Have You Budgeted for Closing Costs?

Have You Budgeted for Closing Costs?

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,...
Fannie Mae’s Home Ready Mortgage for Orange County Home Buyers

Fannie Mae’s Home Ready Mortgage for Orange County Home Buyers

HomeReady is the newest home loan program offering from Fannie Mae and can save Orange County home buyers money. It’s designed to provide financing to creditworthy lower income borrowers in minority and low-income neighborhoods. It provides several benefits to borrowers like a reduced down payment, lower Loan Level Pricing Adjustments (LLPA’s), and reduced monthly Private Mortgage Insurance (PMI) premiums. Loans made through HomeReady can also be potentially refinanced up to 97% of the loan value. Eligibility for the HomeReady Loan Program There are some basic eligibility requirements for the HomeReady program,  but for those that are eligible  HomeReady offers quite a bit of  flexibility in getting your loan application approved. HomeReady does not allow the borrower to own another home at the time of the new loan, but not require the borrower to be a first time buyer. That’s right, this program not not restricted to only first time buyers. An online Home Buyer Education course is required to be completed prior to closing.   One of the coolest things about the HomeReady program is that it allows unconventional ways to establish a credit history. So for an Orange County home buyer with limited to no credit, providing alternative credit ( for example submitting proof of making a utility bill on time for 12 months) can be used in place of not having credit on the credit report. HomeReady also allows for the pooling of income from family members to help qualify the loan. Income limits still need to be met. Down Payment Requirement for HomeReady Home Loan Program The down payment requirement with HomeReady is lower compared to...
Why the FHA Loan is Not Just for First Time Home Buyers in Orange County, CA

Why the FHA Loan is Not Just for First Time Home Buyers in Orange County, CA

In Orange county, the FHA loan program is extremely popular amongst first time homebuyers compared to other mortgage programs. What many Orange County home buyers don’t always realize is that the FHA program can be the best home financing option for move up home buyers as well. Reasons for this include flexibility in underwriting guidelines, credit, and down payment. When is FHA Better Than Conventional Financing? FHA allows for approved lenders to provide loans with very low down payments to borrowers with less than perfect credit scores. The minimum down payment required is 3.5% of the loan amount and can be provided to borrowers with a credit score as low as 580. The FHA loan limit in Orange County in 2016 is $625,500. This means an Orange County home buyer can use FHA financing to buy a home up to $648,000 with only 3.5% down, which is better than any other Conventional loan program. The only program better than that is VA. (You would need to be a qualified active or retired military Veteran). The FHA program also has many other beneficial aspects for potential borrowers. Interest rates with an FHA loan are much lower than a majority of other programs. FHA also allows the down payment to be a gift from a source like a family member or charity. Because interest rates and loan pricing tends to be better with FHA than Conventional loans, it is easier for Orange County FHA lenders to cover the  closing costs using a lender credit (which involves increasing the interest rate). If a borrower were to experience an extreme financial hardship, FHA...