Long Beach, CA. We wanted to share information about how buyers finance in today's marketplace. Below is a lot of information for your review. Our job is answer questions and help guide you for the best decision.
As we know, the $8,000 federal tax credit for first time buyer's drove the marketplace the past several months to where it is primarily a seller's market for entry level home prices Six months ago, it was a buyer's market. To qualify for this rebate you wlll have to fill out IRS form 5405 that when you file with your 2009 federal taxes determining the amount and eligibility of this important tax credit. Please review with your tax preparer.
The State of CA through CalHFA has down payment/closing cost assistance available based on household income. A first time buyer (someone who has not owned property in three years) is eligible for 3% of the sales price for down payment and/or closing costs assistance. Please visit www.calhfa.ca.gov where you may become more familiar with their programs. Currently, 1st mortgages from CalHFA are difficult to acquire due to lack of product. As a result, buyers will get a standard FHA or a FHA Energy Efficiency Mortgage and combine it with a CalHFA CHDAP 2nd mortgage (3% of the sales price) for closing cost assistance. The CHDAP is a silent second mortgage with no payments and a 3.25% interest rate as long as you live; do not refinance; or sell the property. The buyer makes the traditional 3.5% FHA down payment.
Cities have down payment assistance programs based on income and property sales prices. The income limits are often mirrored by the income limits we see with CalHFA. Also, cites have these programs based on specific properties too. This allows the buyer an opportunity to purchase a home that otherwise would not exist.
FHA has three standard popular programs available for buyers.
1. The standard FHA 1st mortgage has only a 3.5% down payment requirement. Two years ago less than 10% of all owner occupied purchases utiilized FHA. Now, more than 75% of the same purchases use FHA financing and the percentage grows as conventional financing is more restrictive and difficult to get.
2.The FHA Energy Efficiency Mortgage allows up a buyer to finance energy efficient improvements (i.e. windows, doors, hot water heater, dishwasher, insulation, heating/air conditioning). The amount of money is based on the sales price (generally 5% of the sales price may be available for improvements). This was increased from a previous limit of $8,000 just a few weeks ago!
3. The FHA 203(k) Streamline allows a buyer to finance improvements and non structural repairs (flooring, paint, kitchen and bathroom fixtures/cabinets, appliances, pool equipment). The maximum amount is $35,000. Please see the attached HUD document outlining this valuable program.
Given the condition of many properties, the FHA 203(k) Streamline is more and more popular. I have personally provided this mortgage and have a couple in escrows right now with more buyers out shopping using this financing. The FHA Energy Efficiency Mortgage may be combined with the FHA 203(k) Streamline for maximum financing. The repairs/upgrades require use of a licensed general contractor and allow the normal close of escrow. A buyer of mine in San Diego bought a duplex with a pool that was bank owned for $340,000. We financed $43,000 (using 203(k) and Energy Efficiency combined) for the repairs/upgrades. The bottom line is the improved property value exceeded $400,000! The client made money day one! The beauty is ONE 30 year fixed payment!
One important aspect of FHA is the FHA Sreamline Refinance programs the home owner may utilize if interest rates decline after the home is purchased. This important refinance allows the buyer to refinance with a benefit to the buyer (lower home payment) without the cost of an appraisal; without declaration of income and assets! This simplified refinance right now is being/has been utilized by home owners who utilized FHA last year. Many are financing 6% plus interest rates into interest rates in the middle 5% range with the issue of an appraisal!
There are teacher and veteran programs available. The VA financing allows 100% financing. The CALSTRS financing for those who work for a public school system allows an 80% 1st mortgage and a 17% second mortgage with no payments for five years! Plus, there are other specialty finance programs.
About me and Golden Empire Mortgage (GEM). This has been my full time job for more than seventeen years. I work/am available six and one half days a week. Focus, listening, and execution of a game plan is how I operate. My client (you) is the only person I care about in a transaction by law and ethically. It is my job to protect your interests period.
GEM is a direct lender processing, underwriting, loan documenting, and funding the loan in our name. Our underwriters have delegated underwriting authority from numerous banks. What this means is we can approve a mortgage for Bank of America without having to ask B of A for permission to fund the mortgage. Our FHA underwriters are approved by HUD and banks for approving FHA loans. This allows us to look at many of the national lenders on a daily basis for the best rates and programs. For example, Bank of America has been very aggressive with their FHA interest rates. The past few weeks, GMAC (now that they have some issues resolved) has become aggressive too. The bottom line is the client (you) benefit as we seek out the best rates and terms. All of our lending functions are done here in California by Californians. We do not outsource our operations.
Kirk Mulhearn, a Long Beach Real Estate Broker co-manages Prudential California Realty, "The Bixby Knolls Office," and a Net Branch of, GEM Mortgage, a direct lender specializing in FHA, VA, and Conventional financing. Contact him at: 562-989-4608 ext. 110
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