Hi Lee,

Great question – Even though FHA announced that they would like to allow the $8,000 credit to be used toward closing costs, nobody has stepped up to figure out the logistics. About 2 weeks after they announced it, they back-tracked a little and modified the “guidelines” so that the credit could not be used for the required 3.5% down payment on FHA loans but could be applied as additional down payment or closing costs.

Here’s the biggest challenge. There have been no lenders or charitable organization that have stepped up to offer these “unsecured” loans to first time home buyers. Personally, I think Nehemiah should look into implementing this program – the fees would be approximately the same and they are a recognized charitable organization.

CalSTRS is a conventional loan program through Fannie Mae and therefore would not be eligible based on the initial talk about the program.

Hope that helps!

Scott

Hi Isela,

Yes, this is true. That is a challenge that is very common with bank owned properties and distressed sales. Not having heat, water, flooring, broken windows and door or almost any damage at all can prevent you from getting bank financing on a home, especially when using an FHA loan.

You may be able to do the repairs yourself – talk to your lender. It would be a big risk on your part because you would need to pay for the furnace to be installed BEFORE you own the home. Communicate with your lender and your family and determine if this is a strategy that you can consider. If you have any questions, just call

Hi Liz,

Give me a call on my cell phone anytime if you still have questions – 714-336-8286, here’s my input on your comments.

Yes it’s true that you can only put 3% down on a CalSTRS 80/17. One % needs to be from your own funds, the other two % can be a gift.

This really just comes down to the numbers. Let’s take a look at some of the things to consider.

With only 10% down you only have two options – A Conventional (fannie mae) loan with mortgage insurance or an FHA loan with mortgage insurance.
The conventional loan program with private mortgage insurance makes the qualifying of the loan significantly more difficult. You must have a minimum credit score of 740 and your maximum “debt to income” ratio is limited to 41-45%.

The FHA loan will automatically have 1.75% upfront mortgage insurance and monthly mortgage insurance. Either of these two options, if you’re paying mortgage insurance (which is a requirement with less than a 20% down payment) then you are paying potentially hundreds of dollars each month that does not pay down your principle or interest on your home loan…..I think that’s a big factor to consider when comparing your options.

Here’s another potential consideration. This is no longer a “buyer’s market”. Basically what this means is that there are more buyers than there are sellers in today’s market. When sellers have the upper hand in the negotiation process, an offer that does not ask for the seller to pay for closing costs is going to have an advantage over a buyer asking the seller to cover closing costs.

Here’s one more. If if very common in today’s market that the “purchase price” of the home is greater than the appraised value. The reason for this is that home prices are rising due to reduced availability of homes and an increase in buyer demand. This is a natural market reaction. The value of the home is determined by what homes sold for in the past 3-6 months which would be lower. You may find yourself in a position where (if your agent is savvy enough to know this trick) you pay the seller more than the home is worth above and beyond the appraised value. This might sound confusing, I’m going to do an on-line class on it next week on Tuesday.

Again, this all comes down to the numbers. I think the 10% gift can be better leveraged as part of your offer strategy due to the increased competition in the market. Let’s put all of these options on paper and see which one makes the most sense to you.

Was that an answer to your questions? I don’t know, sometimes I get caught up in “lender speak” and I’m not sure if it translates into comprehensive english

Hi Janna,

We definitely specialize in this program. We do quite a few and work with the loan every single day. Let’s answer your questions:

1. $300 STRS fee…..there should be no “STRS” fee. STRS is not a lender and they do not charge a fee that is to be passed on to the client. Sounds to me like it’s a way to charge $300, it’s as simple as that.
2. The .25% is correct. It’s called a declining market fee and is not charge because you are a California resident but California (as well as many other states) is considered a “declining market”.
3. The underwriting fee is typical and does not sound extraordinary

Another way you can “test” your lender is to speak to an 80/17 loan specialist at Broadview. We work on these loans every single day. You will never get a sales pitch from our company, just education. If we validate everything you are being told by your current lender, you’re in good hands – If not, it’s possible that your lender does not have the same level of expertise and you may want to consider working with a company that is more familiar with the programs you are interested in.

Thanks for the comment! Hope this helps

Hi Dave,

Great question. It comes down to a couple of things the way I see it. Yes, the interest rate is higher than FHA. With the CalSTRS loan you have the benefit of not paying mortgage insurance. Let’s look at the interest rate vs. mortgage insurance thing first:

Let’s say you’re looking at a $550,000 purchase price. This will be just over the maximum $521,250 that keeps us within the conforming loan limits. For the sake of this scenario I am also going to assume the minimum allowable down payment.

First let’s look at the numbers under an FHA scenario:

Down Payment @3.5% = $19,250
Upfront Mortgage Insurance @ 1.75% = $9,288.13

Base loan amount at 96.5% = $530,750
Finance the Upfront Mortgage Insurance = $540,038.13

Now let’s look at the Payments….

An “average” rate on a Jumbo FHA today is around 5.875% – so, i’m going to use that.

Monthly Principle & Interest Payment will be $3,194.53
Monthly Mortgage Insurance Payment will be $247.52
So, we’re looking roughly at a $3,442.05 payment NOT including property taxes or homeowners insurance.

Ok, let’s take a gander at the same scenario using a CalSTRS 80/17 Jumbo with a purchase price of $550,000

Down Payment @3% = $16,500
No Upfront Mortgage Insurance

Make payment on 80% first mortgage for first five years = $440,000 loan amount

Now let’s look at the Payments….

Today’s rate (9/23/09) on a Jumbo CalSTRS 80/17 is 6.5%

Monthly Principle & Interest Payment will be $2,781.10
Monthly Principle & Interest Payment on 17% second don 61st month will be $836.50
So, we’re looking roughly at a $3,617.60 payment NOT including property taxes or homeowners insurance

Here’s where we really start to crunch the numbers…..

Mortgage insurance is required on an FHA loan for a minimum of 5 years. Since the 17% second loan is deferred for 5 years as well, that works out well.

With the FHA loan payment of $3,442.05 for 60 months – you will pay $206,523.00 during the first 5 years of this loan
With the CalSTRS 80/17, you pay $2,781.10 for 60 months – this totals $166,866.00 over the first 5 years of this loan
That’s a difference of $39,657.00 over the first 5 years of the loan.

But wait, your payment goes up to $3,617.60 starting the 61st month – This now leaves you with a payment that is $175.55 more than your FHA payment.

Divide the $39,657.00 that you paid out of pocket for the first five years by the increase in your payment of $175.55 and you will find that it will take you 225.90 months to break even.

If you keep either loan for that long, there’s a chance that it will all even out or you may even pay slightly less on the FHA loan with the lower interest rate after 23.83 years or sooner once you are able to remove the mortgage insurance.

Here’s the $39,657 question though……what could you do with that money that could either improve your quality of life? earn dividends by investing this money into a recovering stock market? create a little nest egg during uncertain economic times? you see where i’m going with this.

So there ya go – that’s my two cents. Sorry about all the math. This is at least one more way to look at it when considering all of your options and what will work best for you and your family.

The very last thing I would leave you with is that currently, the ability to write off mortgage insurance as a tax deduction is due to expire at the end of 2010. If you make less than $100,000 and are counting on writing this off, it may not be available unless they extend it beyond it’s expiration. That’s one more thing to consider.

Hope that helped

Hi Ruth,

If you currently have a VA loan, you would be unable to use another VA loan. If you purchased with a VA loan and have since refinanced or sold the home, you may be eligible to use another VA loan. In regards to government loans, you can still use an FHA or USDA loan if you are eligible.

I have many questions in before I can accurately offer other options.

Do you still own that home? Are you still a homeowners?
Are you a member of CalPERS? Are you a member of CalSTRS?

I hope this addresses your question

Hi Juanita,

YES, there are a couple of great programs available to teachers in California. The HUD program is very difficult because it is only for certain properties in specific areas. Do you teach in a public school or community college? If so, you will want to look into the CalSTRS 80/17. We are experts in this loan program and help educators get approved for financing every single day. Also, if you are a CalPERS member, you may qualify for a down payment assistance program.

You can either call me on my cell phone, 714-336-8286 or shoot me an email: ScottS@broadviewmortgagecorp.com and let me know the best time and number to reach you and we can talk about these options a little more.

Hope this is good news for you

Scott

Hi Lori,

The first step is to find a lender and Realtor that will educate you about the process. If you haven’t attended some of our free web-classes, that’s a good place to start. The challenge is that if you get a lender or Realtor on the phone they are going to try sell you on doing business with them. Try to educate yourself first so that you understand the process.

The first step is to get approved for financing. The payment that you qualify for will determine your purchase price. Once you are fully approved you can hire a real estate agent to help you find the perfect home.

Hopefully you will have an opportunity to attend tonight’s webinar on “Credit, Qualifying & Completing a loan application”. This should make you familiar with what lenders are looking for.

Here’s the link to attend tonights class – http://www.californiateachersandemployeeshomeloanprograms.com/web-classes-schedule/

We are very passionate about educating homebuyers and calling us to get pre-approved will give you a no-pressure, no-sales perspective on what to expect throughout the process.

I hope this helps Let me know if there’s anything else I can do to help

Scott

Hi Ricky,

You’re most likely option would be to look at an FHA loan to buy a duplex. If you are a member of CalPERS, there are some great options there! Let me know if you would like to explore these options further, shoot me an email at ScottS@BroadviewMortgageCorp.com with the best time and number to reach you and we can go from there.

Hi Rita,
Thank you for your email. First, your “friend in real estate”? Do they work full time as a real estate agent? I have run across so many nightmare stories where buyers use friends and family because they want to help them, when the reality is that this is a VERY difficult and challenging purchasing market. Your real estate agent needs to be very experienced and it’s not possible to fire a friend if they are not doing a great job for you. I talk about this quite a bit in my classes.

As far as the lender. I am the branch manager of a direct lender, Broadveiw Mortgage – Katella Branch. The reason I put this site together is because we have an expertise in these programs, we process CalSTRS loans every day. I am amazed on a daily basis how many crooks there still are out there that try to mislead or misinform buyers in an effort to make an extra buck. It’s very common for lenders to push FHA loans instead of the CalSTRS to make more money.

There are certainly differences between mortgage bankers, brokers, FDIC depository banks & credit unions. You will not find the CalSTRS 80/17 with most of these institutions and I think that what is more important is the experience of the loan officer that is helping you, not whether or not a company is able to offer the program.

I get very passionate about this subject because we see so many people get misled. They go to the internet because they are not happy with what their lender is telling them and they end up finding our website. Most times, we can save their loan and the home, other times it’s too late.

I know this was maybe more information that you asked for but I am on a mission to help change buyer’s perception of home buying to empower you to make a business decision (not an emotional decision) when buying homes.

If you would like to talk about this more, feel free to give me a call on my cell phone anytime – Cell: 714-336-8286

Hi Sandy,

I completely understand your mistrust of the lending field….there was an awful lot of effort put into earning that reputation. That being said, I want to help you educate yourself about your available options so that you can make an informed decision as to whether or not a refinance will accomplish your goals.

First, a 6.5% 30 year fixed rate is not bad on a loan amount of $613,000. Any advertisement or interest rates that you see, hear or read about are for loan amounts under $417,000.

Yes, you may be able to lower the rate, but once you look at the actual cost to refinance and the fact that you will be “resetting” your loan back into a 30 year loan (erasing the years of payments that you have just made), it might just present you with a different set of data to consider.

I would need a bunch more information to lay out these numbers for your specific scenario, I just want to take this opportunity to help others in your situation to look at refinancing in a different way.

If you would like to explore these options, shoot me an email with the best time and number to reach you and let’s look at this a little closer. You can email me at ScottS@BroadviewMortgageCorp.com or give me a call on my cell phone at 714-336-8286

Hope this helps

Hi Michele,

We do have a branch in Arizona – If you would like to shoot me an email with the best time and number to reach you, I can get you pointed in the right direction. ScottS@BroadviewMortgageCorp.com

Scott

Hi Anna,

Your lender is lying to you because they either do not know anything about the CalSTRS 80/17 or the do know, and they are trying to discourage you from using it because they are making more money with the FHA.

I am so happy that you found us – I know you’re speaking with Peter Maldonado today. After looking over the costs that the other lender gave you, I think you will be very surprised at the truth.

Hi Michelle,

That is a very good question. Unfortunately, there is not a “right” answer to this question, you kind of need to look at it from a couple of different angles to make sure you’ve considered all options and you are making an informed decision.

Let’s look at the cash reserves part first. Cash is absolutely king – there’s no question. If you can stay liquid, it’s a good idea to hang on to that, especially in this economy.

Now, on the other hand – if your debt to income ratios are not allowing you to qualify for enough home….well….there’s a couple of ways to look at this too.

First, let me play the “Mother” role – “Michelle, if you temporarily pay off those credit cards so you can borrow more money – what’s going to happen when you charge them back up?!”.

You have to make sure you are VERY comfortable with the liability you are bringing on by purchasing this home. Especially with the 80/17. If you are using your cash reserves to pay off money you borrowed (credit cards) just so that you can borrow more than you qualify for now (because you’ve already borrowed too much), what is going to happen when you have to start paying the second mortgage in 5 years?

You see, sometimes the emotional part of buying a home over-rides some of this kind of thinking. We tend to “justify” our actions because we really, really, really, want something.

Now, I don’t know your entire situation – maybe you have sources of income that are not able to be documented for the purposes of qualifying? Maybe you have a second job or you are self employed part time and write everything off so you can’t show the income?

In these situations, where you CAN afford the payments in reality, but on paper you cannot prove it – well, this is a house of a different color. If this is indeed the case, I am much more comfortable considering paying off the credit cards to qualify for more.

I guess, in my opinion, it comes down to one thing. Can you keep the credit cards paid off? Debt to income ratios serve a very important purpose – they are there to reduce the risk of foreclosure by making sure you’re not taking on too much debt.

It really only takes one family emergency to make finances tight – if you’re already struggling to live pay check to pay check and something happens….well, you get the idea of where i’m going with that.

So, a couple of things to maybe consider. Look at different loan programs. Look at our Community Access program, look at FHA, Look at the CalSTRS 80/17. Also, maybe talk to your agent to see if there are homes closer to what you do qualify for….maybe you originally didn’t want to live in that area, but hey – hang on to it for a few years, sell it and then move to your dream home.

That’s a lot of stuff to think about, i know – I hope it helps you consider all of the angles and maybe the answer will become more apparent to you after thinking about it from a different perspective.

Let me know if you want to talk about it more, you can call me on my cell phone at 714-336-8286 or shoot me an email directly at ScottS@BroadviewMortgageCorp.com

Hi Melody,

Great questions…I’ll start with the first one..

1. You will not see both payments on the good faith estimate, Karrie should have given you two – one showing what the payment will be on the 61st month.
2. I am not quite sure what you are asking on this one. You are allowed to get 2% of the 3% down payment as a gift from a relative. CalSTRS does not allow “down payment assistance” from a city or county or anything that requires a lien against the property. I would need to get more information about that. Make sure you discuss that with Karrie so that there are no surprises at the closing table.
3. There are never any difficulties working with other Realtors. We are more than happy to recommend someone that we trust and have worked with in the past, and you have the right to choose anyone you wish to represent you.
4. CalSTRS has no problems with you buying a short sale or foreclosed home. The only challenge you may encounter is the condition of the property. Condos are more difficult to get financing on and if there are health or safety issues (major damage) to the property, you will be unable to get financing. This is not a CalSTRS guideline though, it’s just a typical guideline for all lenders – Fannie Mae and FHA.

If you have any other questions, ask Karrie – Make sure she is answering all of your questions, or you can call me on my cell phone anytime! 714-336-8286