Shopping for a home is stressful. On top of everything else, financing is required unless you plan on an all-cash transaction. To make it easier and less stressful, the Dana Point real estate agents at Inspired Realty share a few tips to smooth the process.
Check Your Credit in Advance
Thinking about buying a new home in 2024 or 2025? You should check your FICO score now. If this is your first home, you should check your credit score around six months before you begin the mortgage application process. Checking in advance provides plenty of time to address any issues and raise your score if necessary.
Check your FICO Score for free when you request your credit report from any of the major credit bureaus (Equifax, Experian, or TransUnion).
Decide Between Pre-qualification and Pre-approval
When you find a house you love and want to make an offer, show your ability to close the deal with a pre-qualification or pre-approval letter.
What’s the difference between the two?
With pre-qualification, your credit, income, and debt are subject to high level review. It’s a great tool for helping you determine how much house you can afford. The review isn’t as rigorous as a pre-approval.
With a pre-approval, your information is verified and submitted to a mortgage underwriter. This is the same level of rigor used to determine whether to close on a loan.
When faced with two equal offers, a seller sees the approved buyer as more likely to close than the qualified buyer.
How Do You Find a Lender?
When buying in Dana Point, listen to the advice of Dana Point real estate agents. They know the various banks and mortgage companies that serve the area. In addition, your agent may put you in touch with a mortgage broker. This professional generally handles loans for the self-employed, business owners, and others with non-traditional, forms of income that don’t appear on W-2 forms.
How Much Should You Put Down?
The standard rule of thumb is 20%. When you keep the loan-to-value ratio at 80% you may be able to avoid paying mortgage insurance premiums. However, some FHA and VA programs require as little as 3% to 5%.
Refrain from depleting your liquidity. You’ll still want cash on hand for emergencies and unforeseen expenses after closing and move-in. When mortgage rates are high, a lower loan amount keeps payments affordable. This requires a higher downpayment. When rates are low, compare the interest rate you’ll pay on the mortgage to the return you earn if the money is invested. A lower downpayment might make more sense.
What are FHA limits in Orange County?
The amount of money that can be lent on an FHA-insured loans varies by area. FHA recognizes that home costs are higher in certain areas (like Dana Point) than in other areas (like St. Louis, MO).
The high-balance FHA loan limit for 2024 in Orange County is $1,149,825. The “low-balance” FHA loan limit for 2024 in Orange County is $766,550.
Remember, FHA lenders consider your ratio of income to loan payment (front-end ratio) and the ratio of income to all debt payments. For Orange County, the front-end ratio should be under 31% and the back-end ratio should be under 43%.
What are the VA loan limits in Orange County?
Good news for active or retired military! VA loan limits no longer apply to qualified Veterans with full VA loan entitlement. If you have an active VA loan or a past loan that was not paid off, partial loan entitlement still applies. This is capped at $1,149,825.
How Can Dana Point Real Estate Agents Help with Financing?
Make sure you work with a Dana Point real estate agent with deep connections and contacts in the community. Your Dana Point real estate agent serves as a knowledge base. They tell you when a local bank is the best bet or when your needs will best be served by an independent broker.
Real estate agents and brokers in Dana Point know the ins and outs of FHA, VA, and conventional financing.
Be sure to discuss your financial situation with your agent before you start the hunt for a Dana Point home. Your agent can help you determine your creditworthiness, review the loan options available to you, and help connect you with a lender that’s familiar with your financial situation.