This is a question that I got the other day from someone trying to get first time home buyer loan and wanting to buy Santa Maria real estate. Actually I get this question pretty much all the time , ,then I get what is the rate ,,,followed by do you think they will go down again or more?? Followed by are homes going to get any cheaper?? But I am only going to work on one question since the rest really don’t matter if you cannot qualify. Also most of these loans will be focused on home purchase vs. Condo there are separate issues in buying a condo but that is a different blog post. So here is the question.
“Hey I had a few questions about buying a home. First off what kind of down payment is involved for a first time home buyer and what if your credit isn’t all that great???”
First I am going to start with the obvious and then do a little clarification that always seems to get some a little confused, on down payment and closing costs. I will discuss a new loan program I currently have for first time home buyers than move on to your FHA loans and your USDA loans. There are other loans available but these loans will pretty much dominate the first time home buyer market.
Right now as of April 06, 2011 since I do not know when you are reading this and who .. I do have a loan program for those that qualify for Half a percent down.
That’s 1/2% down payment for the purchase price of the home you want!!
One more thing this loan is for California only, since I only do loans in California and only licensed in California if you happen to be reading this and you are from out of state that particular loan on half down is not available for your state. But to illustrate what you need, to be able to buy a home and the down payment for a $200,000.00 home would only 1k. That is it just $1,000.00 and if you do not have that saved then to be honest you should not be considering buying a home at this time. Just keep in mind that is only the down payment not the closing costs those are separate costs. Usually about 3% of the loan amount sometimes more we will touch on that later, and many times the home you are trying to buy is a foreclosure or short sale, and the bank owning the property kicks in about 3% for those costs. SOOOOO… it is feasible to buy a home for…..
$1,000.00 or even less if the purchase is less than $200k.. qualifying for that loan is the key.
Literally the biggest thing holding most of my clients back from buying a home is not down payment but their credit, many of my clients have lost their homes back in 07 and 08 and are trying to buy again but they have credit issues. SO you have to know what is on your credit.
Most loans done today for first time home buyers are FHA loans which is just short for Federal Housing Administration. FHA loans are govt. sponsored loans so that pretty much explains why they are so prominent since they are really the only one’s with any money to lend, it seems. The other type of loans that are usually bank loans are conventional we won’t be going into that since it maybe too difficult to qualify in today’s market. So lets get started with some First Time Home Buyer Information and please keep in mind if you are I can help you get the financing for your home anywhere in the state of California. 
To do a FHA loan all you need CURRENTLY IS 3.5% down payment on a house. I want to make sure you caught that which is CURRENTLY. There is a lot of proposals and pressure to increase the down payment on a house to 5%. Aside from increasing the down payment to 5% there is also the possibility that minimum fico scores may be increased and the PMI was just increased. The PMI is Principal Mortgage Insurance, this does nothing for the homeowner this is solely for the benefit of the bank and is insurance in case the home owner were to default on the loan, it would cover any losses on that loan. On FHA loans a portion of the PMI is financed up front in the closing costs and can vary depending on your current credit scores. These are just a few things to keep in mind if you are contemplating on buying a house now or waiting for things to get lower or that super duper deal. If home prices do get lower but your down payment increases to lets say 5% and qualifications to get approved gets more difficult and your closing costs become more costly. Then what does it matter what the price of the home is 6 months from now or a year from now if you no longer qualify for the home loan. So the food for thought is if you want to buy a home , and you think they may get cheaper just keep in mind you may qualify today but not tommorrow.
Closing costs and Down Payment this is something that seems to confuse most first time home buyers. Your Down Payment is just want you need to bring to the table that gets you into the game based off the purchase price so if you are buying a home for 100k then all you need to bring in is $3,500.00 which gets applied to the purchase price. Closing Costs is what you need to get the loan CLOSED and this is sometimes a shocker to some first time home buyers because you usually need a lot more than just the down payment. The closing costs are what it will cost you to get the loan, such as processing fees, escrow fees you pay for your taxes and your insurance. Part of getting the loan as mentioned above is YOU pay for the PMI also and that can vary depending on your credit score. But for this example we will use the 1.00% of your loan so add $1,000.00 then there is your escrow and title and lets just add $2,000.00 and there are your impounds. Your impounds are your taxes and your insurance not the PMI but homeowners insurance for the house and they collect this upfront and depending on the time of the year will dictate how much is collected up front due for your new property taxes. Let’s just say $3,000.00. Then there are loan costs for actually doing the loan whether you pay point and the admin costs associated with the loan. Let’s just add $2,500.00, and do remember these are just numbers purely for demonstration purposes only. Keep in mind that median price for homes in Santa Maria is slightly higher and is more around $200,000.00 and not 100,000.00. Median price for homes on the Central Coast is even higher and this example is just for illustration purposes only on potential closing costs it can actually even be lower, so don’t get scared just yet.
Just An Example only
PMI – 2000.0
Escrow and Title - 2,000.00
Impounds - 3,000.00
Loan Costs 2,500.00
Total $9250.00
If you would like a loan Worksheet to help you figure your cost and payments Please let me know
BUT before you get discouraged keep in mind that in today’s market sometimes you can get the seller which when dealing with foreclosures is the BANK. Luckily for you the bank will sometimes pay for some of your closing costs . This is where you need to make sure your team is on the same page with you and by your team I mean your Realtor that will help you negotiate with you on the contract and your loan officer that will help you get the loan, and who needs to know what you are trying to qualify for. Most of the transactions on homes for sale in Santa Maria are currently either foreclosures or short sales and in most case the banks are paying up to 3% of the closing costs, NOT ALL THE TIME but you will find it is pretty common right now to ask for them. Now homes for sale on the Central Coast such as San Luis Obispo or the 5 cities may have more normal transactions and the seller or homeowner may not be so inclined to pay for those costs as easily as a bank. But if you can get the bank to pay and help out even better for you.
Okay now to other stuff and by other stuff I mean other loans. There are loans out there based on the community that you live and how much money is available to you as grants for new home owner ship. So in this respect check with your local Realtors that are usually aware of funds available. Santa Barbara county and San Luis does not have any special programs that I am aware of but I do know that Ventura County has some special programs as well as Kern so check with your local Realtors for special programs.
If you live in a rural area you can even still get 100% financing so NO MONEY DOWN
That leaves you with more money to pay for the closing costs and if the bank helps out even better. These loans are USDA loans. I know you think of that when you buy meat but they lend too. But they are usually for rural areas here locally for example you cannot buy a Santa Maria home but you can buy a home for sale Guadalupe or a home for sale in Nipomo with a USDA loan. There are some other aspects of the loan such as income caps and loan amounts these loans are more for lower and middle income not for your Mc Mansions. But you will find that the income limits are actually pretty much up there for qualifying. Go here to type your location to see if it is eligible for 100% financing its pretty simple. All you gotta do is follow the directions does not matter where in the country you are in this link will help you find out if the program is available in your location. If you have any questions on this just shoot me a comment.
Related posts:
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If you have any questions about buying a Santa Maria home for sale in the Santa Maria Real Estate market or any properties on the Central Coastand need to get a loan in Santa Maria, CA or any where in the state of so I California not just on the Central Coast, so I can do California home loans, and first time home buyer loans, as well as refinance home loans and just plain simple mortgage loans. So please contact me by sending me an email at: GenePerez@GMSLoans.net
I do also service all the nearby communities and other markets such as the Santa Ynez real estate market, Nipomo Real estate market, Arroyo Grande real estate market, Grover Beach Real Estate Market, and all other surrounding areas regarding the homes on the Central Coast.
my goal is to provide you with resources you need. I can also help in getting the financing for your home. If you have any suggestions or questions in how I can provide more or better
information please let me know. I have been helping my clients for the last 15 years on the Central Coast, Gene Perez – 805-448-7101 , DRE 01321588
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Gene Perez is Licensed Real Estate Broker for Valley Hills Realty and a mortgage broker for Greater Mortgage Solutions.
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