California Mortgage Information

California Mortgage Brokers and California Mortgage Lenders

Getting A California Home Loan

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There are a lot of myths about qualifying for a California home mortgage. You often hear that you need to have 20% of the purchase price in cash. This is not true. Also, you may have heard that a few late payments will disqualify you. This too, is not necessarily true. There are many programs that are designed to help first-time buyers get into a house with as little as 0- 5% down.

Generally speaking, to qualify for a California home mortgage you need:
• Sufficient income to support the monthly mortgage payment
• Enough cash to cover the down payment
• Sufficient cash to cover normal closing costs and related expenses
• A good credit background that indicates your payment history or "willingness to pay"
• Sufficient appraisal value, which shows the house is at least equal to the purchase price

There are two basic formulas commonly used to determine how much of a mortgage you can reasonably afford. These formulas are called mortgage qualifying ratios because they estimate the amount of money you should spend on mortgage payments in relation to your income and other expenses. These are just guidelines.
Generally speaking, to qualify for conventional loans, housing expenses should not exceed 26% to 28% of your gross monthly income. For FHA loans, the ratio is 29% of gross monthly income. Monthly housing costs include the mortgage principal, interest, taxes and insurance, often abbreviated PITI.
Any expenses that extend 11 months or more into the future are termed long-term debt, such as a car loan or a college loan. Total monthly costs, including PITI and all other long-term debt, should equal no greater than 33% to 36% of your gross monthly income for conventional loans.
When budgeting to buy a home, it is important to allow enough money for additional expenses such as maintenance and insurance costs. If you are purchasing an existing home, it would be wise to gather information such as utility cost averages and maintenance costs from previous owners or tenants to help you better prepare for homeownership.
Homeowner's insurance or property insurance is another cost you will have to consider. The lending institution holding the mortgage will require insurance in an amount sufficient to cover the loan. However, to protect the full value of your investment, you might want to consider purchasing insurance that provides the full replacement cost if the home is destroyed. Some insurance only provides a fixed dollar amount which may be insufficient to rebuild a badly damaged house.

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