Am I Ready To Buy A Home – Royce Kemp, Owner of Royce Realty & Property Management Answers
Home Buyers Blogs
Your actions after receiving lender approval for a mortgage loan can disqualify you for the loan. A mortgage loan is conditionally approved, with the lender reserving the right to re-verify credit, income, assets and employment at anytime. The lender may cancel the loan if there are any adverse changes to your qualification status.
Your debt-to-income ratio is your gross monthly income divided by the amount you spend on debt. Debt items include mortgage payments (including principal, interest, insurance, tax), car payments, credit card payments, student loans, child support payments, etc.
The lender considers debt-to-income ratio when approving you for a mortgage loan. Only 28 percent of your income can be used for your mortgage payment, which includes taxes and insurance; and 36 percent for the mortgage payment plus the rest of your debt. Anything you do to negatively affect your debt-to-income ratio may change an “approval” to a “disqualification.”
Avoid Red Flags
A red flag is any inquiry made regarding your credit worthiness. If you decide to purchase a big ticket item – like a car, boat or furniture – prior to closing, you’re at risk of having a red flag show up on your credit report.
Keep Your Money Where It Is
The balances of your liquid assets are considered when approving you for a mortgage loan. These liquid assets may include checking accounts, savings accounts, certificates of deposit, money market accounts, retirement accounts, stock and mutual funds.
Avoid changes to the balances of these accounts. Do not close accounts. Do not change banks. A large withdrawal or deposit to any of these accounts will trigger a red flag for your mortgage lender. If a red flag is triggered, you may be asked to produce a paper trail tracking large withdrawals and/or deposits.
For most employees a change of jobs to one of equal or higher pay will not trigger a red flag. However, sales people should not change jobs prior to closing on their mortgage loan.
If your income is strictly salary than you should not have a problem changing to another job of equal or greater income. If, however, your income includes salary
bonuses, commissions and/or overtime, you should not change jobs prior to closing.
If your income is based solely on a 40-hour work week without overtime, than changing to a job with equal or greater hourly pay should not be a problem. However, if your income is dependent upon overtime pay, do not change jobs prior to closing.
If your income is from commission or a substantial portion of your income is from commission, then you should not change jobs prior to closing. Typically, mortgage lenders average your commissions over the last two year period to determine income. Changing employers eliminates the two-year commission history and places uncertainty on your income status.
Talk to Your Loan Originator
Do not make any changes to your financial and employment status without first talking to your loan originator.
The 2013 San Diego County FHA loan limits will remain the same as 2012. The maximum loan limit will stay at $697,500 for San Diego FHA loans. FHA loans with loan amounts below $417,000 in San Diego are considered “conforming” and will have slightly lower rates and less stringent guidelines.
FHA Loans in San Diego that exceed $417,000 to the maximum of $697,500 are classified as “jumbo” or “High Balance”. San Diego High Balance FHA Loans will have slightly more restrictive guidelines and rates that are about .25% higher than the conforming loan amounts. High Balance FHA loans remain one of the few options for San Diego Mortgage Brokers to get loan amounts in the $600,000 range without going with a San Diego Jumbo Loan or a VA Loan.
The FHA loan program is a great low down payment loan option in San Diego and is used many times by First Time Homebuyers. It offers great flexibility, low rates, and an opportunity to buy a house with as little as a 3.5% down payment.
There are many other benefits to the San Diego FHA loan for borrowers. The 3.5% down payment on a purchase can be gifted to the buyer by relatives. This allows San Diego First Time Home Buyers or others who have not been able to save in today’s current economy to buy a home without having to accumulate the down payment on their own.
FHA loans in San Diego allow non-occupying co-borrowers as well. This is another great way for San Diego First Time Homebuyers to get into the housing market because parents can help them qualify for the loan. San Diego FHA loans still allows the seller to pay up to 6% of the purchase price to cover the buyer’s closing costs.
The up-front mortgage insurance premium is currently 1.75% for San Diego FHA loans, but there have been discussions that this could increase to 2.0% sometime in 2013. If you are looking to use an FHA loan to purchase a home, you may want to buy before this increase is implemented.
Please feel free to contact me if you would like to get a more information. For other California counties please see the chart below.