During the past 20+ years, I have seen various real estate markets and the issues that can be created by overstepping ones "affordability" factor.
If you go to a local real estate lender or any lender for that matter, they are going to pre-qualify you at your maximum amount in most cases.
The MAX is the top amount of what they or one of their banks will lend you. My advice to most all parties that want to buy real estate is to stay away from your MAX amount.
Also, remember that it's necessary to factor in the amount of the Home Owners Association, HOA fee's and the extra taxes is they exist in the form of Mello Roos Tax.
You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders.
But there can actually be financial benefits to putting down a small down payment—as low as three percent—rather than parting with so much cash up front, even if you have the money available.
The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.
The national average for home appreciation is about five percent. The appreciation is independent of your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. If you’re looking at your home as an investment, putting down a smaller amount can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.
THE HAPPY MEDIUM
Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security of a traditional 20 percent and an investment-focused, small down payment. Your trusted real estate professional can provide some answers as you explore your financing options.
Choosing a real estate lender
Lenders are many and come in all shapes and sizes. Of course, the best lenders have a proven track record of performing. They always come highly regarded and in all times they make good on all their promises. Some run into issues when the lenders are not local. When the lender does not have a brick and mortar office but is only available via telephone.
Sitting down in front of a person is still very important in all worlds. There is something about looking into a person's eyes to see what they are about. It's Super Important. However, there are people who fall into the trap of hiring a service provider, like a lender, sight unseen. As for me, I don't have enough money to not meet those whom I'm hiring to be my Realtor or Lender.
I have gotten phone calls throughout the years by those lenders who are not local or are within the online systems only. They want access to my database in order to help my clients with refinancing when that time may come. NEVER I say, I would never give up any of my clients personal or private information to anyone that wants it. They trust me with it, I never fail when it comes to being trusted.
I like local. I like the lenders that have brick and mortar offices where my clients can walk inside and talk to a real estate lender personally. Like Augusta Financial. They are located in the same building as Paris and I are with our real estate business with REMAX Gateway.
Two Types of Santa Clarita real estate lenders
Brokers and Banks. Both can be direct lenders. The term direct lenders only refer to the money source. Is the money source the lender which you are seeking, this may be the case, depending on your credit history and other factors.
Mortgage Brokers - they have access to many different loan types. They have access to money from a lot of sources. They can provide for USDA Loans, FHA Loans, VA Loans and conventional loans in the Santa Clarita Valley. Mortgage brokers are about as nimble in the lending world as they come.
Banks - most banks are direct lenders, some do broker out deals like FHA and some maybe broker out VA loans, It'll depend on the specific bank. Something important to know if you are thinking about working with your bank or any bank in the lending for a home, you want to establish some items upfront. You are going to NEED to have the lender's cellular phone and ensure they have access to their phone and email during their off hours.
That is where my statement about Mortgage Brokers being more nimble. The mortgage brokers that I work with are all about being connected to our clients no matter the day, holiday or time. Of course, when they are sleeping the call will go to voice mail, but when they are awake, they are performing no matter where they are.
Recently we went to Paris, we adjusted our time schedules to be awake in Paris during the working hours here in the Pacific Standard Time Zone. That is because our clients count on us and if we are not there when they need us, there are bound to be problems. Plus, it's my duty - to be there for my real estate clients no matter what! During times of stress, our clients need us. My team and I attempt to keep the stress at a minimum, but we are not the only entity working for our real estate clients.
Where the rubber meets the road is at the point when a real estate buyer who is needing a loan needs information in order to make a life decision. Not whether they are living or dying, but a decision that will affect their lives. If they fail to do so, they may make a decision that they regret. This only happened because they were working with a real estate lender who was unavailable at the time when they needed to be.
I cannot tell you how many times this has happened when we had clients who were working with Credit Unions. They seem to be far less nimble than anyone in the real estate lending and mortgage field. They are super stringent and most of their applications and other forms are completed online with their borrowers rarely if ever talking to a real live person getting their questions answered. Some Credit Unions thrive on pure arrogance thinking they have the deal in the net. Where they have a member, as they call them, who is almost by proxy forced to utilize their services. That is not the way it should be and when those types of people call me I explain to them why and help them through the true real estate process as it should be.
Like a savvy real estate home buyer, you need to protect yourselves. It's important for you to know a false motivational key when you hear one. That is where I will come in and run interference for you. I'm Connor and I'm so glad to be at your service. When you are ready, just reach out to me and I'll take great care of you. Be safe - Always - Connor with HONOR.
Make sure you listen to HousingRadio.com. I keep our radio show up and running and have for a lot of years now. Talking about the housing and real estate markets keep me happy and keep our clients informed.