Christi Nelson's Lake Oroville Real Estate Blog

A Good Faith Estimate is a lenders proposal as to what closing costs and loan fees will be associated with your home loan. Real Estate Settlement Procedures Act (RESPA)  now mandates home buyers receive a standard, three-page Good Faith Estimate within three days after they apply for a  loan.

The Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s. These mortgage fees, also called settlement or closing costs, cover every expense associated with your home loan: inspections, title insurance, taxes and other charges.  An accurate Good Faith Estimate is essential for a prospective home buyer to make a informed decision about their exact settlement or closing costs.

Lenders also are prohibited from increasing the origination fee from the estimate. Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent. Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower,may not be subject to such limits.

It is important to have your lender fully explain your Good Faith Estimate to you. All charges typically paid for by the buyer must be disclosed on the GFE regardless of  whether the charges will be paid for by the buyer, the seller or other party. Remember, dont be afraid to ASK QUESTIONS!

For example: Lets say the seller is paying the buyers closing costs of  5% on a purchase price of $250,000 that would be a credit to the buyer of $12,500. That is now going to be shown on the buyers GFE as a buyers cost. DONT PANIC! At closing the seller will still be giving the credit to the buyer but it must show as a cost for the buyer to give the buyer a true picture of what the costs for the loan are.

So your agent has shown you a bunch of  houses and you might be getting a little frustrated if you havent found the right one.  Be patient! Sometimes it takes a few showings to really fine tune what it is that you REALLY want. 

 Then, you finally find it! Let the flood of emotions and questions begin!

In my opinion, it is good idea to educate the buyer as to what the process is and what decisions we will have to be made when finally making the offer.  However there are still little things that will need to be addressed and especially if there are going to be multiple offers on the property.  Thats where you will need to really listen to what your Realtor advises you to do. They have the experience and negotiating skills that will put your offer in its strongest possible position.

Although there are many part to the purchase contract here are a couple examples of things to think about:

The  purchase price. What is the amount you really want to offer? This will usually be a number you come up with according to the sold comps your agent has provided to you. Keep in mind this is probably the toughest part. There are a couple of factors to consider when finalizing the price. Is the seller being asked to give a credit for your closing costs? Are you asking for the seller to pay for all the inspections? How long is your escrow period?  These are things that need to be considered and your agent  will help you fine tune the numbers to make it attractive to the seller.

Escrow Period- How long of an Escrow do you need? Generally the normal time period is 30-45 days. Its a good idea to check with your lender regarding the time period they may need to complete the loan process.

Inspections- What type of inspections do you want to do? What is customary? What do you want the seller to pay for and which ones will you as the buyer pay for?  Your agent will be able to advise you on what the different types of inspections you can do and the importance of them. Your lender may also require certain inspections depending on the type of loan you have.

Here is an example of what a Califonia Purchase contract will look like.

I found some incredible news for investors as well as buyers…
Friday, the FHA has suspended the 90-day anti-flipping rule for 1 year, effective February 1, 2010. So for at least the next 12 months, FHA buyers can obtain loans on properties that have been recently purchased by investors.

 With certain exceptions, FHA currently prohibited insuring a mortgage on a home owned by the seller for less than 90 days.

The policy change will permit buyers to use FHA financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales.  

This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities. 

This is great news for investors trying to flip properties to FHA Buyers! For the next year at least, you wont’ have to sit back waiting for 90 days on title before you can even GO TO CONTRACT with a buyer. 

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

New Year still Offers Great Interest Rates!

The 30-year fixed-rate mortgage  averaged 5.06 percent for the week ending January 14, 2010, down from last week when it averaged 5.09 percent. Last year at this time, the 30-year FRM averaged 4.96 percent.

Home sales in the Lake Oroville real estate market, especially for lower-priced homes, increased due in part to the home buyer tax credit and house prices appeared to have changed little.

I want to give you an example again of what the difference between a 5.06% interest rate and say 6.5% rate is on a 30 year mortgage.

Lets say on a $150,000 purchase price at 5.06, the principle and interest payment would be approx. $810.74 per month. Now take that same purchase price of $150,000 at 6.5% and the approx. monthly payment would be  $948.10. This is a difference of $ 137.36 per month, a  savings of $1648.32 a year and $49,449,60 over the life of the loan! That is almost a $50,000 difference. So interest rates play a big role in purchasing a home.

Whether your a first time buyer or looking to move up or down for that matter, you need to take advantage of this!

Speak with a Oroville Real Estate Professional to see how they may be able to help you get into a home. There are alot of programs available.

In my next post ,I will be giving you the information and links you need to get enrolled in  the Mortgage Protection Program. This is a free program that every first time buyer should be enrolled in! There are time periods so stay tuned for details.

 First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers has been extended until April 30, 2010. The  improvment to this? There is now a credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010. Home buyers can still take advantage of the prices in the Oroville, Chico and Paradise Real Estate Markets as well as take advantage ofgreat interest rates!

This is a great  “MOVE UP” market. If you have been thinnking about upgrading to a larger home..there is a credit for you, here is your chance!

Who Qualifies for the Extended Credit? 

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase. 

Can a Buyer Still Qualify If He/She Closes After April 30, 2010?

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

• Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
• Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.

Who Qualifies for the Extended Credit?

• First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
• Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.

To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase. 

Can a Buyer Still Qualify If He/She Closes After April 30, 2010 

Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.

So in our office, we are witnessing many things going on for all the “First-time Homebuyers”. Especially if trying to take advantage of the tax credit, as they are under a time line.  Many of them had no idea what the process of buying a house was. Like talking to a lender, getting pre qualified, learning about the different loan types, learning what properties they would be looking for etc.. they did not speak to a realtor first .You should always consult a realtor, they will educate and guide you through the buying process. Oroville Real Estate

Several buyers went out and traded that old “Clunker” in to get a new car! Don’t they always smell so good!  Then they find out they qualified for the home but cant now because of the “New Car” payment or they are qualified for less..its sad really.  Most would have waited on the car, if they had only known what it was going to do to their dream of home ownership. Oroville Homes

 Majority of the first time buyers also qualifying for the same properties as all the other first time buyers. Majority are properties that are in foreclosure, short sales or are in such bad shape they don’t qualify for the loan. Typically first time buyers are FHA loans. These lower priced properties are getting offers same day and sometimes multiple offers, which multiple is never fun with the banks!

So I thought I would put a few key notes in here I thought might help.  I guess its information and advice.

 It is still a GREAT time to buy! Interest rates are still great and property prices are down. The Magic Combination.

The Tax Credit

As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed legislation that grants a tax credit of up to $8,000 to first-time home buyers. You should consult you tax advisor.

Who Qualifies?

First-time home buyers who purchase a home between January 1, 2009 and December 1, 2009. To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase. You must have closed escrow by midnight November 30th.

Will the Tax Credit Need to Be Repaid?

No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during the three-year period, the credit will be recouped on the sale. Consult your  tax advisor on this if you do decide to sell.

Short Sales

These can be very attractive. The sellers have taken care of the home , they are usually in good condition and the price is right!.Perfect! However, it is critical that buyers understand the time frames for short sales before they make an offer. Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. With the tax credit time frame running out, it could be a real gamble to get it closed on time. 

Foreclosures / Bank Owned

These are usually priced well for the first time buyers. A foreclosure can be that perfect price and they usually close within a realistic time frame. These however need to be checked carefully as they may need repairs that the appraiser will make note of. These will need to be repaired for an FHA loan. FHA loans are stricter with the condition of the property.  Banks may do repairs but most of the time they only care about their bottom line, which didn’t include repairs..

Most properties under $150,000, get ALOT of activity. As soon as they come on the market, there are multiple agents and buyers looking. If you like it ,dont wait. It will either end up with multiple offers and could price you out or it will be gone!

I guess most importantly…Do Not buy ANYTHING during your escrow process. It can change your credit score and/or you debt to income and cause you to lose your loan and so the house.

I came across this article again, and thought it might be a good to share at this time.. Alot of buyers are aware of the tax credit but still are on the fence in fear…What if  “life happens” and I lost my job? Fear of being in the   same  situation as alot of the homeowners now. Well this article may help put your mind at    ease,  but dont forget the clock is ticking on the credit. You MUST close escrow by midnight on November 30th to qualify! Oroville Real Estate

 To help provide first-time home buyers with peace of mind when purchasing a home, the CALIFORNIA ASSOCIATION OF REALTORS® Housing Affordability Fund (C.A.R.H.A.F.) is offering a mortgage protection program to first-time home buyers.

Through the C.A.R. Housing Affordability Fund’s Mortgage Protection Program, first-time home buyers who lose their jobs due to layoffs may be eligible to receive up to $1,500 per month, for six months, to help make their mortgage payments. A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months.

To qualify for the Mortgage Protection Program, Applicants must:

1. Be a first-time home buyer – someone who has not owned
             property in the last three years (includes co-buyer)
2. Open escrow April 2, 2009, or later, and close on or before
   Dec. 31, 2009 (purchase agreement cannot be dated before April 2, 2009 (purchase agreement cannot be dated before April 2,2009)
3. Use a California REALTOR® in the transaction
4. Purchase the property in California
5. Be a W-2 employee (cannot be self-employed)

Read more…

Is there a difference between a Mortgage Pre-Qualification letter and a Mortgage Pre-Approval letter?  The answer is YES!

These terms appear to be similar, but are different.

Speaking as a REALTOR®, the difference is in documentation and verification. In other words, is the buyer providing copies of income pay stubs and bank account statements to the Lender or is the Lender simply relying on verbal information provided by the buyer?

 Mortgage Pre-Qualification is generally a process where a buyer contacts a Mortgage Lender/Mortgage Representative, often on the telephone, who then asks the buyer to provide some information. The information requested involves a current address and how long living there, a social security number and permission to order a credit report, annual income and hopefully the amount of down payment.

 After the credit check is ordered and received by the Mortgage Lender, the Mortgage Rep then estimates the amount of mortgage the buyer can afford and sends (via fax or email) a letter to the buyer with the title Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ or Congratulations, You Are Pre-Qualified, for a mortgage loan in the amount of $__ and a purchase price of $__. This is usually done within a half hour or so of the initial phone call, and at best can be described as an estimate of potential mortgage ability and not Mortgage Pre-Approval.

Mortgage Pre-Approval,  in addition to obtaining a credit report, many Lenders require the buyer to provide proof of two years of work history, pay-stubs or income tax forms, copies of bank statements for source of funds verification and copies of charge card statements.

When the documentation is provided, it is then submitted to the Mortgage Underwriter for review and approval. The Mortgage Pre-Approval letter is worded something like this: Congratulations, You Are Pre-Approved for a mortgage loan in the amount of $__ and a purchase price of $__ subject to a Contract of Sale and a satisfactory Bank Appraisal on the home being purchased. While more time consuming than the previous pre-qualification practice discussed above, it is more thorough and more reliable, shortens the formal mortgage application and approval process and provides the ability for a fast closing if one is desired.

Mortgage Pre-Approval will give the buyer confidence in a price range and confidence in obtaining mortgage approval. In submitting offers, sellers will know they have a serious buyer who has taken the time to arrange for mortgage financing first.

Qualified, first-time home buyers using a Federal Housing Administration (FHA)-insured mortgage now can apply the $8,000 federal tax credit toward their down payments, the Dept. of Housing and Urban Development (HUD) announced today.

Currently, borrowers applying for an FHA-insured mortgage are required to make a minimum 3.5 percent down payment on the purchase of their home. Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. 

For more information, please visit:

 http://www.hud.gov/news/release.cfm?content=pr09-072.cfm

What Is an FHA Loan?

An FHA loan is offered by a conventional lender, but the government agrees to insure the loan, meaning less risk for the lender in case the borrower defaults. FHA loans are attractive to buyers as well, as they require lower down payments and are available to those with less than perfect credit. There can be some requirements the property will need to meet for an FHA loan so consult your real estate professional as well as your loacal lender regarding Oroville’s FHA loan limits.