SAN DIEGO FIRST TIME HOME BUYER: FHA AND ZERO DOWN LOAN OPTIONS

Disclaimer:  This article is short–and a good place to start when searching as a San Diego first time home buyer.  However, if you first want to talk to a knowledgeable person about buying your first home in San Diego, we understand that!  Call Scott Murphy at 760-613-6190 or our lender associate Mark Luciani with America One Mortgage Group at 760-230-0498 or email mg@goam.com  and he will provide expert guidance, support and rates.

As a San Diego First time Home Buyer, How Much Home Can I buy?

When buying a home or condo for the first time, obviously the most important question to ask is “How much can I or we afford?”  Your mortgage lender will have a simple mathematical equation to determine exactly how much home you can afford to buy.  However, you can roughly calculate it yourself, before you even speak with a mortgage company.  (This is purely for the sake of illustration.  When speaking to a professional loan officer, you may find that you qualify for more or less than this example shows– but this will get you close.)

When qualifying for your first San Diego home, your loan officer will ask about your gross monthly salary.  As an example, if you earn $48,000 per year, your monthly salary would be $4000.  If you are married, or buying your home with another person, the loan officer would add both of your salaries together.  So let us say that there are two home buyers and each earns $48,000 per year for a total annual income of $96,000.

The Next Step?

Your San Diego loan officer will take the $96,000 and divide it by 12 months.  That gives $8000 per month to work with.  FHA allows a borrower to qualify for up to 43% of their monthly salary. Keep in mind that you are not qualifying for the total amount of the loan; instead, you are qualifying for the monthly payment.

So we take the $8000 and multiply it by .43 or 43%.  FHA wants all of your bills to total up to 43% (or less) than what you actually earn–but on a case-by-case basis will sometimes allow this figure to go as high as 50%.

That gives us $3520 per month that we can spend on our first home.  But hold on just a second!  We still have to subtract out other expenses.  Remember, FHA wants 43% to include all of your bills.

Let’s say each one of the borrowers has a car payment of $350 per month.  We must take out $700 from what we can afford.  That leaves us $2820.

Do you have student loans?  Let’s say one of the borrowers has a student loan payment of $200 per month.  Also, let us say that they have four credit cards between them and each one has a minimum monthly payment of $100.  (Cell phones and utility bills do not count.  Only loans.)

The credit cards and student loan brings us down another $600 per month, so we subtract that out and that leaves us with a balance that will allow you to buy your new home.

Are we there yet?  Not quite.  Everybody who owns a home has to pay yearly property taxes and insurance.  There is no way for us to guess how much either of those will cost for you.  If you are a San Diego first time home buyer, here is a site dedicated to information about your  California and San Diego property taxes–which in most San Diego neighborhoods run around 1.25 percent of the sales price (give or take a little!).

As far as insurance goes– just count on $50 – $100 per month.  It depends upon your claim history and what company you choose.  There are many factors.  Whoever holds your auto insurance policy should be the first agent you call.  Usually you will get a discount for holding multiple policies such as auto and life insurance.  After that, call two or three others and just go with the one offering the best rates and coverage. For veterans, we are partial to USAA.

TIP: MAKE SURE THEY ARE ALL OFFERING YOU THE SAME COVERAGE.

So we still have to subtract for property taxes and homeowners insurance from our $2220.  Let’s subtract $420 to keep the numbers easy.  It will most likely be less, but why max ourselves out?

We have $1800 per month to pay off a mortgage loan.  That’s great!  At current interest rates, which are hovering around 3% to 4%, that monthly income would qualify you for approximately $325,000 or so— no problem.

However, should interest rates go up, the amount you could afford (the $325,000) will go down.  This is why it is vitally important to buy real estate– first time homebuyer or not– right now, while the rates are low.  In having the vision to buy a home now, when interest rates are at historic lows, you are making a very intelligent financial decision that can benefit the rest of your life.

Of course, there are other factors to consider, such as credit score.  Also, if you need an FHA loan-– which allows for credit that may be compromised– there are FHA maximums.  For example you can use FHA  for a current maximum mortgage loan amount of $580,750.   (Click here if you want to double-check.)

If you have good credit, don’t worry about the FHA maximums or their hefty mortgage insurance premiums. You might also consider also exploring a conventional mortgage loan which might be structured so there will be no mortgage insurance.

CAN I BUY A HOME WITH ZERO DOWN?

If you are a military veteran, most likely YES!  Like FHA, this loan requires that the buyer be within certain guidelines for income and purchase price.  For buyers that are above the income limits there are still occasional options for 100% financing.  Mark Luciani you give you more information on this.

WHAT ABOUT NO-COST LOANS? DO THEY REALLY EXIST?

Yes they do–and they need not to add a single dollar to the loan or San Diego home you are buying. Mike Murphy, a retired mortgage banker and agent with San Diego Previews, developed and issued the first no cost mortgage loan in California in the 1980’s– and we struggled for years to find another lender who understood the concept and was willing to do them. What a relief to have discovered Mark Luciani with America One Mortgage Group, who does them the right way with loan closing costs and escrow fees funded via a slightly increased interest rate for the borrower. The beauty of a no cost loan is that if you wish to refinance the loan six months later because rates have dropped, you can refinance with a no cost loan once again. To discuss this further, call Mark at either 760-230-1876 or 760-518-8315.

IF YOU ARE A SAN DIEGO FIRST TIME HOME BUYER CALL SCOTT OR ROBERTA MURPHY TODAY AND WE’LL START THE SEARCH FOR YOUR FIRST HOME  IN A  PRICE RANGE THAT WORKS FOR YOU. SCOTT MURPHY CAN BE REACHED AT 760-613-6190 AND ROBERTA MURPHY AT 760-402-9101. AND FOR MORTGAGE INFORMATION, CALL MARK LUCIANI AT 760-230-1876.