Attachment 5 - Calhfa: Fill & Download for Free

There are at least three ways of buying a home without using any of your own cash. I’ll tell you what they are, then dash your hopes by telling you what the catch is. I’ll build you back up by giving your some strategies to get around the “catch,” then dash your hopes again by telling you about the real world of buying and selling real estate. Finally, I’ll give you just the tiniest sliver of hope.Still reading? Good. Here are the main ways you can buy a home with no down payment:VA home loan. Veterans and active duty members can be eligible for a home loan guaranteed by the VA. It requires no down payment (up to a county maximum, which is generous) and has no mortgage insurance.USDA loans. These are expressly for “rural” properties, but you might be surprised at those areas that qualify. Do a search on “USDA loan” and find the USDA site, where you can enter an address or area to see what qualifies as “rural.Down payment assistance programs. In my state, California, the California Housing Finance Agency (CalHFA) offers a number of assistance programs for first-time buyers. There are limitations of purchase price and of income, but they are realistic. It is possible to buy a home using CalHFA programs with no money ultimately out of pocket—including closing costs. Which brings me to the first downer.Closing costsBuying a home involves more than just the down payment. You will also have to pay for title, escrow, underwriting, appraisal, notary and initial deposits to your impound account for taxes and insurance. It would not be at all out of line to suggest that closing costs for a $400,000 property could easily hit $10,000, and possibly more. Most of these costs are third-party fees and initial deposit, so checking with a “different lender” won’t do you much good.Three solutions to closing costsPay them out of pocket (duh). Oh, wait. I forgot we were trying to do this with no cash. Scratch that one.Ask the seller to pay them. Although this is tough in a competitive market, it is not impossible. Just be aware that the seller will be getting a slightly higher price for the property if they are paying your closing costs. It is completely permissible, and not unusual.Increase the interest rate to get a lender rebate. If your “par” rate (no “points”) is 5%, increasing the rate to 5.5% can generate a lender rebate of around 2% of the loan amount. This may be enough to cover your closing costs.Mix ’n’ match the above. You can combine the three approaches any way that works for you.Dashing your hopes againNow that I have told you how to buy with no down payment AND showed you how to cover the closing costs, I’ll give you another bit of reality: You must have the ability to write a few checks before closing escrow.First, when you make an offer to the seller, you will include a deposit check with the written offer. It is called an earnest money deposit. It shows you’re “in earnest,” hence the name. A deposit—called “consideration”—is a requirement of an enforceable contract. Although a deposit of $1.00 is theoretically acceptable, you are unlikely to find a seller who’ll take your offer (or you) seriously unless there is some serious money attached. Talk to your agent, but deposits of $1,000 to $5,000 are very common in our area, and even 3% of the purchase price is not unheard of. You do not risk a penny of this because it will be deposited to escrow only if and when the seller accepts your offer. At the time the seller accepts your offer, the check must be good—rubber checks won’t fly.You’ll also typically have to pay for the appraisal when your loan officer orders it. The cost is typically $500-$600, but you can pay with a credit card. You should also get at a minimum a home inspection for a resale home, no matter how good it looks. Expect to pay about $350-$500 for the inspection.The real difficultyIf the market is at all competitive, multiple offers on each property are common. Sellers select one offer over another not only because of the price they’ll get, but also because of what looks “clean.” In other words, an offer that seems complicated with multiple loans (like CalHFA), or has a very low down payment starts at a disadvantage because sellers think they have a lesser chance of going through. If you are going to buy a home with little or no down payment, just be aware that you may have to make offers on several properties before getting one accepted.The important components of your successFirst, you MUST have a solid, credible preapproval from a lender. Do this even before you start talking to Realtors. You may also want to have conversations with a number of Realtors to find one who is compatible with you and who is willing to work with you. Having your preapproval in hand will help you a great deal in convincing real estate agents, who work solely on commission, that you are serious and a good client.Do NOT under any circumstances try to work with multiple agents. You want one agent who is loyal to you and working for you. You must earn their trust by working with them exclusively until you either find your home and complete the transaction, or decide to part ways with them. Just be up-front and candid if you are not happy with the service you are getting from the agent. Be aware, too, that agents generally prefer to work with sellers (listings) rather than buyers. You want them to believe in your cause and make it theirs, as well.I realize I may have painted a somewhat pessimistic picture of the process. Speaking from the viewpoint of four decades in the real estate industry as real estate broker and as lender, I can assure you that 1) The picture I have painted is realistic; and 2) It is definitely possible to succeed. Preparation and a firm grasp on reality are the twin keys to success.I hope this was helpful. Good luck!