Buying a home is an exciting process, but one that can easily overwhelm first-time buyers. The most challenging aspect of home buying is choosing a mortgage loan plan will best fit your situation.
With the right mortgage plan, you won’t have to worry about being house poor—you can feel confident in your future financial stability. The California Housing Finance Agency (CalHFA) has plenty of loan programs designed especially for first-time homebuyers. If you fall under this category, here are the best mortgage options for you:
CalHFA FHA loan program
Insured by the FHA (Federal Housing Administration) this program has a 30-year fixed interest rate. This loan isn’t subject to recapture tax, making it a great option for those wanting to buy a starter home with plans to upgrade in the future.
CalHFA FHA loans are usually taken together with a subordinate loan known as the MyHome Assistance Program, a deferred-payment loan that offers help with down payment and closing costs.
CalPLUS FHA loan program
The CalPLUS FHA loan program is a federally insured fixed interest first mortgage. Interest rates, which are slightly higher as compared with other standard FHA loan programs, are fixed over the 30-year loan period. This type of loan is typically combined with the CalHFA Zero Interest Program, which helps with closing costs.
CalHFA conventional loan program
The CalHFA conventional loan program is yet another 30-year first mortgage loan with a fixed interest rate. Unlike the previous loan programs, however, the CalHFA conventional loan program isn’t insured or guaranteed by the federal government. It’s a private loan that’s insured through private mortgage insurance on the conventional market.
CalPLUS conventional loan program
The CalPLUS conventional loan program is a 30-year term loan with a higher fixed interest rate compared with the CalHFA conventional loan program. You can combine your CalPLUS loan with the CalHFA Zero Interest Program to help you with closing costs.
One of the advantages of a conventional loan program is that you can cancel your mortgage insurance later, should you prefer to do so. If you’d like to avoid paying mortgage insurance altogether, you would need to be prepared to make a minimum down payment of 20%.
Applying for California state loans
Buyers can apply for CalHFA loan programs through approved private loan officers. You must, however, must fall under the set income limit. These programs are ideal for low-to-moderate income borrowers because the loans don’t need a high credit score or a substantial down payment.
Government-backed loans are meant for the purchase of a primary residence and require the borrower to himself occupy the property. Private loans don’t have such restrictions.
To qualify for a loan, you may be asked about your employment history, and you will need to provide recent pay stubs, bank statements, and previous tax returns. Interest rates on loans will vary depending on the amount of the loan, your financial situation, and the lender.
Applicants for CalHFA loan programs must go through homebuyer education. This course can be taken online through eHome’s eight-hour Homebuyer Education or in person through NeighborWorks America or a HUD-Approved Housing Counseling Agency.
CalHFA loans can be used to buy a single-family home, manufactured housing, or a one-unit property. The size of the property must not be over five acres. For condominium purchases, you must follow first mortgage guidelines.
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