regarding private sector lender programs, and funding sources – helping match those in need with programs and services that benefit them most.

After performing these tasks, you may find out that you may have some financial work to do before you can buy a home, and you can establish a time line (action plan) for accomplishing this goal.  Or you may find out that you are financially ready right now.  Either way it is worth the effort to be educated, informed, and prepared.

I was asked the other day about why someone would need to get ‘pre-approved’ for a loan before looking for a home.  Here’s why:

If you are serious about buying a home, your next step is to get a ‘pre-approval’ from a reputable Lender.  By doing this before looking at homes, you’ll save yourself time, energy, and frustration. 

The pre-approval will:

• Determine how much home you can afford:  Helps you avoid buying less home than you can afford, or being disappointed if you don’t qualify for as much as you had hoped.
• Shows what your total investment will be: You’ll know approximately how much money you’ll need for your down payment and closing costs.
• Lets you know what your monthly payment will be: You’ll have a very close estimate of what your monthly principal, interest, taxes, and insurance (PITI) will be.
• Identifies the loan programs you can qualify for:  With a wide variety of loan programs available, it is important to know which types you qualify for and which will best suit your needs.
• Strengthens your offer: Sellers may be more inclined to accept realistic offers when they know that you are serious and have taken the time to be interviewed by a lender and are pre-approved for a loan.

When you are pre-approved by a Lender, you’ll receive a Pre-Approval letter to give to your Realtor®.  This letter should state that the Lender has checked your credit, your credit score, verified your income and employment history, and your monthly debts and obligations.

Choosing Your Lender

When you buy a home, one of your primary concerns will be finding a lender who can provide the financing YOU need.  So how should you shop for a Lender?  Most real estate agents have a network of reputable professionals they can refer you to.  Calling around and asking for interest rate quotes is NOT always the best way to select a Lender.

Competitive rates are important, but when you consider the fact that most Lenders get their money from the same sources (and therefore have essentially the same rates to offer), you must look at some other factors before choosing a Lender.  You need a Lender who works with you and your real estate agent as a team and has the same goal – to get your loan approved and closed in a timely and professional manner. 

Meeting With the Lender

When you meet with the Lender you choose, be prepared to provide the following information:

1. Your residence history
2. Your employment history & income
3. All outstanding debts, loans, credit cards
4. All bank accounts – savings, checking, and investment accounts
5. Real estate you currently own
6. Personal property you own

Remember finding a Lender you can trust is just as important as finding an experienced Realtor®.  You want to make sure that your needs are going to be met professionally and represented throughout the entire process of buying your home.  Ask for, and check references.

The year is half-over, but its not too late to  remind you that each year you are eligible to receive a FREE copy of your consumer credit report from each of the three major credit bureaus.  TransUnion, Experian, and Equifax will provide these to you at NO CHARGE. 

Go to www.AnnualCreditReport.com to obtain your FREE reports.  There is no credit card information required on this site to obtain your reports.  (There are other sites out there that say they are free, but they will ask for credit card information before giving you access to your information.)

All sites will offer access to Credit Scores and there is usually a fee for that report.  It may be worth the cost to keep an eye on your credit score, especially if you are planning on buying a home in the near future.  Also if you are trying to repair credit problems, you can periodically check your score to determine how your score is improving over time.

You will have the opportunity to download your report from all three credit bureau reports at once, or you can download one (of your choice), and revisit the site at a later time to download another.  Some credit professionals suggest downloading one every 4 months to keep an eye on changes throughout the year.  Whichever method you choose, this is a valuable tool!

In some cases, if the system is unable to identify you online, you may be required to order your report via phone or mail.  If this happens to you, simply follow the online instructions for obtaining the phone number, or the appropriate form to download and mail.  You will receive your credit report in the mail usually within 2 weeks.

You can also download forms to correct errors, dispute incorrect information, and/or remove outdated information. 

Hope you found this information useful!

On June 8th, CalHFA reinstated the California Homebuyer’s Downpayment Assistance Program (CHDAP).

CHDAP provides down payment or closing cost assistance to qualified borrowers in the form of a deferred payment junior loan up to 3% of the sales price or appraised value of the home, whichever is less.   Borrower’s qualification include, but not limited to the following; 1) borrower contribution minimum of 3% cash from their own funds (IRA, 401K, cash in bank), 2) homebuyer education counseling. 
 
See below how CHDAP can help you close more loans with CalHFA…….
 
CHDAP may be combined with any of the following CalHFA first mortgages:

• Cal30 Conventional Mortgage Program
• Community Stabilization Home Loan Program (CSHLP) 
• SMART Loan Program

CHDAP may also be layered with other CalHFA down payment assistance:

• Affordable Housing Partnership Program (AHPP)

CHDAP, a program financed through voter-approved Propositions 46 and 1C, has been the most successful down payment assistance program in CalHFA’s history, providing more than 31,000 California families with assistance to buy their first home and getting a first mortgage.

For  www.calhfa.ca.gov and see Program Descriptions for details
 

CALIFORNIA HOUSING FINANCE AGENCY

Loan Modification Program kicks in: On Monday (12/15), the Streamlined Loan Modification Program (SLMP) policies regarding loan modifications and foreclosure prevention became effective. The new policies apply to mortgages held by Fannie Mae, Freddie Mac and privately-held securities.

According to the Federal Housing Finance Agency eligible borrowers must meet the following criteria:

• They must be owner-occupants;
• They have missed three or more payments;
• Have not filed bankruptcy;
• Have experienced a hardship or change in financial circumstances, and
• Have not purposely defaulted to obtain a modification.

You can get more detailed information at www.hopenow.com, orwww.hud.gov/foreclosures.