REO, Bank Own- Buy it now!

It’s here, the time to purchase a bank owned property. There are much more active buyers bidding on a home. The need to wait for a short sale or an auction sale isn’t necassary. Banks are asking for at least 10% -down payment and properties to be sold in an as is condition. Make a trip to the city, where the property is located to see what are the pending violations, if any.

 

Most loans which are 10% down payment require Private Mortgage Insurance (PMI). The lender programs may have the option of including the PMI on the rate (in the form of a higher rate), or may include a seperate monthly private mortgage insurance premium along with the mortgage payment (its about aproximates .82% of the loan amount and varies by insurer). The difference is, adding it to the rate makes the payment lower. The downside is when you do have the 20% equity you would have to refinance the loan rather than on a monthly premium you would just call the bank and ask them to remove the monthly PMI premium. It would be wise to you ask your loan officer to give you the different payments and make your decision accordingly.

 

Be prepared, by being buyer ready in these times of multiple offers we suggest the following:

Consult a loan officer to give you a “good faith estimate” (make sure you get a copy of your credit report)

A good faith estimate will show an itemized estimate of all fees involved in closing the mortgage loan

Receive a qualification letter from the loan officer.

Do not disregard an “as is” purchase. Most purchase agreements allow an inspection time frame.

Bank owned properties in many occasions just need paint, carpet, and minor maintenance.

Building sweat equity is what matters.

 

 

 

 

 

 

 

FHA Limits Southern California

Three percent down (3%), Private Mortgage Insurance (PMI), seller can provide you  with up to 6% closing cost credit. 

County Name	MSA Name	MSA Code	Division	SFR	2 unit	3 unit	4 unit
Los Angeles	Los Angeles– Long Beach-Glendale	31100	31084	$729,750	$934,200	$1,129,250	$1,403,400
Orange	Santa Ana-Anaheim-      Irvine	31100	42044	$729,750	$934,200	$1,129,250	$1,403,400
Riverside	Riverside-San Bernardino-Ontario	40140		$500,000	$640,100	$773,700	$961,550
San Bernardino	Riverside-San Bernardino-Ontario	40140		$500,000	$640,100	$773,700	$961,550
Ventura	Oxnard-         Thousand Oaks-   Ventura	37100		$729,750	$934,200	$1,129,250	$1,403,400

-Federal Housing Administration (FHA)

Brush up on these mortgage basics to help you determine the loan that will best suit your needs.

• Mortgage terms. Mortgages are generally available at 15-, 20-, or 30-year terms. In general, the longer the term, the lower the monthly payment. However, you pay more interest overall if you borrow for a longer term.

• Fixed or adjustable interest rates. A fixed rate allows you to lock in a low rate as long as you hold the mortgage and, in general, is usually a good choice if interest rates are low. An adjustable-rate mortgage is designed so that your loan’s interest rate will rise as market interest rates increase. ARMs usually offer a lower rate in the first years of the mortgage. ARMs also usually have a limit as to how much the interest rate can be increased and how frequently they can be raised. These types of mortgages are a good choice when fixed interest rates are high or when you expect your income to grow significantly in the coming years.

• Balloon mortgages. These mortgages offer very low interest rates for a short period of time — often three to seven years. Payments usually cover only the interest so the principal owed is not reduced. However, this type of loan may be a good choice if you think you will sell your home in a few years.

• Government-backed loans. These loans are sponsored by agencies such as the Federal Housing Administration or the Department of Veterans Affairs and offer special terms, including lower down payments or reduced interest rates to qualified buyers.

Slight variations in interest rates, loan amounts, and terms can significantly affect your monthly payment. For help in determining how much your monthly payment will be for various loan amounts, use Fannie Mae’s online mortgage calculator.

You can always have the option to buy down your interest rate.  The cost is usually one percent of the loan amount and the rate decreases (rate decrease varies with all lenders),  ask how much will it reduce and calculate the cost vs. how long you are planning to keep the specific property.    This can be a substantial savings in the long term.