Loans

Financing

(Scroll down for information on San Diego down payment assistance programs)

There are so many options to consider when choosing a lender and choosing a loan. It is important to chose a lender that understands your needs, will listen to your concerns and treat your money as you would. You have worked long and hard to get to this important time in your life and your lender must respect and honor your hard work and dedication in achieving your goals. With the recent turmoil in the housing market, it may seem as though there is no one left, or no one to trust. Not so! So where do you start? Your Agent of Possibility has many referrals available as well may your friends and family. You may also want to consider where you have your checking account; which may be a bank or credit union.

The first step in the home buying process is speaking to the lender of your choice and getting prequalified. The lender will ask you for your family income, the money you have available for a down payment, closing costs and cash after closing. They will review your credit report and any outstanding debts you may have and they will help you determine the amount you can afford for a monthly payment of principal and interest along with taxes, insurance, and possibly mortgage insurance. By determining this upfront, you will be in a better position to chose the home of your dreams.

There are a few different options you have available to you in the way of financing. There are low down payment loans, no down payment loans and loans that will require you to put money down. Your lender will help you in the matter of choosing the best loan available for your situation, but here are some overviews of some financing options.

Interest on mortgage loans along with real estate taxes and mortgage insurance provide an additional benefit to homeownership as these items are tax deductible. There also is a recently approved $8000 tax credit available to First Time Home buyers.

Conventional Financing

A conventional loan is a loan that is not guaranteed or insured by the government as are it’s predecessors FHA and VA. A conventional loan may be considered “conforming” or “non-conforming” or “jumbo”. Conforming loans are loans that are underwritten to guidelines set forth by either Fannie Mae or Freddie Mac which are GSE’s or government sponsored enterprises. Both have been in the news a lot lately and have received assistance from the government in the mortgage bailout. This recent assistance should help stabilize the market and assist many potential home buyers in becoming home owners! These conforming loans have loan limit specifications. The general loan limit is $417,000. There is also a “high-cost” conforming limit that may go as high as $729,750 depending upon the area of California you are looking to purchase a home. Jumbo loans would be considered any loan higher than the high cost area maximum conforming loan limit.

The difference in underwriting guidelines for conforming and jumbo will be amount required for down payments; which determines the loan to value ratios or LTV, amount of money available after the close of escrow and credit score requirements. The standard down payment for a conforming loan in today’s market are about 10% of the purchase price. Anything with less than 20% will require private mortgage insurance as part of your mortgage payment. This insurance is an insurance for the lender if for some reason you were to not make the payments, the PMI company would help mitigate the loss to the lender. Jumbo loans will require a much larger down payment.

If you have the money for a down payment, the conventional mortgage will have better rates than it’s government sister loans, FHA and VA. A higher FICO score will be required for conventional financing. Please see our page on Calculating Payments to help give you an idea of what a payment may be.

FHA Financing

An FHA loan is a federally insured mortgage loan insured by the Federal Housing Administration. This loan is available through many federally qualified lenders. The FHA was established in the 1930’s during the Great Depression. The program was set forth to allow lower income households the dream of homeownership. The FHA does not lend money, they insure the lender against loss.

There are many advantages in obtaining an FHA loan. The down payment requirements for an FHA loan are 3.5% of the purchase price. This down payment requirement, as well as funds from closing costs may be a gift from a family member. Where in a conventional loan, there may be a gift given, but the buyer would require a minimum investment. Another advantage of FHA financing is credit requirements. The FICO score requirements may be a lot lower on an FHA loan than on a conventional mortgage. The underwriting will allow for past or current credit derogatories with a reasonable explanation. Additionally, an FHA loan will allow the borrower to establish alternative credit if there is not traditional credit such as credit cards and auto loans. The alternative credit can be established through positive payment histories on rent and utilities.

FHA will require an upfront mortgage insurance premium of 1.75% of the mortgage amount, however, this may be financed. For a loan of $100,000 for 30 years at 8% this would be an additional $11.51 included in the mortgage payment. In addition to the upfront mortgage insurance, there is a monthly mortgage insurance of .5% which will be included in the payment as well. Fortunately, the interest paid on a mortgage loan is tax deductible.

FHA loans also have loan limits based on a formula of the areas median home price as established by the Department of Housing and Urban Development and can be found at the FHA website under Mortgage Limits.

Please see our page on Calculating Payments to help give you an idea of what a payment may be.

VA Financing

The VA program was established to assist eligible military service people or surviving spouses (if not remarried) the benefit of home ownership. The loan is guaranteed by the Veterans Administration and is issued by qualified lenders. This is the only program available that offers 100% financing. This is available without the cost of mortgage insurance. There is a one time VA Funding Fee that is based between 0 and 3.3% depending upon type of loan (purchase, amount of down payment, refinance or subsequent use of the benefit) and disability status. This may be financed over and above the maximum loan limit. VA does not limit the amount a Veteran may borrow, however, lenders will keep the loan limits in line with the conventional conforming limits, including high cost.

In addition to the benefit of no down payment requirement, the VA also allows a higher debt to income ratio than traditional conventional financing. The credit requirements for a VA loan are not as strict as those for a conventional mortgage. The seller or family member may pay all of the Veteran’s closing costs as long as it does not exceed 4% of the sales price of the home. In addition to closing costs, debts may be paid through escrow to qualify and may be paid by the seller or family member as well, within the 4% guideline.

There are requirements for eligibility one being an honorable discharge or active duty. To find the eligibility requirements you may visit the Veterans Administration at the VA’s website here.

Please see our page on Calculating Payments to help give you an idea of what a payment may be.

First-Time Home Buyer Assistance

Programs listed below may be based on availability. Please contact us for additional information.

Down payment/closing cost assistance grant- First-time home buyers earning 100 percent or less of the San Diego Area Median Income (AMI) can apply for a grant equal to four percent of the purchase price (not to exceed $7,500), to be used toward the down payment and closing costs. The grant is recoverable if the buyer sells or rents the home within six years. (San Diego Housing Commission)

Mortgage Credit Certificate (MCC) program- First-time home buyers purchasing houses or condominiums within San Diego city limits can receive a tax credit equal to either 15 or 20 percent of the mortgage interest they pay each year on their federal income taxes. (San Diego Housing Commission)

Calhome first-time home buyer mortgage assistance program- Qualified first-time home buyers earning 80 percent or less of the AMI, as adjusted for family size, can purchase homes in the City of San Diego with the help of a deferred second trust deed loan of $19,350. (San Diego Housing Commission)

Downtown First-Time Home buyer Program- A program that assists first-time home buyers earning 120 percent or less of the AMI to purchase a home in downtown San Diego. This program provides financing, in the form of a second trust deed loan, not to exceed $75,000. The loan is for 30 years at zero percent interest and has no monthly payments for the first five years. (Centre City Development Corporation, San Diego Housing Commission)

Shared equity program- First-time home buyers earning 80 percent or less of AMI can purchase homes in the City of San Diego with the help of a “silent second” trust deed loan for 25 percent of the purchase price or $70,187, whichever is less. No monthly payments of principal or interest are required. Maximum purchase price or appraised value is $280,749. (San Diego Housing Commission)

First-Time Home buyer Shared Equity Program in southeastern San Diego- First-time home buyers in southeastern San Diego can apply for a shared equity loan. Applicants cannot earn more than 120 percent of the San Diego AMI (for example, $76,080 for a family of four). Interest-free loans are available up to $40,000. (Southeastern Economic Development Corporation)

Down Payment Grant Program- Assistance with partial down payment costs up to $5,000 is provided in the form of a cash grant to eligible first-time home buyers who are in the process of purchasing newly-constructed homes in targeted areas within southeastern San Diego. The grant is available to home buyers with household incomes up to 120 percent of the San Diego area median income. (Southeastern Economic Development Corporation)

Home in The Heights (PDF: 226K)- The City will fund silent second mortgages for first-time home buyers of up to $15,000 per property within the City Heights Redevelopment Project Area to qualified borrowers displaced by school projects. The Home in the Heights loan can be combined with San Diego Housing Commission funds provided by the U.S. Housing and Urban Development Department that can provide an additional $40,000 or with Price Charities funds that can provide an additional $25,000. (Redevelopment Division)

Homebuyers Training Programs- Programs to teach first-time home buyers how to purchase a home.

Condominium Conversion Tenant Assistance

Condominium Conversion Tenant Assistance Program- When San Diego’s rental vacancy rate is below 7 percent, occupants of housing units being converted to condominiums who receive a notice to vacate and who have an income below the area median income are eligible for relocation/down payment assistance equal to 3 months current rent. (San Diego Housing Commission)

Property Rehabilitation and Assistance

Property rehabilitation programs- Program to help lower-income (60 - 80 percent AMI) homeowners and rental property owners make needed repairs to older housing. (San Diego Housing Commission)

HOMEWORKS! Purchase/Rehabilitation Program- For buyers wanting to purchase and renovate older homes in targeted areas of the city. Program options include deferred loans, tax credits and down payment assistance. (San Diego Housing Commission)

City Heights Redevelopment Housing Rehabilitation Loan Program (PDF: 216K)- For very-low and low-income homeowners within the City Heights Redevelopment Project Area. The program includes Home Repair Loans of up to $10,000 and Exterior Enhancement Loans of up to $5,000, or a combination of the two, for owner-occupants of one- and two-unit properties. (Redevelopment Division/Housing Commission)

Housing Rehabilitation Program- Available to homeowners in targeted redevelopment project areas that require assistance with interior and exterior enhancements to their home. The Exterior Enhancement & Home Repair Grants are provided to interested homeowners of owner-occupied, one and two-unit properties with gross household incomes up to 80 and 100 percent of the San Diego Median Area Income. A low-interest, fully-deferred Housing Rehabilitation Loan is provided to interested homeowners that have substantial home repair needs and occupy a one or two-unit property with a gross household income up to 80 percent of the San Diego Median Area Income. (Southeastern Economic Development Corporation)

San Diego First Time Home Buyer Assistance programs sourced from http://www.sandiego.gov/housing/assistance.shtml

SDHC Down Payment Assistance

The San Diego Housing Commission is charged with helping to bridge the gap between the high cost of housing in the City of San Diego and the high percentage of low wage earners – helping to correct an imbalance that threatens the stability of our work force.
SDHC has helped more than 4,300 families achieve the American dream of owning a home. Several home buyer assistance programs are available, including deferred loans, grants for down payments and closing costs, tax credits, and opportunities to purchase homes at below-market-rate prices.

SDHC’s programs can be used to purchase a home anywhere in the City of San Diego (zip code must begin with 921). Applicants (except for “For-Sale Affordable Homes”) must be first-time home buyers, defined as not having owned real estate in the past three years. All programs are subject to Area Median Income restrictions and have maximum purchase price limits.

3% Interest Deferred Loan

SDHC provides a 3% interest deferred loan, up to 25% of the purchase price. No payments are required for 30 years, unless you sell or refinance, at which time you are required to pay back the principal balance plus accrued interest. You must obtain a fixed-rate first trust deed loan to obtain the deferred loan, and have adequate income, acceptable credit history, and personal funds for a minimum 3% down payment. Applicants must attend a home buyer education class.

Program Guidelines

Income Limit: 80% AMI.

Grants for Down Payments and Closing Costs

SDHC offers grants to help home buyers with a down payment or closing costs, up to $15,000 of the sales price. The grant must be paid back if the home is sold or refinanced within the first six years, after which it is forgiven.

Program Guidelines

Income Limit: 80-100% AMI.

Mortgage Credit Certificates (MCC)

MCCs now available for the purchase of bank-owned properties.
The Housing Commission received a special allocation of MCCs under emergency federal legislation to help homebuyers and the ailing housing market. This special award of MCCs can only be used by eligible homebuyers purchasing bank-owned properties. Bank-owned properties are homes or condominiums the lender took back through a foreclosure. Due to the high demand for the MCCs, additional eligibility requirements have been included with this allocation.
The Mortgage Credit Certificate Program operates as an IRS tax credit. With a MCC, the qualified homebuyer becomes eligible to take a federal income tax credit of either 15% or 20% of the annual interest paid on the mortgage each year for as long as the buyer lives in the home. This credit reduces the federal income taxes of the buyer, resulting in an increase in the buyer’s net earnings and decreases the buyer’s capacity to qualify for a mortgage loan. Applications are processed through participating MCC lenders. Homebuyer may be subject to recapture tax if they sell their residence within nine years.

Program Guidelines

Income Limit:80-140% AMI.

For-Sale Affordable Homes

SDHC has helped create policies within the City of San Diego that require developers and original buyers to make new and resale homes available to eligible buyers below the market value. Depending on your household AMI, you may also apply to SDHC for a 3% Interest Deferred Loan, a grant for a down payment and closing costs, and an MCC, making the home even more affordable.

List of Affordable Homes For Sale

Prequalification Form