Loan Options
Jumbo Loans
Jumbo loans pick up where Conventional Fannie Mae and Freddie Mac high balance loan limits end. Depending on your county, the limits can range from $453K to $670K.  Rates on jumbo loans are typically higher than conforming loans because banks or investors take on 100% of the risk as they usually keep the loan until it is paid off.  Jumbo loans are most commonly used to purchase more expensive homes and high-end custom construction homes. Typically Jumbo loans require a higher down payment than traditional loans in addition to higher scores. Your ideal profile for a JUMBO loan is 30% or more down payment and scores over 760. If you are in the lower 700’s your rate will be much higher.

I always pre-underwrite my Jumbo clients’ loans because there is so much competition on the upper end inventory that we must close as fast as a cash buyer to be competitive. This means the only thing that needs to be done is an appraisal.

We offer some very competitively priced Jumbo Loans.

Conventional Loans vs FHA
Conventional loans are mortgage loans offered by non-government sponsored lenders. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac, the 2 main governmental sponsored entities who sell bonds to fund loans so we can buy homes. These loans may have either a fixed or adjustable rate. While many think that a 20% down payment is required for all conventional loans, many lenders now offer low down payment options down to 3% if your scores are high enough.

The big difference between FHA and Conventional is that FHA forces you to pay mortgage insurance even if you have 20% equity. Additionally, they compute the equity based on the balance of the loan being 20% lower than the original loan balance. By contrast, a conventional loan will use the pay down of your balance AND your appreciation to current market. Also, FHA adds part of the mortgage insurance to your loan balance. This means a 3.5% down payment is added to the 1.75% UFMIP, or up front mortgage insurance premium, gives you your final loan amount. A 3% down on a Conventional loan is going to have a balance of 97%, BUT you must have higher scores to take advantage of a conventional!

Conventional loans also have a HB, or High Balance loan limit, that can go up to $679,650 depending upon the county, like SF County and Napa County in this example. Contrarily, Solano County stops at a mere $460K before the loan type becomes a Jumbo loan.

Down Payment Assistance Programs
We are currently approved for both the CalHFA (California state program), as well as the GSFA Grant Program. I believe the latter is a better program for a few reasons; call me to discuss further. We are approved for the Napa County Assistance Program and Fairfield and Vacaville down payment assistance programs. The important thing is to get the LEAST amount of assistance you need, unless it is a grant!

All Assistance programs have income and credit score requirements, so some home prices have exceeded the max income allowed. This means even though there is a program, it could be useless with home prices rising so quickly!

203(H) FEMA Disaster Designation Area Loan
FHA offers a 203(H) disaster, re-hab, re-Build your home loan after a fire, flood, or other disaster levels your home.

Features of the disaster loan are:

  • No down payment is required: the borrower is eligible for 100% financing. Closing costs and prepaid expenses must be paid by the borrower in cash or paid through premium pricing, or by the seller (subject to a 6 percent limitation on seller concessions).
  • FHA mortgage insurance is not free. Mortgagees collect from the borrowers an up-front insurance premium (which may be financed) at the time of purchase.
  • 100% financing
  • Borrowers will be subject to up-front mortgage insurance.
Refinancing
Unless you are looking to take cash out of your home, or if you have a higher rate FHA loan, I will say it likely does not make sense to refinance. With rates moving up as much as they have, it would be difficult to refinance to the same amount of the monthly payment from March 15, 2018 to now.
FHA 203k Loan
The FHA 203k is a renovation loan program that provides funds for both the purchase and renovation of a home. There are two types of a FHA 203k loans. The first is the normal 203k, which is given for properties that need structural repairs like a new roof or a room addition. The second 203k loan is the streamlined 203k, which is given for non-structural repairs such as painting or new appliances. Any foundation, mold, or structural issues would denote a normal or conforming 203k loan.  It is also important to note that the minimum loan amount is $5000.

It is not a bad idea or very expensive to go with a consultant no matter what, they do a good job of keeping the General Contractor on task and watch costs like a hawk. Certain things cannot be included, like adding a pool when one was not there before.

203k is a very handy loan if a home meets this formula:

Acquisition price plus repairs = Current market value + 10%.

FHA Loans
FHA loans are an attractive option, especially for first-time homeowners because they are insured by the Federal Housing Administration (FHA). Primarily, the federal government insures loans for FHA-approved lenders in order to reduce their risk of loss if a borrower defaults on their mortgage payments.Typically the borrower can be approved with 3.5% down vs the 20% that is required with other loan programs. FHA is designed to help people get back from financial hardships, such as a bad medical issue, or a one-time traumatic financial situation. We can go down to 600 scores with this type of loan, occasionally lower if the situation can be well documented.

FHA is going to add 1.75% Mortgage insurance onto the base loan, and .85 is the current monthly Mortgage insurance.

If your financial position is solid, NEVER go the FHA route, you will ALWAYS be better off with a 3% down Conventional loan.

VA Loans
A VA Loan is designed to offer long-term financing to veterans. VA mortgage loans are issued by federally qualified lenders and are guaranteed by the U.S. Veterans Administration. The VA determines eligibility and issues a certificate to qualifying applicants to submit to their mortgage lender of choice. It is generally easier to qualify for a VA loan than conventional loans because they have no minimum credit score. However, generally a score under 580 will make it very tough to qualify.

I have been doing VA loans since 1996 and I know what it takes to help our distinguished veterans get a home. I have restored eligibility for many veterans when others have failed. I truly understand how to package and get a VA loan approved. I am very successful in getting my veterans offers accepted by the sellers!

Fixed vs Adjustable Loans
One of the first choices a homebuyer will need to make is whether you want a fixed-rate or an adjustable-rate mortgage loan. The bulk of loans will fit into one of these two categories, however, there is a third option that is a “hybrid” the two.

An adjustable-rate mortgage, (ARM): The interest rate of the mortgage adjusts periodically, usually yearly, based on market conditions. For example, your payment will go up if rates go up and go down if rates go down.

Fixed-rate Mortgage: Unlike an adjustable-rate mortgage, the interest rate is set at the time you take out the loan and will remains the same throughout the life of the loan. Fixed-rate home loans can be 10 year, 15 year, 20 year or 30 year loans. A 30-year fixed loan is the most common because it provides the lowest monthly mortgage payment.

Hybrid ARM: Features an initial fixed interest rate for a certain amount of time before becoming an adjustable-rate for the remainder of the term. Standard terms are 3, 5, 7, or 10 years.

I can tell you from experience, in a normal rate environment, you are ALWAYS better off with a fixed rate loan if you plan to stay 7 or more years. From 2000 till 2017 we had a very unusual rate environment that was artificially kept low. This will most certainly make it’s way back to the 6 to 7% area, which is more of an normal economic norm.

Should I Sell, then Buy? What Would it Look Like?

 

This is the MOST popular question I get right now. The answer is simple:  it all depends!

What does it depend on?

  • How much will you net on the sale after all fees and realtor commissions?
  • Are you over 55? If so, you take your current property tax with you if you stay in the same county and buy an equal or lower priced home than you are selling.
  • What is your tolerance to raise your payment? You MUST know how much more you are comfortable paying or you could be shocked when you apply the new property taxes to your new home and find out it is $1000s more a month!
  • Will there be HOA or Special assessments on the new home? If so, how much are they?
  • Can you update your home, add a pool, larger rooms, enlarge or expand rooms, etc.?

All these scenarios provide me with an opportunity to show you in writing what your options are which we can review and discuss.

At Network Independent Mortgage Brokers we suggest you NEVER put your home up for sale without KNOWING all your options. It is imperative to know ALL your options first!

Questions?

Have more questions? Need clarification?

Contact us and we will be happy to answer all of your questions.