Published on March 7, 2014
How to Finance Your Home Presented by: Irvine Team at Redfin March 5, 2014, Irvine, CA @Redfin www.facebook.com/Redfin
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Understanding the Market
Orange County Inventory
Orange County Prices
Orange County Overview
Local Recommended Lenders In no way does Redfin benefit financially from recommending lenders – we just think they’re great lenders!
Review Your Financial Situation ● Pull credit report, look for errors ● Establish comfort level for monthly payment ● Figure out how much monthly income goes towards debt typically 28 – 40% healthy ● Pay down credit balances to 1/3rd of high limit ● Don’t open any new lines of credit ● Don’t buy any big ticket items ● Determine source of funds ● Current employment status
Organize Your Assets ● ● ● ● ● Get ready for the down payment Cash accounts (liquid funds) 401(k), stocks, other investments Gift funds? (Max. allowed varies) Move funds around before you start shopping
Pulling Credit: Is it harmful? ● Your credit report must be reviewed by a lender before you can obtain a pre-approval ● If you know your score, a lender should be able to give you ballpark pricing for their loan products ● Maintaining a pre-approval has a negligible impact on your credit score ● Don’t allow lots of lenders to pull your credit score repeatedly
Getting Pre-Approved A pre-approval letter is a letter from a bank or a lender estimating how much they'll lend you ● Establishes what you can afford & makes offer process go faster ● Good for 90 days, depending on lender ● Ask for a few different amounts ● Redfin asks that you get pre-approved before your third tour ● Are gift funds involved? ● How much do you have for a down payment? Information needed: ● W-2, two pay-stubs, tax returns, bank statements
Facts on Getting Pre-Approved ● Applications are usually free and credit checks should not cost more than $20 ● If you get multiple credit checks from multiple lenders within a 30 day period, this will only count as one credit check against your credit score ● The application does not bind you to a lender, loan or rate ● You will get a better idea of any other action items you need to complete before you can buy ● Gives you a chance to discuss different financing options ● Your pre-approval stays valid as long as your finances constant (check with your lender to see if they have limits on this) ● Being pre-approved is required by sellers to consider offers
Types of Loans ● Conventional: ► As low as 5% down ► Fixed or adjustable rates, conforming or non-conforming ● Federal Housing Administration Loan (FHA): ► Always have mortgage insurance ► Buyers need only a 3.5% down payment ● VA Guaranteed Loan: ► Veterans, active duty personnel, reservists/national guard, surviving spouses ► No down payment
Start Shopping for Lenders Compile a list of 2-3 lenders & brokers Good sources include: ● Redfin's partner lenders ● Referrals from friends, family & co-workers ● Banks or credit unions you have accounts with ● A large, national bank with an advertised rate ● Your real estate agent ● Online review sites, such as Yelp ● BEWARE OF OUT OF STATE LENDERS!!!
Comparing GFE Results ● Gather Good Faith Estimates (loan quotes) ► A minimum of three, more is better ► Compare similar loans Program (FHA, conventional) Timeframe (same day) ● Compare costs side-by-side ► Discount & origination points ► Interest rates ► Insurance premiums (FHA, PMI) ► APR (interest rates + fees + points + PMI)
Where Are Rates Headed?
Interest Rates - snapshot Type of Loan February 27, 2014 February 20, 2014 30-Year Fixed 4.37% 4.33% 15-Year Fixed 3.39% 3.35% 5/1 ARM 3.05% 3.08% 1-Year ARM 2.52% 2.57%
Why all the Multiple Offers? What’s driving the sudden demand for homes? ► Interest rates are rising In October, 64.6% of listings faced multiple offers. This is down from 72.2% in September. ► OC Winning Offers in October 23.1% sold over asking 5.0% were all cash 25.0% included a cover letter
Make Your Decision ● When possible, get a loan commitment ● Lock your interest rate (30 - 60 days) ● Make alternative funds liquid (401k, stock) Good news! Loan payments are made in arrears, so your first loan payment won’t be for two months. You’ll have one month of no payments.
NEW! Express Loan Program Right now in Orange County, 64% of offers are multiple offer situations By using this program you will be able to offer: · Little to No Loan Contingency · Reduced Appraisal Contingency · 21 Day Close · Reduced Risk for the Seller
Express Loan Program How It Works: ● Step 1: Certified Lender takes you through the underwriting process. This usually happens in your first 10-14 days of escrow. You will need to submit all your financial and other documentation to the lender. Once you have full underwriter approval, it indicates to the seller that pending a clean title and appraisal, your lender is ready to fund the loan. ● Step 2 : Your offer is made with terms that most, if any, other buyers financing their home can compete with. ● Step 3 : Upon opening escrow your appraisal will be ordered as a rush. This is a $100 fee which is covered by your Certified Lender. ● Step 4 : Upon a clear title and appraisal at or above the purchase price, escrow closes in 21 days or less. Get Started Right Away!
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