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First-Time Homebuyer In California

If you are a first-time homebuyer in California that is looking to purchase a home then you’ve found the right place.

Being a first-time homebuyer is an exciting time and at JB Mortgage Capital, Inc. we want to do everything we can to provide our clients with useful mortgage information along with industry low mortgage rates and top-notch customer service.

As a first-time homebuyer, we understand that you probably have lots of questions, and that is why we’ve dedicated so much time and energy to our first-time homebuyer loan programs. We cover just about everything a first-time homebuyer needs to make an informed decision.

And we’re never far away if you should have a question or wanted to discuss different loan program options. You can always reach us by phone (1-800-550-5538), email, social media, or through this website.

What You’ll Learn From Our First-Time Homebuyer Guide

  • The Two Main Loan Programs For First-Time Homebuyers: We go into detail about the most popular first-time homebuyer loan program options. We cover the basic requirements and qualifications for each loan program option.
  • The Loan Process: We provide an overview of the mortgage loan process and how to stay on top of your first mortgage transaction. From getting pre-qualified to the documentation you’ll need to what happens after you have an accepted offer. We cover it all so that you’re better informed to make better decisions.
  • Getting Pre-Qualified: The process of getting pre-qualified and the steps that follow. The pre-qualification process doesn’t have to be complicated and we show you the steps to ensure you have a smooth and efficient process.
  • Ten Tips To Get A Better Mortgage Rate: Here we give you some solid tips on how to get a better mortgage rate. A better mortgage rate means you’ll pay less in interest during the loan.
  • Why You Need A Great Team: Having experienced, trustworthy professionals working on your behalf is so important to first-time hombuyers.

If there is one main thing that we can suggest for each first-time homebuyer in California is this: ask questions and keep asking questions until you feel like your question has been answered.

With that, we’d like to encourage you to reach out to us with any questions you may have about the first time home buyer process or anything else related to getting a mortgage. If you have questions feel free to call us at 1-800-550-5538.

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The Two Main Loan Programs For First-Time Homebuyers

There are two main loan programs to consider if you are a first-time homebuyer in California:

  • Conventional/Conforming loans
  • FHA home loans

There are other options available but nearly all first-time homebuyers use one of these two loan options and we discuss them in detail.

Conventional/Conforming loans

These are two terms you’ll hear a lot as you start the process (Conventional and Conforming). Conventional loans are any loan that is not backed by the United States government (such as FHA loans which are backed by the government).

Conforming loans are specific types of Conventional loans that “conform” to the underwriting standards of mortgage giants Fannie Mae and Freddie Mac. All Conforming loan programs are Conventional loans however not all Conventional loans are Conforming loans.

As a first time home buyer in California, you probably consider a Conventional/Conforming loan as a first option (unless you have a low credit score and a small down payment). But if you have good to excellent credit and more than a 3.5% down payment then you should first start to look at your Conforming loan options.

The most popular Conforming loan is the 30-year fixed-rate option and then there is also a 20-year fixed-rate and a 15-year fixed-rate option. Two additional programs include a 25-year and a 10-year fixed rate option but very few first-time homebuyers select those two programs.

FHA home loans

If you are a first-time homebuyer in California, have a credit score below 700 and a small down payment you may want to look into the FHA home loan program. It’s without question it’s one of the best loan programs out there for first-time homebuyers who don’t qualify for a Conforming loan.

Like Conforming loans; the most popular FHA home loan program is the 30-year fixed-rate loan program. It offers the stability of a fixed rate and the flexibility of a lower monthly mortgage payment.

If you have a credit score above 580 you can put down as little as 3.5% and if your credit score is 579 or below you can put down as little as 10%. FHA home loans can be used for Single Family Residences (SFR), Condominiums, Townhomes, and Multi-Unit (2-4) properties (as can Conforming loan programs).

Another great feature of the FHA home loan program is the ability of a first-time homebuyer to purchase a home even if they are only one day out of a Chapter 13 Bankruptcy. That’s a huge benefit the FHA program offers to those that are trying to get back on their feet after completing a Chapter 13 Bankruptcy.

The Loan Process

Here’s is a quick breakdown of the loan process.

Pre-Qualification

A mortgage pre-qualification is an excellent way to get prepared for when you begin your search. Getting pre-qualified will allow you to know ahead of time how much you can afford and also determine what home loan program is right for you.

There are hundreds of various loan programs, like FHA loan programs, Conforming, or Jumbo and this process alone (of figuring which one is best for your situation can) can take several days.

Being pre-qualified will allow you to search for the home and avoid any additional stress.

Also, it will make your offer a stronger offer when the agent presents it to the seller. At JB Mortgage Capital, Inc. we’ll be happy to answer any questions you have about the pre-qualification process. You can contact us directly at 1-800-550-5538 or submit a question on one of our contact forms.

Things You’ll Need To Get Pre-Qualified

  • Gather your income documentation: If you receive a W2 then this includes the last two years of your W2s and your most recent paystubs. If you are self-employed that means the last two years of your tax returns.
  • Asset Statements: Have ready the most recent statement from which closing costs and your down payment will come from. If you can provide the two most recent statements even better!

The Next Step For A First-Time Homebuyer Pre-Qualification

The next step for getting pre-qualified is completing an application. If you can do this online, complete the physical application by hand or you can complete the application over the phone. Being a first-time homebuyer we highly suggest you complete the application over the phone. It will take a lot less time and be significantly easier for you.

The Smart Thing To Do

Every first-time homebuyer in California needs to obtain a mortgage pre-qualification is a wise and simple option for potential first-time homebuyers, and in the long run can save you both time, money, and headaches.

Approval on your application will be based on a number of factors, such as your income, your job status, and your credit history among other things. In most cases, you will receive a response on your application within 24-48 hours, which can help to speed up the process and enables you to get on with finding your new home.

What Happens Next

The next step in the first time home buyer process is finding a home to make an offer on. Make sure you stay in contact with the Loan Officer during this process and don’t hesitate to get updated quotes and loan payment information.

Here Is What Happens After You Have an Accepted Offer

Congratulations on your accepted offer! Once this happens we move everything forward to ensure we close on time or before. If it’s been more than 2-4 weeks since your initial pre-qualification then you’ll have to provide updated income and asset documentation.

A few things to keep in mind

  • There is the home inspection
  • There usually is an appraisal
  • An underwritten loan approval.

These are three important steps before you’re able to move forward with closing. Once all the conditions are cleared you’re ready to close. This means you’ll sign the loan documents and wire the funds for closing. If you have any questions please be sure to ask.

A Very Important Suggestion To Each First-Time Homebuyer In California

You may be asked to waive your “contingencies” to make your offer “stronger”.

At JB Mortgage Capital, Inc. we suggest you do not waive any of your “contingencies” when making an offer. What is a “contingency” with respect to an offer on a home? There are three parts of the contract that are designed to protect the buyer: the inspection contingency, the appraisal contingency, and the loan contingency.

As a first-time homebuyer in California, you are still learning the process so it’s important to have these protections in place. They allow for your to cancel the contract if the inspection shows deficiencies with the property, the appraised value comes in below the purchase price, and/or if you’re unable to obtain a full underwritten approval.

Consumer Protection

Here in California, there are four main agencies that protect consumers during the mortgage process:

  • Consumer Financial Protection Bureau (CFPB)
  • California Department of Real Estate (California DRE)
  • Nationwide Mortgage Licensing System (NMLS)
  • Housing and Urban Development (HUD)

As a first-time homebuyer, it’s important to know what consumer protections are in place when applying for a mortgage. These four agencies are actively ensuring that all home buyers are protected.

As a group, they regulate the mortgage industry to ensure the consumer is not taken advantage of, and they license Loan Officers, and mortgage companies so that industry professionals are knowledgeable able state and federal laws.

In addition to that, they provide a wealth of educational information so homebuyers can make better decisions. The CFPB is an excellent resource for educational tools and we highly suggest you use the tools they provide.

Three Things A First-Time Homebuyer Should Know

Here are three simple things you probably won’t see in other articles. Nonetheless there important!

Send The Right Documents:

Only send in the documentation requested; if you don’t have a document that is being requested then discuss that with the Loan Officer prior to sending anything else in.

Go With A Payment You Can Easily Afford:

Being a first-time homebuyer there are a lot of things associated with homeownership that you may not be aware of. Since this will be your first mortgage transaction we suggest you obtain a 30-year fixed mortgage rather than a 20-year or a 15-year fixed mortgage. After a couple of years of homeownership then look at a shorter-term if it fits your budget.

Learn About Refinances:

After buying the home you may want to refinance your mortgage. It might be a while but it doesn’t hurt to be prepared.

Reasons You May Want To Refinance:

  • You might be able to obtain a lower interest rate
  • You might need some cash out to cover the cost of a remodel.
  • If you have a current mortgage with PMI or MI you may want to refinance to get rid of that.

Generally speaking, refinance transactions are easier than purchase transactions and they usually can close within 21-30 days. When you close your purchase please be sure to save your loan documentation so you can easily reference if and when you chose to consider a refinance.

Ten Tips To A Better Mortgage Rate

Today’s mortgage rates are lower than ever, making it a great time for anyone looking to buy a home or refinance an existing mortgage. 

The rates you see advertised won’t automatically be yours if you don’t know how to qualify, though. Lenders look for great borrowers – borrowers who won’t default. So how do you prove you are one of these ‘great borrowers’ so you get the best mortgage rate? 

Here are the top ten ways. 

1. Bring Late Payments Current: 

If you have any late payments on consumer debt, bring them current. Credit bureaus consider a payment late if it’s over 30 days late. This shows lenders you are a risk. Bring all late payments current and apply for a mortgage loan when you have a 12-month history of on-time payments. 

2. Pay Credit Card Balances Down 

Your credit card balances shouldn’t exceed 30 percent of your credit line. For every $1,000 credit line, you shouldn’t have more than $300 outstanding. If you do, it brings your credit score down and decreases your chances of securing a better mortgage rate. 

3. Make Your Rent Payments On Time 

If you have housing payments (rent), make sure you make the payment on time. A late housing payment shows lenders you are high risk and they won’t give you the best rates available. They want borrowers who will pay their mortgage on time and proof that they will do so. 

4. Have An Impressive Employment Record 

Lenders like it when you have at least a 2-year history at the same employer. This shows stability and consistency, two things lenders want to see. If you changed jobs in the last 2 years, that’s okay, but try keeping it within the same industry. 

For example, if you were a teacher before and changed jobs to become principal or take an admin job at the school, you’re within the same industry. But if you changed from teacher to accountant, there is no consistency or stability, which makes lenders worry. 

5. Have A Sizeable Down Payment (or equity) 

If you’re buying a home, save as much money as you can for the down payment. The more money you invest, the lower the risk you pose to a lender. You don’t need 20 percent down to get the lowest mortgage rates, but a sizeable down payment helps. 

If you’re refinancing, the more equity you have in your home, the lower the risk you pose. Lenders like it when you have ‘skin in the game.’ This means you’re less likely to default because you’d run the risk of losing the money you invested. 

6. Take A Shorter Term 

Most borrowers go for the 30-year fixed loan automatically, but what if you could afford a shorter-term? Most lenders offer lower interest rates on shorter terms. You don’t have to take a 15-year term if you can’t afford the higher payment, 20 and 25-year terms offer lower mortgage rates too. 

Look at the big picture when choosing your term. If you take the shorter term with the lower interest rate, you’ll pay less for the home overall. With a lower rate and less time to make your payments, you could save thousands of dollars on your home. 

7. Buy The Rate Down 

If you have the lowest rate you qualify for, consider paying discount points. One point may lower your rate by 0.25 percent. This varies by lender, but that’s the average. 

One point is equal to $1,000 for every $100,000 you borrow. If this is your ‘forever home’ it may be worth paying the points to get the lower mortgage rate. Look at the total savings, your savings over the loan’s term will likely far exceed the cost of the points at closing. 

8. Consider An ARM Loan 

If you want the absolute lowest rates available, you might want an Adjustable Rate Mortgage (ARM) loan, but proceed with caution. ARM loans have low introductory rates. They are usually lower than the fixed-rate, but they only last for a certain period. 

Let’s say you take a 5/1 ARM. You’d have the lower rate for 5 years. At the end of the 5 years, your rate will adjust according to the current market, chosen index, and your pre-determined margin. 

ARM loans are good for borrowers who will be in the home for a short time and want to save the most on their payments while they are in the home. 

9. Lower Your Debt-To-Income Ratio 

After your credit score, lenders look at your debt-income ratio. They want borrowers with minimal debts, so they can afford the mortgage payment. 

Each loan program has different DTI requirements, but no matter the program you choose, the lower the DTI, the lower the rate lenders offer. Before you apply for a mortgage pay down as much consumer debt as possible to get the lowest mortgage rates. 

10. Have Reserves 

Most loan programs today don’t require reserves, but if you have them, they lower your risk of default. Some lenders offer lower interest rates because of it. 

Mortgage reserves are money you have on hand to cover your mortgage payment if you lose your job or can’t work. Lenders calculate reserves based on your mortgage payment. 

For example, if you have $10,000 in a liquid account and your mortgage payment is $1,000, you have 10 months of reserves. 

Secure The Lowest Possible Mortgage Rate Today 

Securing the lowest possible mortgage rate isn’t too hard. It takes a little due diligence and plenty of preparation. Know what lenders want and shop around to find the best rate. Each lender has different requirements and can take different risks. 

Maximize your qualifying factors so lenders want to lend to you and give you the lowest rates to be competitive and earn your business.

Couple in front of home

Why First-Time Homebuyers Need A Great Team

Buying your first home is very exciting and at the same time, it can be daunting and confusing. For most first-time homebuyers this is the biggest transaction of their lives and many have never had experience in making such important decisions with respect to where, when, and what to buy.

Understandably this all stems from a lack of experience and knowledge of how the home buying process works.

Having a great team around you will help dramatically; an experienced realtor with a track record of helping first-time homebuyers, a reputable mortgage company that offers first-time homebuyer loan programs, and an experienced Loan Officer that listens first then offers solutions.

Low Mortgage Rates and Customer Focused

Making sure we provide industry-low mortgage rates is a focal point at JB Mortgage Capital, Inc. We understand the importance of saving money. From fixed-rate mortgages to adjustable-rate mortgages we offer low rates at great terms

JB Mortgage Capital, Inc. is 100% focused on the customer experience. From loan application to closing you’ll work directly with one person the entire time. This ensures a better experience for the customer and a more efficient loan process.

Loan Officer Kevin O'Connor

About The Author

Loan Officer Kevin O'Connor has over 16 years of experience as a Mortgage Loan Originator and is licensed with the state of California and the Nationwide Mortgage Licensing System. He has a top rating with the Better Business Bureau, Google, Yelp, and Zillow. CA DRE #01499872 / NMLS #247447

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