mortgage loans in sacramento
Does leasing a car affect a buyer’s ability to buy a home? As a mortgage professional for almost 20 years, I know just about every gotcha that can cause an underwriter to deny your loan. We look at a borrower’s monthly minimum obligations paid on debts. We take those minimum payments, including your proposed total mortgage payment (principal, interest, taxes, insurance, and private mortgage insurance). Then we divide this by your gross income. This debt-to-income ratio is the barometer we use to determine your ability to repay the mortgage.
Hard money loans and fast closes may not always be as good as they sound. An agent presented an offer that promised a 3-day close. Of course, that did not happen, but it did fund after seven days.
We have some title issues as the seller had previously refinanced and borrowed an additional second loan. Both were paid but the payoffs were not filed. North American Title had handled one of the loans and our escrow officer at Placer was able to clear that one up. The second loan is taking more time.
Of course, the buyer’s agent has shared lots of drama about why we did not close on time. It was explained to him that the lender had an entire page of conditions that the buyer had to complete, so the hold up to date was caused by the lender. Hard money loans and fast closes do not always go as smoothly as they are promised to be.
In the land of no such thing as a free lunch, you can actually get free money through a 1% down payment assistance program from Guild Mortgage. OK, the catch is you have to buy a home and get a loan through Guild Mortgage. But even so, it is still free money if you’re a home buyer. You don’t have to be a first-time home buyer. The trick, if there is such a thing, is to buy in an area where there are no income restrictions. Especially if you make too much money for most other down payment assistance programs.
Many of my listings do not qualify without income restrictions but I have a couple of listings that do qualify for the 1% down payment assistance programs. Our preferred mortgage lender, Dan Tharp, at Guild Mortgage, checks my new listings to see if they qualify. When they do, I include a line in the confidential agent remarks to let other agents know about this great program. It is in conjunction with Fannie Mae.
But agents don’t know what it means. Sometimes I receive offers in which the buyer’s agents ask the seller to give a 2% credit to the buyer. I have to explain, no, it is the lender, not the seller. Why is this so difficult to understand? Probably because we’re used to no free lunch. We wonder what’s going on.
There is no catch, though. No downside. Buyers do not have to pay back the money. It is not a loan. It is a gift. Instead of putting down 3% to get a conventional loan, buyers can put down 1% and Guild Mortgage, alongside Fannie Mae, will give buyers the other 2% absolutely free. Or you can use the 2% as a credit toward closing costs. Buyers need a fairly decent FICO score, at least 680 minimum, but that’s about it. Oh, there is a quick online class to take. Easy peasy qualifying.
Click here to fill out a loan application at Guild Mortgage. What kind of home can you buy with the Guild 1% downpayment assistance program? How about a mid-century, 3 bedroom, 3 bath with hardwood floors and more than 2,100 square feet at $349K? The address is 10829 Glenhaven Way in Rancho Cordova, CA. Call Dan Tharp at 916.257.1470 for more information.
The NACA program all sounded too good to be true. And you know what that means. NACA is a HUD-approved company that makes loans to marginal buyers with bad credit or no credit. There are no income requirements, either. Not only that, but no down payment and no closing costs. Now, the NACA program bills itself as the answer to predatory lending for people who otherwise would get suckered into hard-money loans. Or discriminated against. At least that’s the way I read it.
You can see my ranking below in the hierarchy of preferable purchase offers. I rank NACA right below robbing a bank. But then, I’m a listing agent specialist. My team works with buyers. I do not. I represent sellers. So, of course, I see it differently.
I had a vague recollection of hearing about this program many years ago, but never worked with any buyers who needed it. Most buyers have a little bit of money saved, and if they have bad credit, honestly, maybe they should clean up that bad credit first before going further into debt. Not everybody should buy a home. But that’s just a logical opinion based on four decades of experience. You can get an FHA loan with a low FICO score, and there are CalHFA programs to help with down payment money.
Most buyers don’t need NACA. Better options exist.
The Sacramento Bee ran a story on Guild Mortgage, which offers one of the best programs I’ve ever seen for home buyers in Sacramento. No strings attached. In conjunction with Fannie Mae, Guild just gives buyers 2% of the sales price to use as they wish. For a down payment or toward closing costs. No repayment required. No loan recorded. Just free money. Minimum FICO of 680, though but that’s not that high. Only certain areas qualify for this program.
Unfortunately, my sellers instead approved an offer from buyers utilizing the NACA program. This requires a NACA home inspection. And holy cow, that inspection is nearly impossible to pass. I don’t know how any buyer can buy an older home in today’s Sacramento seller’s market with the NACA program, particularly if the repair list we received is common.
Further, the NACA inspector wants the sellers to test a 1978 popcorn ceiling for asbestos. This is a buyer inspection, not a seller inspection. Which, amazingly, the buyers who have zero funds invested in the transaction want the sellers to pay for. If there is asbestos, that requires removal. Very expensive. Air tested by pros, too. Our NACA home inspection calls for licensed contractors and licensed plumbers to evaluate all sorts of things in the house, to the tune of more than $6,000. After evaluation, they demand everything corrected at the seller’s expense.
This overly picky inspector even checked the hard-wired smoke detectors, noting, perhaps incorrectly, that they seemed older than 10 years. Replace them, he said. Along with installing new receptacles in the garage. A grand total of 11 expensive repairs required to pass NACA. Beware, you don’t see this with FHA or VA.
After this experience, I can’t say I would ever recommend to another seller of an older home that they accept a NACA offer. Which is too bad because I can see where there is a need for this type of program in our communities. I also hate to see these buyers’ hopes crushed.
However, we need to get real. The hierarchy that exists in mortgage lending pretty much ranks in the following manner with sellers, especially in multiple offer situations in Sacramento:
- Conventional with 20% down
- Conventional with less than 20% down
- CalHFA down payment assistance
- Hard money loans
- Robbing a bank
Are you concerned about handling a situation in which interest rates increase when building a home? If not, you should be. Depending on where you are building a home in Sacramento, it could take 4 to 6 months (or longer) to finish building your home. What happens if interest rates increase when building a home? You could get socked with a much higher interest rate. The rate could be so high that it could disqualify you from buying a home. Or, put a severe crunch on your financial cash flow.
Last September, interest rates remained around 3.75%. Today, interest rates hover at about 4.30%+. Fact, every 1% an interest rate rises loses a buyer about $25,000 of purchasing power. Some buyers do not understand the direct correlation between sales price purchasing power vs interest rates. However, you should keep interest rate fluctuation in mind when buying new construction. Also, think about how you’ve locked in the price of the home when you signed the purchase contract. Sales prices may go up but your pre-negotiated home price remains stable.
In fact, many first-time home buyers put so emphasis on interest rates that they often forget about the sales price remaining the same on that new home. This is not to say that as interest rates increase when building a home you should not be concerned. Because options exist. If a rate increase to 5% is not comfortable for you, you might want to consider taking our insurance against a rate hike. Yes, you can pay a little bit more to your lender and lock your interest rate for 6 months or more.
The question should be is it worth it? Historically, over the past 10 years or so, I’d say no, it wasn’t worth it. If you paid for an extended loan lock, you were probably wasting money. But if you’re the type of home buyer who doesn’t want to handle this kind of surprise, maybe you should consider an extended loan lock. I cannot sugar coat this; welcome to higher interest rates in 2018.
Interest rates have been superficially supressed for so many years that John Q Public does not remember what can happen. They think of 3.5% or 4% as the norm, but that is shortsighted. Average interest rates used to be 8%. In the early 1980s, rates hovered as high as 18%. Over the last few years, fewer investors elected to purchase a CD or money market due to low returns. Everybody knows rates must go up. But how fast and when? Many experts say now, this spring. Some experts predict interest rates will rise four times in 2018.
Talk to your lender about what can happen should interest rates increase when building a home. Try to prepare for that eventual situation in advance. Don’t get blindsided days before closing when suddenly your mortgage payment jumps and you can’t afford it. You might also consider buying a home a little bit under your means so you’re not stretched to the max when interest rates rise.