Buying a Home in California
Ready to make a home purchase in California? Here is some vital information you may want to know before applying for financing.
California Housing Market Stats
In California, the monthly average 30-year fixed mortgage rate reached 5% for the first time since April 2010, resulting in the lowest level of sales since June 2020 and the greatest year-over-year fall in 5 months, according to C.A.R.
However, California’s median home price increased to a new all-time high of $898,980 in May 2022, exceeding the previous record of $884,890 set in April and breaking the $800,000 barrier for the third time in six months.
Despite the mortgage rates and home prices being high, homes are still flying off the shelves in record time. The median number of days required to sell a single-family home in California was 9 days in May 2022, two days less than May 2021. So, California is still a seller’s market.
Once you know your home buying budget and you’ve decided what type of home loan will work for you, it’s now time to get your loan Pre-Approved.
Pulling together all the documents for a Pre-Approval can be time-consuming. But what you’ll get will be worth it. Along with the Pre-Approval Letter stating how much the lender is willing to lend you, you’ll also get a good idea of the interest rate, fees, and other costs associated with buying.
A Pre-Approval letter also shows sellers and real estate agents that you are a serious buyer who can get financing, which can give you a crucial edge over competing home shoppers. And no, it’s not the same as being Pre-Qualified, that’s just a rough estimate of what the lender might let you borrow.
Top 5 Tips For Home Buyers
Don’t Skip the Pre-Approval
Get a mortgage Pre-Approval before you begin comparing properties.
Don’t Apply For Any New Credit
If you apply for new credit it could affect your credit score.
Save as Much as you Can
Buying a home requires cash for the down payment, closing costs, moving expense, new furniture, and fixtures.
Ask if the Seller is Willing to Contribute to the Cost of the Home
You can increase the purchase price by the same amount if you have to. But at least you will reduce your out of pocket costs.
Understand Your Loan Options
The type of loan you choose will determine your down payment amount, what type of home you can buy, and more. Work with a mortgage company that will find the right product to suit you!
- Let us get you Pre-Approved and on your way to home ownership!
The 3 Most Important Aspects of Buying a Home
Buying a property to occupy or as an investment property can be exciting. There are some general factors to keep in mind when shopping for a loan product.
1. Choose a Loan Type:
If you are buying the property for yourself or your family there are many options to choose from:
These kinds of loans are for a primary residence, and 1 – 4 unit properties. They have some of the lowest down payment programs.
They require more for a down payment compared to an FHA loan. But if you can put at least 20% of the purchase price down then you would not need mortgage insurance. So that is a good threshold to shoot for.
You would need at least 10% down but these types of programs can be more flexible for credit and income documents. Although they can be more expensive in rates and fees than Conventional Loans.
This program allows you to buy a home for yourself with no down payment but there are some eligibility requirements.
2. Credit Scores:
- 500 – This is what is typically referred to as, Non-prime, and would likely require a 35% down payment, and would be offered at a higher-than-normal interest rate.
- 600 – This score opens the door to GSE-type loans like FHA and VA loans.
- 620 – This is usually the score needed to get a Fannie, Freddie Mac-type loan.
If you are purchasing the property for investment purposes, underwriting guidelines for Credit Scores are not as formulated, but factor into the investor’s analysis of the property and the terms they are willing to offer.
If you are purchasing a home for yourself then you must show your ability to repay your loan. That is typically based on a 43% Debt-to-Income Ratio. There are some products that will go as high as a 50% Debt-to-Income Ratio.
Complete a quick loan inquiry, and we can help you determine how much home you can afford.
Why Buying a home is worth it?
What are the steps to buying a home?
1. Be Mentally Ready
You know when you are ready to buy a home or not. Whether you are sick of paying rent and want to jump on the appreciation train? Or you need to buy up, or scale down. Yeah, it can be scary, but get informed, organized, and most importantly, get started! You got this!
2. Get Pre-Qualified
This is a quick way to figure out if buying a home is practical. This can be done by a mortgage professional and takes very little time. You can just give them your information and within a few minutes you will know if it makes sense. They will want to know:
- You are employed or self employed
- How much you make
- If you have been employed for two or more years
- How much you have for the down payment
- What your credit score is
- What is the purchase price that you have in mind
3. Get Pre-Approved
This is where you complete an application and provide your documentation. This is can be done by a mortgage professional, and takes a bit more time for them and you. But it’s a crucial next step. So they will ask you to provide:
♦ Income documentation:
Two years income taxes or 12 months bank statements if you are self employed. A year to date paystub and last two years W2s if you are employed.
3 months bank statements to show the assets you have for the downpayment, and closing costs.
You may know your credit score, but they will need to run your credit. They will get a detailed credit history from three credit repositories, and it’s the score that the lender would use to approved or decline your application. So it’s important.
4. Go shopping for a house
This is the fun part! Armed with information and a Pre-Approval tucked under your arm, off you go! If it’s just web surfing your favorite website, or driving around with your local Realtor, take a look and see what your pre-approval says you can afford.
5. Make sure the property is acceptable for your financing before you buy.
Once you have your property in mind, let your mortgage professional know. They will want to factor in a number of things like:
♦ Is there is a Home Owners Association Fee and will you still qualify with that additional fee.
♦ If the property is in rough shape then it may not qualify for traditional financing. Or you may need to negotiate or budget for repairs before closing.
♦ If the property is too rural and you are buying it as an investment property, then the financing you had in mind may not work.
What age should you buy a house?
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Your financial journey starts today
Let us help you get there.