Orange County FHA, VA & First Time Buyer Loan Information: June 2009

The first thing an Orange County First Time Home Buyershould do is get PreApproved for an FHA loan. (If you are eligible for $0 down VA, then PreApproved for a VA loan.) Too many times new home buyers, even move up home buyers, begin the home buying process by looking for homes and then even making an offer before talking to a lender. That can be a tempting thing to do. Who wouldn't want to check out homes in some of the cities of Orange County such as Placentia, Brea, or Fullerton? FHA financing can buy a great home in Placentia. This can lead to a major let down when they find out they won't qualify for the home they have fallen in love with or are not comfortable with the total PITI payment (principal, interest, taxes, and insurance) necessary for the home of their dreams.

What is the First Step in the Orange County Mortgage PreApproval Process?

One quick phone call to a reputable lender or loan officer is all it takes. Hopefully you will find someone who is well versed in FHA loan guidelines and can answer any and all questions that you come up with. A good loan officer should be able to quickly "prequalify" you based on a few quick questions. Below are some questions to think about before calling the loan officer.

• What do you do for work and how long have you been on the job?
• What is your hourly pay or salary? Do you get a bonus or overtime?
• Do you have income coming from any other sources, such as a part time job, alimony, or child support?
• Do you have any car payments, credit card debt, installment loans, student loans, alimony or child support payments?
• How is your credit? Do you have an estimate of what your FICO score is?
• How much money do you have available for down payment and closing costs? The down payment can be a gift, come from funds already in the bank, or come from a 401K.
• How much do you pay for rent? How much of a new mortgage payment (PITI) are you comfortable with?
• Are you considering an Orange County condominium or a single family home?

Based on the answers to these questions an FHA Expert Loan Officer can put together loan scenarios that will give you a complete breakdown for buying an Orange County home with an FHA loan. The loan scenarios should show the purchase price, loan amount, payment breakdown, debt to income ratios, closing costs, down payment, and amount needed to close escrow. Going through these numbers line by line with the loan officer will give you a good understanding of all (or at least a good part) that goes into buying a home. However, you are not yet PreApproved. You are only PreQualified.

So Now I'm PreQualified. What is Needed to Get Fully PreApproved?

Now that you have a good idea of the purchase price range you are shooting for, you will want to go all the way and get PreApproved. For PreApproval, everything you verbally told the loan officer for the PreQualification is now verified. Now, the loan officer will complete a loan application, which can be done on the phone or in person. Orange County Loan applications can also be done online. You will also need to fax or email the following information.

• 2007 and 2008 Tax Returns, all schedules.
• 2007 and 2008 W2's.
• Paystubs for the most recent 30 days.
• Bank statements for the most recent 2 months, all pages. Also, any quarterly investment account statements or 401K statements.
• Scanned (or very clear) copies of drivers license and social security card.

The loan officer will run a credit report showing the credit score, or FICO scores. Next, the loan officer will run the loan application through an Automated Underwriting Engine, which will (hopefully) deliver the loan approval you are shooting for. An underwriter (if you are working with a Direct Orange County FHA Lender) will review the documentation you have sent in and issue the loan PreApproval. The loan officer can then prepare a PreApproval Letter or Certificate, letting your Realtor know what price you are PreApproved for. Your Realtor will include the PreApproval letter with any offers you make, which lets the listing agent and sellers know that you have already met with a lender and been PreApproved and are ready to close escrow fast.

Is There A Cost to Get PreApproved?

Not usually. Most lenders will do it for Free. What is most important is finding an Orange County FHA Loan Officer you are comfortable with and who can deliver on what they are promising. So before you go out and start looking at homes, make sure to talk to a lender first.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

* Licensed by California Dept. of Real Estate.  Lic. # 01190897

In Orange County, homebuyers are finding out how quickly interest rates can go up. After several bad days for Mortgage Backed Securities, FHA interest rates have increased anywhere from .5% to 1% just in the last 10 days. Interest rates had dipped as low at 4.5% for FHA loans under $417,000 and 5% for FHA loans over $417,000 up to $729,750. Now rates are ranging from 5.5% to 5.75% for loans under $417,000 and 5.75% to 6% for FHA loans over $417,000.

How Much Will this Effect Orange County First Time Home Buyers?

For most people, the increase will have very little effect on what they qualify for. For example, a .25% rate increase will translate into a payment increase of approximately $15 per $100,000. So on a $300,000 loan, the monthly payment will be approximately $45 more per month with a .25% rate increase, or $90 per month with a .5% rate increase. From strictly a "debt to income rate" perspective, this should only increase the qualifying ratios by 1%-2%. Unless a buyer was pushing their debt to income ratios to the maximum limit there should be little problem in keeping currently PreApproved FHA home buyers approved for the price range they are interested in. The bigger issue will be the buyers payment comfort level. It can be tough for a first time buyer who was prepared for a certain payment only to see that payment increase because of an unexpected interest rate increase.

Will Interest Rates Come Back Down?

It's possible. However, there is also talk among the experts that rates could increase further. Historically we are still at very low rates even with the recent increase. One of the best features of FHA is the FHA Streamline Refinance program. This program does not require an appraisal, income or asset documentation. For a buyer who closes escrow with a 5.75% rate now, if rates drop to 5%, they could take advantage of the Streamline Refi and get the lower rate.

Orange County Rent vs Own Analysis

This is a great time to buy a home. With interest rates still very low and property values lower than they've been in years, this is the time to buy a home. Not to mention the First Time Home Buyer Tax Credit of $8,000, which goes away December 1, 2009. The first step is to talk to a lender. Find someone who can answer all your questions, and request a Rent vs Own Analysis.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

* Licensed by California Dept. of Real Estate.  Lic. # 01190897