Buying a home is a complex process and, as the recent housing crisis demonstrated, requires a thorough education on the part of the buyer. First, fully understand your financial position — credit score, available savings, monthly income and expenditures. Subtracting your expenditures from your income, for instance, will yield the amount you can afford for housing.
Be sure to account for all insurance costs associated with owning a home, possible homeowner association fees and property taxes in your monthly expenditures. Overall, loan rules changed in 2015, but according to www.ginniemae.gov (Government National Mortgage Association) and www.homebuyinginstitute.com (the Home Buying Institute) loan programs continue to vary on the percentage of your income that can be used for housing-related expenses. Lenders balance debt against income to decide if an applicant will be able to repay a loan. Most conventional loans require borrowers to have no more than 43 percent total monthly debt versus their total monthly income, though there are exceptions, such as for those with significant savings. The Federal Housing Administration has a two-tier qualifying system: FHA sets its top thresholds at 31 percent front-end debt (housing expenses as a percentage of income) and 43 percent back-end debt (all debt as a percentage of income) for a 31/43 qualifying ratio. Like commercial lenders, Veterans Affairs combines front-end and back-end debt for a 41 percent limit against income.
Next, research the different types of home loans to determine the right fit for your financial situation and discuss your options with a lending professional. Lenders are diverse today, and not all homebuyers obtain their mortgage loans through their banks and credit unions. For example, you may choose to work with an internet lender, a mortgage broker, a homebuilder or a real estate agency lender. To determine which lender is best for you, get recommendations from friends and family members and check credentials as well as Better Business Bureau ratings.
A preapproved loan before starting your search for a home can determine your spending limits and signal any potential issues in the way of receiving a loan. For any home loan application, the mortgage company will order a credit report, so it would be good to get a free report in advance to determine your credit status and make sure the report contains no erroneous information.
To order your free annual report from one or all of the national consumer reporting companies: Visit www.annualcreditreport.com and complete and submit the request form online.
Home Loan Application
To complete a home loan application you’ll need: photo IDs (such as a driver’s license); Social Security numbers; residence addresses for the past two years with landlord contact information if you rented; names and addresses of your employers for the past two years; your current gross monthly income; recent financial institution statements with names, addresses, account numbers and balances on all checking, savings, CDs, money market, bonds and mutual funds accounts; recent financial institution statements with names, addresses, account numbers, balances and monthly payments on all open loans (including student loans) and credit cards; addresses and loan information of all other real estate owned; estimated value of furniture and personal property; W2s for the past two years and current paycheck stubs; copies of all divorce decrees, child support documents or any other court proceedings that affect your financial status; verification of any child support payments; and evidence of any retirement or pension benefits. VA or military forms include: DD 214 (veteran), Form 22 (National Guard), DD 1747, Off-base Housing Authority (active duty) and Certificate of Eligibility (active duty).
For more information, visit www.consumer.ftc.gov/topics/credit-and-loans.
Knowing your monthly budget and the amount of your loan is invaluable during the next phase, especially finding the answers to questions before the hunt for a home begins.
First, determine your home preferences. Does a single-family house, condo, town house or duplex best fit your needs and budget? Do you prefer a new home, an existing home or to build one? Though new homes generally cost more, existing homes may come with maintenance issues and renovation costs. How many bedrooms and bathrooms would you like? Do you want an attached garage? Will you live in the city, a suburb or in the country? How close to work, school, shopping or public transportation do you want to be? Answers to these questions will greatly assist your search and the next stage — hiring a real estate agent.
The ideal agent will help find your ideal home and guide you through the purchase process. First, interview potential candidates to ensure they understand your needs, know your homebuying and neighborhood preferences, and are readily accessible.
Good luck and happy hunting!
California provides housing programs and incentives to help residents with home ownership. For more information, visit www.hud.gov and select “California” from the “State Info” drop-down menu.
Kings County Programs
King County’s first-time homebuyer program loans qualified homebuyers gap financing to help homebuyers qualify for a home purchase. The loan is in the second position and is deferred for the life of the first loan (or until the homeowner sells the house). This program is available in all of the unincorporated areas in Kings County.
Kings County also offers housing rehabilitation assistance to homeowners who qualify. A homeowner may receive help when their home has health and safety problems, such as a leaky roof or poor electrical wiring. The county will loan the homeowner financing to bring the home up to code and the program can provide new carpet, paint and other fixtures.
For more information on Kings County programs, visit www.countyofkings.com/departments/community-development-agency/information/cdbg.
Fresno County Programs
Fresno County’s Homebuyer Assistance Program provides down payment and mortgage assistance loans to eligible low and moderate income first-time homebuyers. Loans have 0 percent interest with payments deferred for 30 years or until the primary mortgage is fully paid, whichever occurs first.
The county’s Housing Assistance Rehabilitation Program provides loans to eligible low and moderate income homeowners to rehabilitate their affordable homes in the unincorporated area and partner cities. These funds are loaned to bring the homes up to current building code health and safety standards. Loans currently have no interest and monthly payments are based on the family’s income. The county’s Rental Rehabilitation Program provides loans to eligible rental housing owners for similar rehabilitation projects.
The county’s Utility Connection Program provides loans to eligible homeowners for connecting homes to an existing sewer or water system. Permit fees are paid by the county, and the loan provides the connection construction costs. Loans have no or low interest, depending on income eligibility.
For more information on Fresno County programs, visit www.co.fresno.ca.us.