Wanna Buy A House?

Oops, Sorry.

2005-12-12T14:23:00.000-08:00

Tried posting a couple of posts last week, and apparently they didn't get through. Working on rewriting and reposting them today & tomorrow.

Costa Mesa Program Update

2005-11-18T13:51:00.000-08:00

Wow, a lot of interest in the Costa Mesa Program! We attended the two homebuyers seminars and there are a lot of first-time homebuyers in Costa Mesa. So for the lack of posts, but we have been spending a lot of our time answering questions one on one recently. Do check with the city for a list of approved lendors before you begin working with one. I have already heard of at least two instances of lenders claiming to be on the approved list and not actually being approved. Protect yourself! Get an updated list from the city before you speak to a lender.

I'd like to touch on some of the specific issues we've seen lately, but for ease of searching they'll be in separate posts. Check back soon.

Out Sick....

2005-11-03T21:08:00.000-08:00

Sorry for the lapse. Between getting sick (both of us) and trying to catch up on the work we missed while sick, there wasn't any time for writing. But, we're feeling better, and have a couple of drafts in the works. Look for new posts on Monday.

Have a great weekend!

You wanna buy a house...but what can you afford?

2005-10-17T22:35:00.000-07:00

Unless you have enough cash to plunk down and buy a house outright, you will need a home loan. A home loan is commonly referred to as a "mortgage," but as you can see in our "What is a Mortgage" post, this is not accurate. For clarity's sake, when we refer to a mortgage, we mean the legal document, not a loan.

So, you need a home loan to buy a house, but you have no idea where to begin. Well, we're here to help you out with that. Lenders generally look at the following when they pre-qualify you for a home loan:

- Credit
- Income
- Assets

That's it. Not too difficult, right? The hard part comes in trying to understand what the information means to the lender, and how your particular situation may or may not fit into the loan program options available.

When a lender says, "Have you been pre-qualified?" what he/she means is, "Has someone analyzed your credit, income, and asset situation to see if we can qualify you for the home loan you want or need?" A pre-qualification is a cursory glance at your total financial picture by an experienced loan officer. This will allow him/her to give you a preliminary, "Yes, we can help you," or a "We're going to need to adjust some things before we can move forward with a purchase."

Most pre-qualifications are free. If the loan officer you are talking to wants to charge you for the pre-qualification, take your business elsewhere. Any decent loan officer will not charge for the initial consultation, or the initial legwork, except for maybe a credit report fee.

When you get pre-qualified, ask for a good faith estimate, which provides you with an itemized breakdown of all the fees that will be included in your loan. In addition to the GFE, you should ask for a TIL - truth in lending disclosure - as this will provide you with your APR, (more about this later).

You wanna buy a house...but where do you start?

2005-10-17T22:14:00.000-07:00

Most people who want to buy a house want to start looking right away. After all, shopping is the fun part! But if your Realtor® is worth his/her weight, he/she will most likely steer you toward a trustworthy lender. The reason for this is to mitigate dissappointment and wasted time.

If you begin to shop, and fall in love with a house that you cannot afford, you will have wasted not only your time, but your Realtor's® time, as well. On the other hand, if you start off your home search on the correct foot, and understand the costs involved, the chances that you will stretch yourself to a point of financial suicide will be greatly reduced.

So, you can begin by speaking to a Realtor®. But it is in your best interest to find a reputable lender as soon as possible. If you don't know where to begin to find a competent lender that you can trust and work well with, then find a Realtor® that you trust, first, and see if his/her recommendations for a lender work for you.

New First Time Home-Buyer Program: Costa Mesa, CA

2005-10-17T13:28:00.000-07:00

First off:
To be eligible for aid, you must attend one of two information sessions.
1) Thursday, November 3 @ 11am Costa Mesa City Hall, Council Chambers

-OR-

2) Monday, November 7 @ 6:30pm Costa Mesa City Hall, Council Chambers

The Costa Mesa City Hall Council Chambers are located at 77 Fair Drive. (Link takes you to Mapquest.)

We attended the lender training for Costa Mesa's first time home-buyer program on Friday. A fascinating program, it opens up a lot of opportunities to new buyers. The funding is limited this year, but this is also the first year they have had a program offering this much aid. They are offering up to $240,000 in assistance on home purchases up to $655,000 through a 0% interest 45 year silent second loan/equity share.

Program Information is located here.

Not everyone will be able to qualify, but the program is a huge boon to those who will qualify. I encourage anyone who is remotely curious to please attend the information sessions.

Some key things to keep in mind:

A silent second. This is a loan that you do not have to make payments on until a specific date, or until you disturb your first loan by refinancing or paying it off. Some programs offer zero or limited interest until the second is paid off. These sorts of programs are typically government aid programs that allow new buyers to qualify for a higher purchase price. (because the monthly payment required is greatly reduced)

Equity Share. In a typical loan, the bank owns a specific dollar amount of the home until it is paid off. In an equity share, the bank owns a percentage of your home. Example: You buy a home for $500,000, using $200,000 in city aid. If you sell your home before the end of the term, in addition to paying back the city the $200,000, you must pay them their percentage of the growth in value.

So, $200,000 on a $500,000 home purchase is 40%. Let's say the home doubles in value to $1,000,000. When you sell the home, you owe the city their 40%, not just $200,000. Thus you'll pay them $400,000. The benefit to the city is that it encourages people to stay and build their lives in the city. Or, if you sell early, the extra funds help to provide assistance to new buyers.

Feel free to email us your questions, or post them in the comments. If we can't answer your question, we'll direct you to the best source for more information.

What is a Mortgage?

2005-10-16T20:33:00.000-07:00

Whenever you borrow money to purchase a home, the bank legally has ownership of the home until the loan is paid-off. A mortgage or trust deed is the document that defines the terms of your possession of the home while the bank has ownership of it. The difference between a mortgage and a trust deed lies in how the bank is allowed to foreclose, or take back the property, if you fail to make your loan payments.

A mortgage requires what is called a judicial foreclosure. A judicial foreclosure requires the bank to make a public statement of its intent to foreclose, followed by a court order granting them authority to sell the property at a sheriff’s sale. There is no minimum amount of time that must elapse between the public notice and the sheriff’s sale, however, this whole procedure usually takes from several weeks to several months.

A trust deed does not require any court involvement in its foreclosure, and therefore authorizes a non-judicial foreclosure. A non-judicial foreclosure requires the bank to make a public statement of its intent to foreclose followed by a trustee sale, no less than 20-days after the public statement. Because the courts are not involved, the trustee sales typically do occur within one month of the public statement.

Are you in a state that generally uses a mortgage or a deed of trust? See below for a list:

Mortgage States

Alabama
Connecticut
Delaware
Florida
Georgia
Hawaii
Illinois
Indiana
Iowa
Kansas
Kentucky
Maine
Massachusetts
Michigan
Minnesota
New Hampshire
New Jersey
New Mexico
New York
North Dakota
Ohio
Oklahoma
Pennsylvania
Rhode Island
South Carolina
South Dakota
Vermont
Wisconsin
Wyoming

Deed of Trust States

Alaska
Arizona
Arkansas
California
Colorado
Idaho
Maryland
Mississippi
Missouri
Montana
Nebraska
Nevada
North Carolina
Oregon
Tennessee
Texas
Utah
Virginia
Washington
Washington, D.C.
West Virginia

Update: corrected the verbage re: non-judicial foreclosures.

Grand Opening

2005-10-13T10:49:00.000-07:00

Welcome! Today is the official first day for Wanna Buy A House, the home ownership blog. We've already got a couple of posts waiting for you. Especially important is the "About This Blog" link on the top of the sidebar. Please read that first. It will tell you a little more about us and why we decided to venture into the blogosphere.

We are here to answer your questions, so we encourage you to post comments (see here for our comment policy) or email us about any aspect of home mortgages that you may not understand. We will make every effort to dig up the latest and most accurate information, and get back to you quickly. Above all, we want you to enjoy your time here and leave with a better grasp on the anatomy of a home loan.

Happy home-buying!

First Time Home-Buyer Programs

2005-10-10T13:00:00.000-07:00

I was reminded after the last post that Lenders Who Care is a great resource for tracking down information on first time home-buyers' and/or down payment assistance programs. The link takes you directly to the list of programs by state. The list is not exhaustive, but it does give you a great place to start.

Lenders Who Care is a non-profit trade organization dedicated to educating and assisting first time home-buyers. Their members are commited to advancing affordable housing programs at the local, state and national levels. The site is updated as members update the programs that they, personally, can work with, so check back for the latest information.

(You can find Lenders Who Care in the sidebar, under "Links", also.)

California Affordability Hits 16 Year Low

2005-10-06T23:44:00.000-07:00

I spotted this story here first, but it is showing up on several news sites now. (hat tip: Google News)

The minimum household income needed to purchase a median-priced home at $568,890 in California in August was $133,800, based on an average effective mortgage interest rate of 5.87 percent and assuming a 20 percent downpayment. The minimum household income needed to purchase a median-priced home was up from $110,980 in August 2004, when the median price of a home was $473,520 and the prevailing interest rate was 5.83 percent.

Only 14% of California households are estimated to be able to afford to buy a home. That's a 2% drop from July of this year. With interest rates creeping up, buying a home is trickier. When you go to meet with a loan officer, keep these things in mind:

Your credit score can really hurt you. You may not be able to qualify for a loan large enough to buy your home. Or if your credit score is blemished, you may need to develop a plan to clean it up before you can qualify for a loan. A good loan officer should be able to help you indentify the items on your credit that are hurting you the most. Make a concerted effort to clean up your credit and you will see a marked improvement in your score.

Be aware of the availability of interest-only loans, or loans that offer an interest-only payment option. They will qualify you for a higher loan amount. But they require a high amount of discipline on the borrower's part to pay down the principle balance. Your monthly payment will not include any of your debt, merely the cost of maintaining it. Interest-only loans are great for a lot of situations. Make sure it is the best fit for you before you commit to one.

Are you a first-time home buyer? Many cities, counties and states have special assistance for new buyers. Search online in your region for available programs and particpating lenders. They will be able to tell you if you meet the criteria for the different programs.

Lastly, be prepared to NOT buy, at least for now. You want to own your house, not vice-versa. When you talk to a mortgage broker, if you can't afford what you want now, ask for information on improving your credit. It could make a huge difference in your buying potential.

Welcome to Wanna Buy a House: the home-ownership blog!

2005-10-05T20:41:00.000-07:00

How this blog came to be:
The two of us have a combined experience of over 4 years in the mortgage industry. So, we, like most industry insiders, took it for granted that our knowledge of how mortgages work and the process of buying a house was something that many others shared. But, after discussing home financing with friends, we realized that much of what we had come to easily understand they viewed as complex and confusing. We recognized that answers to such queries as, "How do adjustable rate mortgages work?", "What is a “point”?", and "How can letting an overdue credit card payment that turns into a collection affect my ability to buy a home?" among others, are what people both want and need.

So, we decided to hit the internet to guage the amount of education that was available online. We attempted to search for a centralized collection of mortgage and homebuying-related information, but every search result delivered far less than promised. Thus, this blog was born. We hope to answer any and all questions you may have about home loans and the home buying process, both for general knowledge, and to help you better prepare to purchase a home of your own. Whether you own a home and are looking to better understand how your loan works, or if you are simply tired of renting and are looking to start building equity in a property of your own, we are here to help you in any way we can.

What do you wanna know?
Do you have a question? Ask us! We are more than happy to respond to your e-mails. So, you heard that The Fed raised interest rates, and want to know what impact that may have. We constantly monitor the bond market (it’s a key part of our job), and we will be providing summaries of major happenings in the lending world. Timely information is important, but so are the basics. Maybe you know nothing about how loans work. Read this blog for such topics as explanations regarding adjustable rate mortgages (ARMs), the histories of the various indices that rates are based on, insights into how the various Option ARMs work, and others.

Who are we to talk? We are loan officers - residential mortgage consultants - in southern California, working for a nationally licensed, publicly-traded mortgage firm. We have over four years of combined experience in the mortgage industry, including operations, sales, funding, and escrow experience, so we can speak with confidence on any aspect of a loan, from how it is marketed, to how it is underwritten. We live and work in Orange County, and a majority of what we discuss will be geared toward this region, but most of the general information will educate you regardless of where you live.

What won’t we talk about?
~ Your personal information. No exceptions. If you have questions related specifically to your situation, we’d love to answer them, but not on the blog. Our position in the financial world makes us keenly aware of the hazards of identity theft and just plain old fraud. All scenarios discussed on the blog will be purely hypothetical. E-mail us if you have specific questions.

~ Specific lenders. Our only exception: Every now and then, one leaps ahead of the pack and offers a unique program that no one else has. Our discussions that may mention a specific company will be merely pro vs. con comparisons and are not to be taken as specific endorsements. We will not tell you who to work with or what program to use.

How can you join the discussion? E-mail us or post questions in the comment section of a post. Comments are always welcome, but off-topic comments, advertisements for any business, profane and offensive content, and any information we deem unwise to make public will be deleted at our sole discretion, for your protection and ours. All personal information submitted to us will be held in the strictest of confidence and protected to the best of our abilities. Topics we receive in e-mails that we feel would be beneficial for the community at large to be informed of may become future posts.

Disclaimer: Any interest rates listed on this site are for comparison purposes only, and are not a promise to lend. A mortgage is a very personal thing and each person’s situation is unique, as are the solutions to one’s situation. All advice given on this blog is done only in a general sense. You should consult a licensed mortgage or real estate broker, whom you trust, regarding what the right solution is for you.

Lastly... Should you desire, we would be happy to examine your specific scenario. E-mail us for more information. We’d love to speak with you directly and see what works best for you. After all, we are here to help when you Wanna Buy a House.