Sara Kirk\’s First-Time Homeowner\’s Blog

FHA Loans are all the rage in this market, but what are they? They’re a type of loan put together by the federal housing administration (FHA) that’s very common for first time homeowners (FTHers) and low to moderate income families.

One of the reasons it’s so popular right now is because homes have dropped in price meeting an FHA loan limit guideline as well as low interest rates. It’s also popular because of the low down payment. With a conventional loan – which everyone used to use, you had to have a 10% minimum down payment but with an FHA you only have to have 3%, sometimes less if you use buyer’s
assistance program such as Ameri-Dream. Here’s some stats on the FHA Loan:

- Loan amount limit for Riverside/San Bernardino County is $500,000 – OC/LA County is $729,750.
- 3% minimum down payment required – but you can get assistance with that.
- A flexible minimum credit score of 620 – but the higher the FICO the lower your interest rate will be.
- Lower closing costs than traditional loans.

There are preferable requirements for an FHA Loan such as a steady job for the past two years, a good debt-to-income ratio. (Debt-to-income ratio: how much of your paycheck goes to pay your debts each month? Example: If you make $2,000 a month and you pay $500 a month in debt your ratio is 25%) And make sure when you go to talk to the lender you have your tax returns, w-2′s and bank statements.

In order to obtain an FHA loan the property you will be purchasing has to meet health and safety standards. The home can’t have broken windows or exposed wires, there needs to be doors, a working stove, heater and toilets. Make sure you understand all these requirements when looking  at homes. If the home is missing some items you can request that the seller fix those items, but each home should be handled on a case-to-case basis.

There are a million more reasons why FHA loan are so popular right now but remember what I tell  you today about FHA applies to today only. The real estate and lending market is changing everyday so when you go to purchase a home talk to your Realtor and lender about current FHA terms.

This blog is specific towards residential real estate in
Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.

FTHER’s Series – 12. Start Saving

You’ve heard it from everyone – the recession is here!!! Well whether you believe it or not you do know one thing – money is tight. And for you, an FTHer, it seems like owning a home is a silly hoop dream. But I’ve got some ways to start saving now for your future home.

BUDGET! No one likes to live on a budget but if you really check yourself on where your money goes every week you might be surprised. Use coupons, look for sales, ask yourself if you really NEED that item your purchasing. And make sure your “good times” money is spent wisely. Think outside the box for entertainment: invite some friends over to play games instead of spending money every week at a bar, movies or other money drainers. You might even want to put a bulletin out to your friends that you’re on a strict budget so creative “good times” with friends and family is a must. You’re not the only person on the budget boat. And remember put that extra money into your savings account or use it to pay off your bills and reduce that debt!

AUTO PILOT. Set up an automatic deduction from your paycheck to go into a savings account. Every little penny counts – especially if your savings account has a good interest rate on it. By doing this you’ll forget about the money that you’re putting away which means you won’t touch it.

DINING. America is the eating out nation, but eating out costs money. Decrease your dinning out and you’ll notice a big change in your wallet. Pack lunch you might even save calories too! Don’t like cooking, learning to make it exciting. Surf the web for new recipes, see if you can recreate some of your favorite meals dinning out. My favorite on the web? www.allrecipes.com and www.FoodNetwork.com

PAY IT OFF. Having one less payment or a lower payment each month can add up. If you have extra money put it towards a bigger payment on your debts. Paying off a credit card or loan feels amazing and once you’ve done that you can put the extra money towards your future house.

INVEST. Look into certificates of deposits (CDs), high yield savings accounts, etc… Look for short and long term investment options – make you’re money work for you.

Need more help? Google “money saving tips” or “budget tips” and you’ll be swamped with more ideas – Happy saving!!

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.

FTHer Series – 10. Paying Taxes  on Your  New Home

No one likes to pays taxes but it’s something you need to know when purchasing a home. And many FTHer’s don’t remember to factor this expense into your homes budget. When you are ready to put an offer on a home your Realtor should look at the homes current taxes and the special assessments – fees for schools, community projects, etc… For a while you will be paying taxes on the homes current assessed value -it’s current taxes, until the county gets around to re-assessing your home. This happens once a year, typically around July for homes that have a change in ownership or the completion of new construction. Why does the county do this? Because
your homes value could have increased or decreased and they want the maximum amount of money from you. You will also more than likely receive a supplemental tax bill but we’ll discuss that in the next FTHer Series.

So how do you figure out your new tax bill? The price you paid for the property is typically a good estimate for your new reassessed value. Please know that we can’t be completely sure what your new assessed value will be. However for ease let’s says the new assessed value will be what you paid for your home. In order to figure out your new taxes take the purchase price and multiple that by the tax rate then add the special assessments to it and you have the yearly taxes for your home.

Example:    
               $300,000.00                 <—- Purchase price
            X                   1.05681% <—- Tax rate
          ____________________
                    $3,170.43                 <—- Total
            +       1,750.00                 <—- Special assessments
          ____________________
                    $4,920.43                 <—- Yearly taxes

Remember this is only an estimate! You may be able to put the yearly taxes into an impound account which gets put with your mortgage bill, allowing you to pay taxes each month rather than in two larger payments. Check into an impound account with your lender and make sure to leave a cushion for that in your monthly payments.

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.

FTHer Series – 9. Paying off Debt

I’ve mentioned MANY times how important your FICO score is to obtain the best loan for your first home. It really is up to you to correct errors in your financial past and get rid of debt you have now. Perhaps you need a little help to see how long it takes to pay off those current debts and I’ve found the website to assist you:

 http://partners.leadfusion.com/tools/kiplinger/card04/tool.fcs

Simply go to the website and plug in the specifications of your current debt: how much you owe, monthly payments, interest rate, and the big question: desired months to pay off that loan, credit card, etc… It then calculates what your monthly payments need to be to get rid of that debt.

This tool could help re-work your budget to pay those debts down. Or if you receive some extra cash, perhaps you’ll put it towards your debts instead of that new toy. All of this not only helps your budget out and lowers your blood pressure but it helps raise your FICO score and puts you on the road to getting a loan and purchasing your first home.

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice and is not an endorsement nor has Sara Kirk been compensated by the company above. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.

FTHer Series – 8. Pre-Qualification VS. Pre-Approval

When you become serious about buying a home it’s imperative to become pre-qualified or pre-approved for a loan. Both are thumbs up from the lender that states how much you’re able to afford. It  makes sure aren’t looking for homes you can’t afford  or let’s you know you can  spend more. Let’s take a look at the differences between pre-qualification and pre-approval.

Pre-Qualification

This can be the step before a pre-approval to see if you qualify for a loan. A mortgage professional will review your financial stats, income and credit report (FICO!) and from those factors estimate what kind of a loan amount you’re able to obtain. This is not a guarantee; it’s again, an estimate of what you qualify for. When you are pre-qualified you’ll receive a letter that states a loan amount you might  be able to obtain.

Pre-Approval

This is the letter that states you  can get a loan up to a certain amount. Since this is a commitment from the bank they’ll need more information on you to completely approve. The mortgage professional might ask you for some of the items below:

-Bank statements, past tax filings
-Your credit report
-Your information: how long you’ve lived at your current address. If you’d lived there for less than 2-3 years you will add your previous residence
-Current employer’s information, your annual income and how long you’ve been there. Again, if you’ve worked there for less than 2-3 years they’ll want your previous employer
-Current debts you have: with home, how much is left and what your minimum payment each month is. If you have any liquid assets, which are…. So if you have a saving account, checking, Roth IRA, child support, 401K, etc…

If you are serious about purchasing a home then giving your information to a mortgage professional should not be a problem. It is a big step but becoming pre-approved is the best out of the two options.  If you need a list of lenders make sure to call your Realtor or ask your friends and family who they trust with their mortgage. And don’t be scared or ashamed when you give your share your financial information with the lender or your Realtor. We’re here to help – not hurt.

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.

FTHer Series – 7. Homeowners Associations

Homeowners Association are most commonly referred to as HOA’s. They are made up of a management company and perhaps a homeowner’s committee that is put in charge of a neighborhood of homes, condos or townhomes. These groups of people act as a jury to the fellow homeowners in the and enforces the rules, decides where the money goes, whether to raise the monthly HOA and a bevy of other issues.

However, the purpose of HOA’s varies. If you live in a townhome or condo chances are you’re HOA pays for the upkeep of common grounds such as a pool, the entrance, the workout room, etc… and might only consist of a management company with no homeowners committee.

Such amenities are sometimes found in single family residences (houses) but more often than not in Southern California you’re paying to keep the neighbor uniform. It’s you’re HOA’s job along with maybe a neighborhood committee to enforce the rules of the neighborhood. What might those rules consist of? Here’s a small list of some possibilities:

-Color of home
-Parking issues (such as no parking boats/rvs on streets or in driveway)
-Landscaping of front yard
-Whether you can rent your home

Homeowners may worry that their neighborhood could lose value because of the neighbors not keeping their homes up that’s when an HOA is great. However other people consider HOA’s to be over bearing with unnecessary fees. So what is the going rate for HOA’s? They differ from each neighborhood and are monthly fees that can range – from $40 to $300+ a month.

Worried about what HOA you might step into? When you open escrow on your home you will receive the HOA’s past meeting notes and their rules and regulations to see what you’re paying for and if for some reason you don’t like what you see you can cancel escrow and move onto  another home. So before you start looking for your first home – make sure you check out the HOA’s.

FTHer Series – 6. Leases – Who Needs Apartments?

Perhaps your not ready to move into a home, but don’t want to live in an apartment. Depending on where you live: Corona, Murrieta, Riverside, Ontario or any of the other cities in Southern California – you could be living in a house instead.

You can lease a condo, townhouse or single family residence (a house) and get a taste of what expenses are incorporated in keeping up a home for the future. Lucky for you – I can help. Realtors can help you find a place to lease in whatever terms you’re looking for and best of all, just like buying a home, you don’t pay for the Realtor’s services.

Why drag a Realtor into it? It’s similar to purchasing a home – a Realtor digs through the piles of homes for lease and matches the ones that fit to you. Then we preview those properties and after you’ve decided which one you’d like we put our offer to lease in. Here’s what to expect when applying to lease a property:

You’ll fill out an application to rent possibly including:

-Your information – past residence history, employment history
-Credit Information – savings, checking, loans, credit cards -Personal references
-A credit check will be ran on you and typically all adults who will be living in the residence.
-A rental agreement (this outlines the terms of your lease – lease length, deposits, monthly payments, etc…)

So what fees are involved? They differ on such issues as a pet and the landlord’s wants, but here are the basics: Credit check (per adult)
First months rent
Security deposit
Pet Deposit (if applicable)
Misc Deposit(s)

Remember to look what’s included in the lease or extras such as homeowners association fee, water, trash, gardener, among other things. So if you’re interested in leasing a home rather than renting an apartment, let me know I’ll be happy to help.

FTHer series – 5. Basics of a Loan

You can’t purchase a home if you don’t have funding – which means learning the basics of a loan is essential. All your hard earned money and your future monthly payments are determined by your loan. Doesn’t it make sense to learn as much as you can about it now? Below are three important topics you need to have a grasp on when shopping for a loan:

 - DOWN PAYMENT. A significant amount of money can be put down toward the purchase of your home in this category – or none at all. This depends on several factors, two important ones are what your loan requires you to put down and how much money you have. In order to get some loans, you need a 3% down payment of your purchase price. Let’s say your first home will be around $325,000, your down payment of 3% will be around $9,750 dollars. That is a frightening number for most – but don’t let it scare you, 100% loans are still out there, though few and far between. If you were to get a 100% financing loan you wouldn’t need a down payment. Just remember that your down payment can determine your monthly payments. The more money down, the smaller your loan is, thus making your monthly payments less.

 - TYPE OF LOAN. Jumbo, FHA, VA, 100%, there are heaps of different loans out there but don’t fear your loan officer will make sure you get the one that fits you. This portions requires a full blog – breaking down different types of loans and we’ll deal with that another day.
 
 - RATE. If you’re looking to buy sooner than later you’re in luck when it comes to rates. Some are as low as 5.75% but can go all the way up to 12%+. Just like your credit cards, you want a rate that’s low – meaning you’ll pay less each month to your lender for borrowing the money. Here are two types of mortgages rates:
     1. Adjustable rate mortgage (ARM) – These rates start out with a fixed rate for a certain period of time, than after that term the rate adjusts typically to a higher amount.
     2. Fixed rates are what’s most desirable. You lock in a low rate and a loan to be paid off anywhere from 15 to 30 + years. By locking in a rate, there are no surprise with  rates moving up and down, giving you piece of mind with your monthly payments.

All the topics above will be addressed with your lender when shopping for a loan. I can’t stress how important it is find a trust-worthy lender that communicates with you, just like your Realtor. When the time comes I have a list of lenders you can talk to.

We’ve just scratched the surface with loans and the money involved with purchasing your first  home – we’ll cover it all with time. Again, if you have any questions or comments please post by clicking the ‘post a comment’ link below or contacting me personally.

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog is opinion of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.

FTHer’s Series – 4. What is Escrow?

You hear the phrase, ‘We’ve just opened escrow!’ – but what is escrow? It’s a neutral, third party who is called in when the buyer and seller make an agreement on the sale of a home to ensure it  closes properly and on time. The escrow holder  reviews all terms and conditions of the seller’s and buyer’s agreement to make sure they are met prior to the sale being finalized, including receiving all funds and documents and assuring the title to your property is clear. Escrow on average takes 30 days, but can be shorter or longer depending on what both parties agree upon.  

We have escrow in California to make sure there is no commingling of funds. Therefore not everyone involved has a copy of your deposit check, etc.. During escrow the following steps will typically occur for a 30 day escrow:

¢  Deposit money gets cashed – ASAP
¢  Lender starts working on your loan – ASAP
¢  You sign paperwork, mostly disclosures “ First 17 days
¢  Order title search – ASAP
¢  Lender presents you with good faith estimate for loan “ Week one or two
¢  Home inspection – First 17 days
¢  Termite inspection – First 17 days
¢  Request for Repairs – First 17 days
¢  Purchase home warranty – First week or two
¢  Purchase homeowners insurance to protect your home in case of a disaster – Week two or three
¢  Receive escrow instructions to make sure everyone™s on the same page (buyer/seller) – Week two or three
¢  Look through HOA document (if applicable) – Week two or three
¢  Final Walk-through of home – Week three or four
¢  Loan approved and documents sent to escrow – Week three or four
¢  You, the buyer, sign your loan documents   – Week three or four
¢  Final review by lender – Week three or four
¢  Down payment cashed, closed and title recorded – Week three or four
¢  Move in!

Why does escrow have a negative connotation to it? Because sometimes a buyer could enter into an agreement with the seller to purchase the home and it turns out that the buyer could not afford the home therefore the loan does not get funded. Now the seller’s excitement of a sold home, becomes a headache and the house has to go back on the market. On the other hand, a buyer could  find out that the house is covered in termites and now backs out of the deal having to find another home. You need to know that these things might happen, but so do smooth escrows. That’s when your Realtor works for you – calling to make sure everything is on track.

When you do buy your first home, don’t be scared of escrow, have positive thoughts about escrow and, as the secret says, you will have a great escrow. So next time you hear someone say they’re in escrow, congratulate them!

This blog is specific towards residential real estate in Southern California and is intended for informational purposes only and should not be construed as real estate or financial advice. The information in the blog are opinions of Sara Kirk and not the opinion of Tarbell, Realtors. When posting a comment your personal information will not be shared or sold to anyone.