Orange County CA. Mortgage and Finance Information

The Mortgage Bankers Association recently fought off federal legislation that would have allowed bankruptcy judges to modify residential mortgages. The MBA's victory was a huge success for lenders, but an unfortunate loss for homeowners who have declared bankruptcy. 

Lenders disliked the proposal, since it would have shifted some of the power over mortgages from lenders' loss-mitigation departments to bankruptcy judges, who might have imposed modifications that the lenders wouldn't have liked.

The risk was deemed so serious that the MBA pulled out all the stops to pound the idea into dust. Lawmakers were lobbied, members were mobilized, press releases were issued, and the MBA's Web site featured a "Stop The Bankruptcy Cram Down Resource Center".

Consider "cram down," a bit of MBA-speak that refers to a judicial cut in the interest rate on a borrower's existing loan. The term may be new to some, but in fact dates back to the last real estate downturn. The phrase naturally evokes emotionally charged images of gagging, choking and force-feeding, none of which is relevant to a serious discussion of bankruptcy relief.

Consider also the MBA's claims that mortgage interest rates would rise by as much as 2 percentage points and that lenders would be forced to require bigger down payments and charge higher closing costs if bankruptcy judges had a say. No factual evidence was offered to support these arguments.

In fact, a causal connection between the so-called "cram down" and significantly higher interest rates is a stretch at best, according to an academic paper by Adam J. Levitin, a law professor at Georgetown University. The paper stated that even unlimited loan modifications in bankruptcy courts would have only an insignificant, if any, impact on mortgage interest rates or mortgage markets.

Of course, the MBA also had a promised presidential veto in its pocket and the support of Alphonso Jackson, the now-former secretary of the U.S. Department of Housing and Urban Development. In a speech, Jackson called the proposal "an odd, time-consuming, distant way to help homeowners," and said, seeming with no evidence other than the MBA's say-so, that it would increase interest rates and -- horror of horrors -- benefit lawyers and law firms.

The MBA has supported other measures such as pre-foreclosure counseling, the use of mortgage revenue bonds to refinance subprime loans, and the strictly voluntary Hope Now loan workout program. These measures may be worthwhile, but the cost to lenders is minimal and so far, the results have been modest.

Not surprisingly, consumer groups support an expansion of bankruptcy judges' jurisdiction to encompass residential mortgages. AARP, the AFL-CIO, ACORN and the Center for Responsible Lending are among the groups in favor of this proposal. These groups believe the federal government should put more pressure on lenders to help homeowners who are in danger of foreclosure, and a Congressional Budget Office report said lenders might have more incentive to modify loans if bankruptcy judges had the power to impose such concessions.

The MBA deserves plenty of credit and kudos for the success of its "Stop the Cram Down" effort. The group did exactly what such groups are supposed to do, which is to protect the interests of their own members -- no matter how narrow or parochial those interests may be.

But at the end of the day, the win on this one should have gone to the homeowners. Bankruptcy isn't pretty, and recent changes to the U.S. bankruptcy code have already made the process more onerous. Yet bankruptcy serves a legitimate and important public policy purpose, which is to give people in dire straits a fair and reasonable way out of their extremities. Bankruptcy shouldn't be just another form of Dickensian debtors' prison. It should offer real relief and an opportunity for folks who've experienced hard times to get a fresh start.

As the law stands today, home-loan lenders are a favored class of creditor in the bankruptcy system. In fact, residential owner-occupant mortgages are perhaps the only type of debt that bankruptcy judges aren't allowed to modify. Judges can alter loans backed by cars, boats, farms, manufacturing plants, mobile homes, vacation homes and investment properties.

Of course, there should be limits to bankruptcy judges' power, and the proposed legislation contained plenty of them, perhaps even too many. Relief would have been offered only to homeowners who faced imminent foreclosure, who had a subprime or nontraditional loan such as an interest-only or payment-option adjustable-rate mortgage, and whose income wasn't sufficient for them to afford their mortgage payments. Bankruptcy judges would be required to set commercially reasonable interest rates on modified mortgages and wouldn't have been allowed to reduce loan balances to less than the home's market value.

Homeowners who've been forced into bankruptcy deserve a chance to keep their homes if they can afford to make reasonable mortgage payments, and bankruptcy judges are in a good position to make that call.

As stipulated in the newly passed Economic Stimulus Bill of 2008, FHA announced the  new loan limits for Orange County, CA.  This new FHA loan limit is based on a calculation of 125% times the median price, up to a maximum of $729,750.  Since the median price in Orange County is around $600,000, the new FHA loan limit for Orange County is the maximum allowed.  Below is a table of the loan limits for single family homes, as well as small multi-family housing:  


HUD Secretary, Alphonso Jackson recently announced the new limit increase at the Anaheim Convention Center where HOPE NOW was conducting a national anti-foreclosure campaign. This new $729,750 limit will double the previous FHA loan limit of $362,790, the U.S. Department of Housing and Urban Development (HUD) announced. This limit is good until the end of the year when it reverts back to $362,790, but some feel this deadline will be extended into 2009'.  This new bill will allow FHA to refinance of up to 97% loan to value, but most mortgage lenders will only go up to only 90% loan to value.

This new FHA loan limit will enable many Orange County homeowners to refinance out of their expensive adjustable rate mortgages, even if their property has has gone done in value over the past few years.  Also, the new FHA loan program will allow some homeowners with adjustable rate mortgages to refinance if they are behind on payments.

Another great benefit for Orange County would be home purchasers, is that FHA is much more forgiving of a few negative marks in ones FICO credit rating. in the past 12 months, Conventional lenders have become much more demanding on credit quality. New FHA underwriting will also allow for more flexible income documentation and less time on a given job.

This new FHA loan limits for orange County plus more flexible qualification standards could be a big boost for the slumping Orange County housing market.  Many Orange county residents depend on jumbo loans, anything above the current $417,000 limit. Interest Rates on jumbo loans are more expensive, ten conforming loans (ie: loans below $417,000).  The average rate tis past week for a 30-year fixed conforming loan in Orange County was 5.9 percent with a one-point fee, while the average jumbo rate on a 30-year fixed was 6.9 percent with a one-point fee.

If you would like more information on the new FHA loan limits, or would like a referral to a couple of great local FHA lenders, feel free to call us at: (949) 388-3396, or send us an email at:  Info@OCRealtyGroup.com   We specialize in Short Sale workouts for Orange County homeowner in need.  If you would like to learn more about Short Sale workouts, visit our website at:  www.OCShortSaleCenter.com

President Bush signed the Economic Stimulus Bill into law this past Wednesday, February 13th.   Although the details are not finalized, the department of Housing and Urban Development (HUD) has 30 days to publish the median area home prices, Metropolitan Statistical Areas and mortgage principal obligation limits after the bill became law.  The new Proposed Fannie Mae and Feddie Mac conforming loans are to be based on 125% of the area median home price not to exceed $729,750.  That is great news for Orange County, for the median home price here is approximately $600,000, which means that Orange County conforming loan limit should be around the $729,000  limit.

I expect that this year will be the bottom of this severe market correction.  With the proposed buy-out of Countrywide Mortgage by Bank of America, the recent large decrease in the Fed funds rate, the new Federal program called Project Life Line that helps delay and possibly avoid Foreclosures, and  this new Economic Stimulus Bill raising loan limits,  this should put the brakes on  further price erosion here in Orange County..

The new loan limits will apply to 30 year and 15 year fixed rate, fully amortizing (sorry no interest only) and owner occupied homes only.  They should also apply to high Loan to Value (LTV) FHA loans which should really help to stimulate the local real estate market back to normal health.  Adjustable rate mortgage are being considered but but I would not  count on it. Although the bill has passed the information above is not final.  Changes are set to expire on December 31, 2008, although I would be willing to bet the this Bill is extended like many other Bills in years gone by. 

"Will the recent 3/4 point drop in the Fed Funds Rate help the local Orange County Real Estate market ?"... I've been asked this quetion several times today, and my asnwer is "Yes" and "No"....  May sound like an answer from a political candidate, but let me explain my "have it both ways" answer. 

First of all, here is the "NO" part of the answer.  The Fed Funds Rate has had little correlation with actual 30 Mortgage rates in the past 8 years.  Mortgage rates are most closely tied to 10 year treasuries.  While long term adjustable rate mortgage (ARM) rates are often tied to prime rate, LIBOR and other factors.  Look at the graph below from the year 2000' to the year 2005'.  Around January 2001', the 30 year mortgage rates were around 7% and the Fed Funds Rate was around 6.5%.  1.5 years later, the Fed Funds Rate dropped to about 1.8%, yet 30 mortgage rates were still hanging around 7%...  Then in mid 2004' Fed Fund Rates went from 1% up to 3.5% by the end of 2005', while 30 mortgage rates stayed around 6% during this period of time.

So based upon the past 8 years (and more) of history, I don't see that this recent large  drop in the Fed Funds Rate will do much in lowering Mortgage Rates... which still happen to be very low historically. 

The recent major downturn in real estate prices here in Orange County is the result of two effects - One a natural correction... or a letting off of steam if you will, from the overheated and overextended run-up in prices that took place from about 1998' until early 2006'.   And two, is the result of the record breaking foreclosures and pre-foreclosure sales that are occurring due to the large number of loan defaults.  These defaults are primarily caused by overextended buyers who were given highly leveraged loans with adjustable mortgage loans with artificially low teaser interest rates in the past 1 to 4 years.  A slight drop in long term mortgage rates (if they drop at all due to the Fed Funds Rate), will not be much help to these homeowners in financial distress.    

The "Yes" part of the original question comes into play as follows.  The lowering of the Fed Funds Rate should help to stave off a recession, which should help to prevent future job losses, which should help to prevent future Foreclosures.  Plus this should give the current pool of potential home buyers additional confidence to buy now or soon, if they feel good about their long term local employment.  In addition, the Fed Funds Rate drop also acts as a positive psychological effect in that it is somewhat reassuring to know that the powers of government are making some serious attempts to resolve the current economic troubles.

 

More so then ever before, Mortgage Banks are looking for ways to avoid foreclose on delinquent Orange County CA. homeowners.  So today, mortgage banks and homeowners, with the guidance of their real estate professionals, are working out creative alternatives to resolve non-performing mortgage loans.  This type of mortgage loan workout is normally referred to as Loss Mitigation.

Here are some little known and interesting facts about Loss Mitigation: 

1.) Fifty percent (50%) of the Homeowners who are foreclosed upon never initiate any "contact" with their mortgage bank from the date they miss their first payment.

2.) Mortgage Banks / Mortgage Insurers / Mortgage Guarantors absorb losses of more than $50,000 for every foreclosed conforming loan and $40,000 for every foreclosed non-conforming loan.

3.) Fewer home loans are now being foreclosed. Many conventional mortgage banks, as well as FHA, VA, FNMA and FHLMC require that all options to avoid foreclosure must be explored (ie: Loss Mitigation).

The benefits of Loss Mitigation are that Mortgage Banks and Mortgage Insurers can reduce Foreclosures, Save money, and Re-establish communication with Homeowners.  Homeowners may be able to preserve home-ownership, or at least sell and relocate prior to foreclosure thus salvaging their credit and eliminating the stigma associated with foreclosure. The Real Estate Economy as a whole also benefits by preserving home-ownership rates, reduce financial losses caused by foreclosures, maintain a strong  viable housing market, and eliminate the blight that may be caused by a vacant and neglected foreclosed home.  

Today, due to the dramatic slow down in homes sales, and the drop in home prices, many homeowners find themselves in financial hardship.  These hardships are usually caused by job loss, illness, disability, death in the family, relationship breakup or divorce, poor money and credit management, and other reasons.  The good news is that many mortgage banks are agreeable to alternatives other then foreclosure.  There are typically 6 different Options that the mortgage banks may consider for a homeowner who is in financial difficulty. These 6 options are:

Option 1: Rate Reduction Modification. This type of loan modification will permanently reduce the interest rate associated with the loan, thus lowering the monthly payment from the Homeowner.

Option 2: Capitalization. Capitalization means adding the delinquent payments into the remaining balance and updating the payment due date and perhaps "recasting" the payment amount. Capitalization may be used when other modifications would not be appropriate, such as, if the interest rate is already at or below the market rate, or if the delinquent amount due is just too much for the Homeowner to pay back within the specified period of time

Option 3: Term Extension.  Term extension is extending the amount of time the Homeowner has to repay their loan to achieve a reduced monthly payment (i.e. 15 year mortgage extended to 30 years). Term extensions are often used together with an interest rate reduction or a capitalization modification.

Option 4: One-Time Assumption. Most mortgages are non-assumable, which means the loan cannot be transferred from one owner to another. However, as a form of loss mitigation, the mortgage bank may opt for a one-time assumption, in order to facilitate the sale of the property. Generally if the Homeowner can demonstrate hardship, Fannie Mae and Freddie Mac may allow a one-time assumption. HOWEVER, the transaction must be an "arm's length" transaction. In other words, there cannot be any pre-existing relationship between the Homeowner and the individual assuming the mortgage.

Option 5: Loan Type Conversion.  Some Homeowners with an adjustable rate mortgage (ARM) may not be able to keep up with increased payments during times of increasing interest rates. In this case, the mortgage bank may opt to modify the loan type to avoid increasing the interest rate. The loan could be converted to a fixed rate mortgage.

Option 6: Short-Sale.  A short-sale requires that prior to the sale, the mortgage bank  agrees that the sales proceeds from the sale of the Homeowners home will satisfy the debt, even if that amount is less than what the Homeowner owes on the loan. Many conventional loan mortgage banks prefer this method when the home is severely upside-down (ie: the home is worth substantially less then the mortgage debts owed).  A Short Sale will still negatively affect a homeowners credit, but is far less damaging to ones credit rating (ie: FICO score) then a Foreclosure.

For more information about Loss Mitigation or Short Sales in Orange County, CA., please feel free to call us at: 949-388-3396 or email us at: Info@OCShortSaleInfo.com , or Text Message at:  949-283-4679

Orange County CA has been experiencing record breaking mortgage loan delinquencies and foreclosures this year. A large number of homeowners who purchased homes in the past 3 years using zero down 100% financing, now find themselves with mortgage debts more then their home is worth... sometimes called an "upside down mortgage".   Many of these homeowners who experienced a job lose, medical emergency or other financial hardship are unable to re-finance and are now finding themselves in Foreclosure. Foreclosure is a terrible experience that ruins ones credit for up to 7 years.  But to add insult to injury, if one purchased a home with zero down payment, and lost their home to Foreclosure, and the home sold at the Foreclosure sale for $50,000 less then the original sales price 2 years ago, the homeowner will possibly be subject to an additional $50,000 of taxable income...  Ouch ! 

But with the recent Mortgage Forgiveness Debt Relief Act of 2007' (HR 3648), the homeowner in the above example would not be subject to this extra income Tax. This bill was recently passed by Congress (House Bill 3648) by a wide margin on October 4th, 2007'.  It is now awaiting Senate approval and rumor has it it should pass easily and signed off by the President [UPDATE: Dec 17th - Senate passed this bill with some Amendments which will go back to Congress for approval before going to the President]  .  This Tax provision will only apply to taxpayers' principal residences and not investment property.  Once passed, this House Bill will be retroactive to apply to anyone who has had purchase money debt discharged or forgiven on or after January 1, 2007'.   This Debt Relief Act, if passed, will apply to Foreclosures as well as Short Sales. 

For those not familiar with the term Short Sale - a Short Sale is a pre-foreclosure sale in which the the mortgage lenders agree to accept less then what they are owed on the property, to a dollar figure which equals the sales price minus all cost of sales.  The homeowner does not receive any cash from the sale (just as in a Foreclosure).  Compared to Foreclosure, a Short Sale is becoming a preferred solution for "upside down properties" for both homeowners and mortgage bankers alike.  A Short Sale is less damaging to ones credit as compared to a Foreclosure.. a Short Sale does not stay on ones credit report as long as a Foreclosure, and a Short Sale is a more dignified resolution to a tough problem.

There are couple of items to note regarding Tax consequences that apply both equally to a Short Sale and Foreclosure. The Mortgage Cancellation Tax Relief if passed, will only apply to purchase money mortgages, and not re-finance cash out mortgages.  The other item to note, is according to many accountants, if one can prove financial insolvency, then the income Tax liability discussed above can be avoided. 

If you are a home owner who may be upside down in your mortgage, or if you are delinquent in your mortgage payments, there is free help available to you.  For details, visit:  OC Short Sale Team.  We are not Attorneys nor Accountants and this article is not to be construed as Legal nor Financial Tax advice.  Please seek Tax advice from an Tax accountant before making a decision in these matters.

The mortgage loan Default rate and rate of Foreclosures is at an all time high in orange County, Ca.  In July 2007, a survey was conducted to identify the primary reasons why home owners  fall behind on their home loan payments. Responses were gathered from approximately 80% of borrowers who were facing foreclosure in California. Of those borrowers, the most common reasons they were facing financial difficulties were:

Curtailment of Income............................... 58.3%
Illness/Medical.......................................... 13.2%
Divorce....................................................   8.4%
Investment Property/Unable to sell............   6.1%
Low regard for homeownership................   5.5%
Death......................................................    3.6%
Payment Adjustments...............................    1.4%
Other......................................................    3.5%

There has been much written as of late that adjustable rate mortgages that have recently reset to higher rates, are the main cause of loan Defaults. Looking at the above numbers certainly does not bear this out.  Although, one could argue that some of the home owners who experienced a Curtailment of Income (58.3%) could have possibly kept their loan payments current if the interest rate did not adjust and increase recently. 

If you are behind in your mortgage payments, please feel free to call our team on consultants, and we'll give you our years of experience as to what options you may have to resolve your situation.    Drop us an email at:  Info@OCRealtyGroup.com    or give us a call at:  949-388-3396

It's funny how things often come around full circle.  15 years ago the Zero Down Veteran Administration (V.A.) Loan was about the only loan program available which allowed home buyers to purchase a home with 100% financing... as long as you were a veteran of course.  Starting about 10 years ago, the zero down conventional loan was created and more and more mortgage lenders offered this type of financing.  So for the past 10 years or so, the VA loan was largely ignored by many mortgage brokers in favor of the zero down conventional loan which had fewer qualification restrictions (the main restriction being having Veteran status), and allowed for a higher purchase price.  Well, we have now gone full circle, for the zero down - 100% financing conventional loan is just about extinct. 

Today, the VA loan is one of the few loan programs left that enables prospective home buyers to purchase with 100% financing, with the exception of the Acorn Loan and the CalHFA Loan..  And as fortune would have it, the state of California has teamed up with the Veterans Administration to offer a superior loan product called the CalVet Loan, which provides 3 very exciting zero down payment loan programs.   The other fortuitous event, is that home prices have now dropped about 10% in southern California, which gives many veterans a window of opportunity to purchase a home here in desirable Orange County, CA. using the Cal-Vet loan.  We'll highlight the 3 basic CalVet Loan programs below.

The first program is a CalVet loan plan geared towards low income Cal Vet home buyers.  Of course, here in Orange County, the CalVet administration considers anyone individual making less then $$103,000 per year as a low income buyer, and any family making less then $121,000 per year as a low income family.  That allows many Veterans wishing to  to purchase a home in Orange ?county to qualify.  The exciting part is the this loan offers 5.25% fixed interest rate amortized over 30 years.  And it allows for a maximum purchase price of $521,000.  Also, one can have a credit rating as low as a 580 FICO score, and debt to income ratios as high as 55%.  That's one great loan program made available to a very deserving group of individuals.

The second loan program we'll highlight is one made available to Vietnam Vets.  This program has all of the great advantages as the above with the low 580 FICO score cut-off, and the high debt ratio with zero down.  But there is not maximum income restrictions and the interest rate is 5.5% fixed over 30 years.  Again, a fantastic opportunity for Vietnam Vets.

The 3rd loan plan is the basic Cal-Vet loan which again offers zero down - 100% financing for home purchase.  Plus the FICO score can be as low as 580, with 55% debt ratios.  The interest rate of this program is 6.55% fixed over 30 years with purchasing power up to $521,000.  (The rates, terms and conditions specified in this article are subject to change at anytime due to market conditions and CalVet guidelines)

You may ask, what can I buy in the desirable and high priced Orange County CA. real estate market ?  Well you would be surprised today as to what you can buy.  For example, today there are a total of 1,267 detached single family homes (SFR) available for sale throughout Orange County, CA.  Plus, there are 4,051 attached condos for sale with 2 bedrooms or more.  That's are large selection of homes and condos to choose from.

If you would like more information about CalVet Loans here in Orange County, CA. please feel free to call us anytime at:  949-388-3396 or email us at:  Info@OCCalVetLoan.com .  Also, if you would like a list of all homes or condos for sale, that you could purchase using one of these Cal Vet loans, just contact as above.  If you would like to search on the Internet for all homes and condos for sale in Orange County, just visit our website at:  Orange County Homes for Sale

There has been a loophole in the Fair Isaac credit score (FICO) methodology for years, which would allow people to quickly increase their credit score by being added as an authorized user on someones else's good and established credit card.   Edward Jamison, one of the leading authorities on credit card repair has been predicting that Fair Isaac would correct this loophole, and it now appears that they are.  Here is an excerpt from a recent article by Edward Jamison...

" For the most part, this loophole has stayed under the radar until recently when a few companies came out of the woodwork with a marketable service that catered to consumers who will benefit from this practice. These companies recruit people from all over the country who have older credit cards with low debt ratios and offer them $100-$300 for each person they add to their credit card as an authorized user. Then, they market to consumers with limited credit histories and/or high revolving debt ratios and offer to have them added as an authorized user on a seasoned trade line for around $1500 per credit card and pocket the difference. As this practice became more popular, it wasn't long before the over exposure of this loophole shed light on the flaws of Fair Isaac's software.

Under pressure from lenders, Fair Isaac made the decision to invest the money into correcting this loophole. The correction is fairly simple: When Fair Isaac takes that snapshot of somebody's credit file, they are going to look at one extra field that they previously had not looked at when generating the score. That field is the one that says who is responsible for that account. If the scoring software sees that the person is the primary on the account, then it will score the report just like it had done before and no change to the credit score will take place between the old and the new scoring model. This will also hold true if it says that the account is a joint account. But if they see that the responsibility on that account is as an authorized user designation, they will completely ignore that entire account when calculating the credit score. It doesn't matter if the authorized user was added five years ago or yesterday; they will instantly lose the benefits created, if any, from that account being shown on their credit report. ;

Due to the fact that the scoring model is changing in a few months coupled with the fact that some lenders are even denying applications in some instances if an authorized user account is present, I would advise that people refrain from getting added as an authorized user immediately. The benefit will soon be gone, and taking advantage of that benefit before it leaves may leave a person at risk for having a loan denied by some lenders."

So if you are planning on buying a home here in Orange County and this new change affects your FICO credit score, there are other alternatives.  One of  the more exciting ones that I have seen is an alternative loan program called the ACORN loan.  This loan does require a credit check, but they do not solely base the approval on a hard and fast FICO score, rather a more human analysis of one overall credit worthiness, and other factors.  For more details on this exciting No Down loan program, visit our blog at; Orange County ACORN Loans.  If you would like to discuss your mortgage loan finance options feel free to contact us at:  949-388-3396 or email us at:  Info@SearchOCHomes.com  

No, this is not another zero down loan scam program... This is a legitimate government backed loan program designed to help California residents buy their first (or second) home.  The ACORN loan can be used to purchase single family homes (SFR) and condos, as well as manufactured (mobile) homes on permanent land (not leased land).   ACORN (Association of Community Organizations for Reform Now) loan program limits the purchase price of the home to $500,000 in Orange County, and the maximum income the buyer(s) can make is $109,620 in Orange County, CA.  In Riverside county the maximum income limit is $80,500.  The ACORN loan is similar to the CHFA loan, but has several advantages as outlined below: 

• 100% Loan to Value, meaning Zero Down financing.
• NO PMI is required (CalHFA requires PMI)
• The ACORN loan in not based upon the buyers FICO credit score. There is no minimum FICO score required.
• ACORN allows up to $1,200 per month in undocumented income.
• Recent Bankruptcy is allowed if the borrower has re-establish credit.
• 3 Months of mortgage payments in the bank at closing in not required.
• The Seller can credit the home buyer up to 3% to 4% of the purchase price, or the Selelr can pay for all of the Buyers actual closing costs.
• A minimum of only $500 is required from the home purchasers own funds.
• Ratios of income to debt can sometimes be as high as 60/60.
• Public assistance and voluntary child support is counted as income.
• There is no equity gain recapture clause as is the case with the CHFA loan.

This exciting home purchase mortgage program is not just limited to first time home buyers.  As long as the potential buyer does not own another home at the time of the application, they can qualify for the ACORN loan.

It gets even better.   This loan program is one single zero down loan and there is no second trust deed mortgage like many of the other 100% financing programs around today.  The interest rate is very low for this ACORN loan.  For example, at the time of the writing of this article rates were at 6.62% fixed interest for 30 years  (rates are always subject to change on a day by day basis).

What's the catch you may ask ?  Well there isn't one, except for the maximum income limits of the home buyer, plus the prospective home buyer must attend a mandatory 3 hour First Time Home Buyer education class.

If you would like to learn more about this little known exciting loan program, or if you would like to find out if you can qualify for this loan, please feel free to contact us at:  949-388-3396 or email us at:  Info@SearchOCHomes.com


 

There is a little know State of California government subsidized loan program available in Orange County, CA. called the CalHFA loan (CalHFA stands for California Housing Finance Agency), and is even called the CHFA loan for short.  This exciting loan program allows a buyer to purchase a home with Zero down payment, with a FICO score of around 630, and offers below market  fixed interest rate financing (today's rate is just 5.75% and is subject to change), which is fully amortized over 30 years...  There are some limitations though that we will get into in just a moment... but first a segue regarding Zero down loans.

Lately, there has been a lot of bad press (deservedly so) regarding certain types of Zero Down loan programs here in Orange County... The problem has been primarily due to the lax underwriting standards in which buyers were able to get Zero down financing with FICO scores less then 620, and the borrower did not have to proof their income (this is called a Stated Income loan... essentially, you could just make up a figure).  To make matters worse, some of these loans offered adjustable rate mortgages, or worse yet, negative amortization loans, in which the loan balance would increase every month.  These issues are not a concern with the CalHFA loan as explained below.

Here are the basic qualifications and limitations of this fantastic loan program:

1.) First Time Home Buyer:  The State of California created this program to assist first time home buyers, therefore the prospective Home Buyer cannot have owned a home in the past 3 years.  The good news is, if you owned a home 4 years ago and sold it,  then you are eligible, as long as you have never used the CHFA loan before. 

2.) Income Limits:  Since this program is geared to assist first time homebuyers, the State has placed maximum income limits for CalHFA home buyers.  It varies by which county in California that the home is located in.  For Orange County, CA. the income limits for Moderate Income home buyers are as follows:   $103,920 for a 1 to 2 person family.  $121,240 for a 3 or more person family.  

3.) Credit Requirements:  The home buyer must be able prove their income with either W-2 forms from the employer or if self employed, one must produce 2 years of Tax Returns or 12 months of bank statement.  Secondly, the CHFA program only offers fixed interest rate loans, so one need not worry about rate increases down the road, nor negative amortization. The FICO score requirement varies, but typically a 630 or better FICO is sufficient.

4.) Sales Price Limits:  Again this program is designated for first time home buyers in Orange County, Ca. therefore the State of California does not intend to make this loan available for buyers who want to buy a $750K home.  The maximum price home that one can buy in Orange County using this CHFA loan is $571,278 for existing re-sale homes and condos, and $591,272 for new construction.

In addition, the CalHFA allows the Seller to grant the home buyer a credit through escrow that helps to pay for some of the Buyers closing costs.  Last year, we negotiated a purchase of a home for one of our clients using this CalHFA loan, and that buyers total home acquisition costs were just $767 !

CHFA does not loan money directly to consumers, but works through and uses approved mortgage lending institutions to qualify potential borrowers and to make the mortgage loans. The fee's that these mortgage lenders may charge can vary from lender to lender, but the program is highly regulated by the State so the variation in fee's are kept to a minimum.   There is some flexibility with regard to the FICO score.  If someone has a FICO score below about 620, it may still be possible to qualify for this loan depending upon the reasons for the lower FICO score. 

There is a Conventional CalHFA loan and a FHA based CalHFA loan.  Each have their advantages and disadvantages. There are other details and pertinent information regarding the CHFA loan, such as the potential of a Recapture Tax, Lower Interest Rates for Low Income buyers versus Moderate Income Buyers, High Cost versus Non High Cost Areas, special Lower Interest Rates for School Teachers in Target areas, and more.  But these topics are bit beyond the scope of this blog article.  There is also another little known government subsidized below market loan program, that is similar to CalHFA, and it is called the Acorn Loan program.

Fore more information about the CHFA loan here in Orange County, CA., or for a referral to several trusted Orange County CalHFA mortgage lenders, please feel free to call us at:  949-388-3396 or email us at:  Info@SearchOCHomes.com

Many senior citizens are talking about Reverse Mortgages here in Orange County, CA.  There is a lot of misunderstanding regarding Reverse Mortgages, so this article we will explain some of the basics and compare it to a more commonly understood conventional mortgage. A Reverse Mortgage is a Tax Free way for a Senior citizen to unlock the equity in their home without having to sell the home.  With Reverse Mortgage you do not have to  go through the difficulties of trying to qualify for a conventional loan for you do not need any income.  And you do not have a risk of losing your home in foreclosure.

Reverse Mortgages have been around since 1989, but have only recently become popular. As the name suggests, a Reverse Mortgage is the opposite of a conventional mortgage. In a  Reverse Mortgage the bank pays you a monthly stipend, while in a conventional mortgage, you pay the bank a monthly mortgage payment.   For as long as you live in your home, you never have to pay the loan back, while in a conventional mortgage, you have to pay the loan back within a pre-determined period of time (ie: 15 years, 30 years).  There are limits place on a Reverse Mortgage to protect senior citizens, so that you will never owe more then you home is worth.

There are three types of reverse mortgage products available in the USA, but by far the most popular one is the federally insured FHA Home Equity Conversion Mortgage (HECM).  Over 90% of all Reverse Mortgages are the HECM type, and this FHA insured loan offers the largest loan balance and the most flexible terms. You can receive the money on a monthly basis, or in a lump some.  You can pay-off a conventional mortgage that you are monthly making payments on, with a Reverse Mortgage which has no payments and is only due when you sell the home or move out of the home. Unlike a conventional mortgage, in which the lender can foreclose and take back the home if the borrower stops making monthly mortgage payments, a reverse mortgage lender rarely, if ever, takes title to the property.

To qualify for a Reverse Mortgage, you do not need a job, nor do you have to have good credit , or any credit at all for that matter.  The amount you can borrow is solely based on your homes value, current interest rates, the number and age of the home owner(s) (you must be 62 years or older), and the county in which you live in.  Here in Orange County, CA. the HECM FHA lending limit is just over $312,000.

A Reverse Mortgage is not for everyone.  Here are some of the limitations and disadvantages are as follows:  1- You need to 62 year or older.  2- Your home needs to have a good amount of equity.  3- As the Senior citizen ages, there is less and less equity in the home to pass onto the children as inheritance.  4- There are upfront costs associated with a Reverse Mortgage so it would not be appropriate for short term use or to supply needed small sums of money.

AARP has a Reverse Mortgage Calculator to give one a rough idea how much one can borrow on their home.  There are many more details to discuss regarding Reverse Mortgages, which we will do in subsequent articles.  If you have any questions, or would like to find out if a Reverse Mortgage would be right for you, please call us at:  949-388-3396 or email us at:  Info@SearchOCHomes.com