Financing Guide for Homes in Santa Clarita and Valencia, CA

Getting
Started		 Shopping
for a Loan
 Know
Your Costs		 Getting
Pre-Approved
by a Lender		 Application
& Processing

Funding
your Loan

Getting Started

Build A Green File.

A “green file” includes all your important financial documents. You will need these items on hand to secure financing.  A typical green file would contain:

Check Your Credit Rating

Credit scores range between 400 and 800. 620 + is considered “good”. 680 + is considered “premium” and may possibly help get you a lower interest rate. Your credit rating will have a huge impact on the type of property you can buy, and at what price.  We recommend that you first check your credit rating with an experienced lending institution so that we can determine what you can afford.  The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and Trans Union.  We can recommend experienced, knowledgeable lenders in the residential, commercial, and investment real estate areas.

Equifax http://www.equifax.com (800) 685-1111
Experian http://www.experian.com (800) 392-1122
Trans Union http://www.transunion.com (800) 888-4213




Be Careful With Your Finances.

You probably don’t want to make any sudden career changes or large purchases right now because of the impact they will have on your credit score. And, if you need help, we can make suggestions that will help you approach your property purchase from your best position of financial stability.

Savings & Debt

If you are buying real estate, try to accumulate funds towards your down payment, closing costs (appraisal, miscellaneous fees, escrow, title insurance, etc.) and expenses such as inspections. Also, try to pay down existing high interest rate debt, like credit cards.

Top of page

 

Shopping for a Loan

How to Find a Lender

Today, lenders can be easily found through a variety of sources. In addition to calling ads in the newspaper, you can also find and apply to lenders on the internet, and through referrals from your real estate agent. We would be happy to suggest lenders we have used successfully, who have proven themselves competitive and capable even with problem properties or poor credit.

Choosing the Right Lender

We recommend that you interview several lenders and evaluate them based on the following:

Choosing the Right Kind of Loan

Your lender is the best person to help you select a loan program to suit your needs. Below is a summary of the three most popular loan types we see in practice; for more detailed information click the link at the end of this page.

  1. Fixed Rate Loan: A fixed rate loan assures your monthly payments will stay the same over the life of the loan, which is typically between 15 and 30 years. A fixed rate loan may be best if you intend to hold the property for a long period of time, say over 7 years.
  2. Adjustable Rate Mortgages(ARM’s): ARM’s may be suitable if you plan to sell or refinance your home within 7 years. The starting interest rate is typically lower than a fixed rate loan, saving you money initially, though it is important to understand the index, readjustment interval, capitalization rate and downside risks before making a final decision on this type of loan.
  3. Intermediate ARMs: Also called Hybrid Loans, these loans offer fixed interest rates for the first few years, for example, 3, 5, 7 or 10 years, after that the interest rate adjusts with the market.

Top of page

 

Know Your Costs

 

 

Your Credit Report

This fee is typically under $50.00. Your lender will order a review of your outstanding loans and your payment history from a credit agency after you've given your permission.

Processing Fee / Application Cost

This cost, typically a couple of hundred dollars, covers the work to evaluate your credit worthiness and you ability to repay the loan. Some lenders offer this back to you as a credit upon closing.

APR

The Annual percentage rate, or APR, is the total of all your costs of borrowing as a percentage rate that is to be charged on the loan balance.

Index Rates

Variable interest rate loans readjust their interest rates periodically based on changes in an given index. Typical indexes are Treasury Bill or the Federal Reserve Rate.

Points

Depending on the market, mortgage companies sometimes charge a one-time interest payment calculated as a percentage of the loan. This charge is called the “points”, and may range from 0.25% up to 2% of your loan balance. It is usually paid in advance.

Appraisal Fees

Lenders hire experienced appraisers to evaluate your property’s purchase price, condition and size in comparison to similar neighborhood sales that have recently been closed. This helps both you and the lender to ensure the purchase price is not too high. Appraisal costs vary according to the property type, the kind of appraisal required, and the region where the property is located.

Miscellaneous Fees

Various charges may be incurred while processing of your loan. These may include notary fees, courier fees, and recording fees.

Prepayment Penalties

These can vary widely. Be sure to find out if your lender plans to charge a penalty if you refinance or sell within a certain time frame.

Top of page



Getting Pre-Approved by a Lender

There are several benefits to getting a pre-approval letter.

First of all, you will know exactly how much real estate you can afford. When you find a property you want to buy, your offer will be in a better position than someone less prepared. Finally, being pre-approved is more efficient; it reduces the amount of time it will take your lender to fund your loan. You will be asked to provide comprehensive documentation, which the lender may independently verify. For example:

Top of page

 

 

Applications and Processing

 

Mortgage Brokers and Lenders

A mortgage broker is a person or company who will be your main contact throughout your loan. They are often able to work with a number of lenders, who provide the funds for your loan. Typically, the lender pays the mortgage broker a fee for acting as the intermediary and providing the customer service.

Filling Out the Application

There are some standard forms to be completed when applying for a loan. Some mortgage brokers keep these on their website so you can fill them out and submit them on line. The information will be verified and used to qualify you for your loan, so be sure you’re accurate on the information you provide.

Documentation

Your mortgage broker or lender will need copies of the documents you began gathering early on, including:

Stay in Communication


The lender will have an underwriter, who will verify your documentation and confirm your ability to repay the loan. Once you are in a contract on a property, there may also be a loan approval committee which will meet to review the underwriters’ conclusions, and evaluate the property. sure to return your mortgage broker’s calls promptly so you keep the process moving forward, and check in with your broker from time-to-time.

Top of page

 

 

Funding

 

The Signing

Your real estate agent and mortgage broker will have you sign the final loan documents when the lender is ready to ”close” your loan, or “fund” it. Signing typically takes place in front of a notary or escrow officer. Ask your mortgage broker if there is anything you need to do to prepare for this. You will need to bring a photo ID and perhaps a cashiers’ check if monies are still due. Be sure to allow yourself enough time to review all the documents to assure their accuracy.

Congratulations!

Your mortgage broker will likely call you to confirm that the money has been transferred and the loan has closed. It is a good idea to keep permanent records of this phase of the transaction, once completed.

Top of page


Home | Margo | Buyers | Sellers | Properties | Communities | Contact me

web development by eSolutions
© 2009 Margo Sherwood. All rights reserved.