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You could consider a interest only loan for 5 years or 10 years- as you know you are paying on the interest only, and nothing on Principle, but with property being high there - many ppl are in a interest only loan - so they can afford the home - just consider it as paying rent - with the tax advantage of taking off the interest at tax time. When you sell your home, down the road, you will be able to sell it since the property may have gone up.
You could get a 90 percent loan or a 85 percent loan with no MI or even a 100 percent loan, put your money in the bank and draw interest - on your money - and use it toward your home payments if needed (just a idea)...
There are so many loan programs out there, that you need to talk with a Mortage Broker/Lender/ that can underwrite in California.
Other things to consider:
Talk with a broker, a broker underwrites for many company's (I underwrite for 150 companies) so I only have to pull credit 1 time, and they look at my credit. A single lender (not a broker) has programs available, but they may not be able to help you and your situation, so you go elsewhere, and than that person pulls your credit (see what I mean.) If you shop, your credit is pulled and that is considered a soft pull, for a 30 day period. Just like shopping for a auto, it is good for 30 days. If you apply for a credit card, that is considered a "hard" pull and it drags down your credit score. When looking for a home, please do not apply for a credit card, Department Charge Card, Gasoline Card or make any major purchases, like a auto, etc. This will pull your credit down.
Try to find someone (broker) that will pull your credit one time, and submit your loan application to company's that will go off his credit report. By the way, a loan application is called a 1003, and they will issue you a GFE (Good Faith estimate, with-in 3 days, that is per the RESPA laws, and the TIL (Truth in Lending). The GFE will tell you the up-front closing cost associated with your loan. The TIL will tell you the terms, rate associated with your loan. This is a estimate only - not the final - but it does help you figure things out.
There are fixed loans, , interest only loans - adjustable loans, option arms (where you pick the payment, from 4 payments, including interest only). Interest only are lower payments, but nothing is being paid on your home. Some self-employed ppl like the payment options, in a lean month when money is tight., they can pay a lesser amount.
You will get a 1099 INT form, for interest you paid each year at tax time, you can take that off if you go 1040 long form. Sign up for your Mortgage exception and Homestead exception and any other exceptions at your local court house 1 month after you close on your loan. This will LOWER your PROPERTY TAXES. Your Broker should mention it to you, or your closer at the closing.
Cost associated with your loan. You will need to pay for the appraisal up front (when it being done). You will need to pay for The Home Owners Insurance Coverage for at least 6 months (ask your lender), if you are escrowing (where it is added into your mortgage payment, than lenders normally want to see 1 year paid).
The seller can help you with up to 6 percent of closing cost. So the title fee, lender fees, underwriting fees, flood cert, etc can be paid for my the seller. Check your good faith estimate that I mentioned above.
Research on the Internet. Look at the MultipleListing Service to find houses you like in neighborhoods you're eyeing. This will also give you an idea of how much sellers are asking for listed homes.
Start interviewing agents so you'll have a good one when the time comes to start looking. Get referrals and select someone who knows your market and the neighborhoods you prefer. A good agent will notify you as soon as a home that fits your criteria goes on the market and stays on top of the listings on a daily basis and calls you the minute a good match shows up, especially in communities where homes are listed and pending sale in the same week, or even same day.
Pin down the basics, specifically the neighborhoods you like that will accommodate your family's needs, including commute to work, schools, recreation, shopping, and, most importantly, are in a price range you can afford.
Have an open mind. It's easy to start looking at houses and get discouraged because you don't see anything that matches your vision of the perfect house. But be open to a home's potential. Remember carpet and flooring can be replaced, walls can be painted, and a dreadful kitchen can be updated. Think about whether the floor plan will work for your family.
Find a qualified inspector. You'll want to find a qualified professional affiliated with the American Society of Home Inspectors or American Association of Home Inspectors to examine your Heating and central air conditioning systems, interior plumbing, electrical systems, the roof, attic, visible insulation, walls, ceilings, floors, windows, foundations, and basements are among the key inspection points. Inspections may also include appliances and outdoor plumbing. The inspector will provide a report and if there are any major problems, they can be negotiated with the seller. Or you can back out of the deal altogether
Make a list of features that are important in your home
Write down desirable locations you would consider, an acceptable price range, number of bedrooms and bathrooms, and any other amenities. Be specific. It is unlikely that you will find a home that offers every feature you desire; however, without a wish list, it will be more difficult to recognize a home that meets your expectations.
Provide the information to your Realtor
Your Realtor will look for homes that match your criteria. This will save you time – you won’t need to look at homes that don’t fit your needs and desires. Choosing the wrong home can become a costly mistake – a home which is too large or too small for future needs; a fixer-upper when you are not handy; house that is too far from work or too close to traffic; home in the wrong price range.
A proper game plan will save you time and reduce the hassle of shopping for a home. Spend a little time in advance and save a lot of time and money in the future.
Thinking, “I can’t afford a home”
Many people feel they can’t afford a home, but affording a home has never been easier. Mortgage rates are more flexible today than ever, and the tax laws favor home ownership like no other tax shelter.
Home ownership is a durable (real) investment. Although no one can say if a specific home will appreciate in value, generally speaking, the odds favor the homeowner.
Numerous unique tax advantages are available to homeowners. The thousands of dollars you pay in mortgage interest is deductible. This tax deduction alone can sometimes make owning your own home cheaper than renting with “after tax” take home dollars.
Failing to properly “screen” your Realtor
It’s likely that you don’t often interview people. Yet, in order to find the Realtor who is right for you, you may need to interview several. The quality of your home buying experience is dependent upon your skill at selecting the best qualified person.
It’s interesting that in the real estate business someone with many successfully closed transactions usually costs the same as someone who is inexperienced. Bringing that experience to bear on your transaction could mean a lower price at the negotiating table, buying in less time, and experiencing a minimal number of hassles. Your agent should be a skilled, win-win negotiator!
You need to select an agent who guarantees his/her service. You should have the right to fire the agent if you are not satisfied – no questions asked.
Agents make it their business to provide every service connected with your home search, from expert advice in the early stages through careful monitoring of your settlement. The more closely you work with your agent, the better your needs are known and the more effectively you can be served.
Your agent should have access to the MLS system – a computerized system that will assist you in locating the home that fits your needs and desires.
The purchase of your home could well be the most important financial transaction you have ever made. The person you select can make it a satisfying and profitable activity or a terrible experience. It’s your home. It’s your money. Never hesitate to ask questions.
Failing to obtain a home inspection from a qualified inspector
The job of a professional home inspector is to look over every major part of a home and write a report that judges the home’s quality and condition.
A home inspector reports on the structural and mechanical condition of the home. After the inspection, you will have the facts you need to make a decision about buying your home.
A well-qualified inspector who has adhered to federal licensing standards can spot problems that you might not be able to see. Expect problems to be clearly explained, repair expenses closely calculated, maintenance costs estimated, and a written report delivered within a day or two.
Most contracts are written conditional on the outcome of several inspections. These inspections may include several items including inspection for wood-boring insects, excessive amount of radon gas, structural soundness, and the condition of the heating, wiring, and plumbing.
When the contract is written, it should specify who would be responsible if there is a problem with the results of any of these inspections.
If well written, home inspections can create a safety valve for both the buyer and seller. If poorly written, the result can be heartbreak or law suits.
Your Realtor should be very familiar with the laws regarding home inspections. Many people have lost the home of their choice because the agent failed to comprehend this crucial report.
Not knowing your rights and obligations
Real estate law is extensive and complex; the contract for sale and purchase is a legally binding document. An improperly written contract can cause the sale to fall through or cost you thousands of dollars for repairs, inspections, and remedies for title defects.
You must be certain which repairs and closing costs are your responsibility. You must know whether the property can legally be sold “as is” and how deed restrictions and local zoning will affect the transaction. If there are defects in the title, or if the property is in conflict with local restrictions, you or your Realtor must remedy them. Otherwise, you could lose thousands!
It is your Realtor’s job to know the laws governing real estate transactions. They are involved in an on-going training program to keep up-to-date with these laws.
You deserve to have an agent who is not only knowledgeable about the transaction, but is also willing to educate you throughout the process so you will feel more comfortable.
Failing to make your own inspection
You probably would not want to rely on the seller to point out defects in a house he is attempting to sell. There may even be hidden problems of which he is unaware.
Be sure your sales contract is worded so that any “earnest money deposit” must be returned in the event the house fails inspection. If a major defect is found, you have the option to cancel the contract and have your deposit returned, bargain for a lower price to compensate for the cost of repairing the problem, or have the owner make needed repairs before the sale.
Even before you get to the point of a contract and having a professional inspector look at the house, there are many items you can check yourself as you are shopping for a home.
Structure – Basement, check the foundation for cracks or water marks. Floors, are they level? Does the roof sag?
Water damage – Look for unevenly painted ceiling or wall; mildew odor in basement; signs of re-plastering or re-tiling in just one area of the room.
Water pressure – Flush toilet and turn on both hot and cold water faucets at the same time to test.
Plumbing – Ask what type pipes are installed and their age. If applicable, ask when the septic system was last inspected and cleaned. Stand near the tank to detect odor or soggy ground.
Wiring – A 100-amp system is typical in modern construction and uses a one-inch main line; this can be seen leading to the fuse box. Appliances such as dryer or range require a 220-amp line. Notice if lights flicker or don’t work. Check for electrical outlets . . . usually at least 2 in each room.
Energy efficiency – Ask to check last year’s heating and cooling bills. Determine if proper insulation has been used.
Pests – Be alert for small accumulation of sawdust in the basement. This might indicate an insect problem. Obtain date and results of the last wood-destroying pest inspection. |
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