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...
