FHA loans have become one of the primary ways for financing a home in Orange County, CA. This series of case studies describe recently closed FHA transactions in Orange County, CA. To protect privacy, personal details have been changed, but the information on the closing of the loan is accurate.

John and Theresa Garcia had tried to buy a home in 2005, but home prices were too high. Although they had been PreApproved in 2005 for a purchase price of $600,000 with $0 down payment, the monthly payment was too far beyond their budget and they knew it. The lender was offering a Stated Income loan that would adjust in only 2 years. The Garcia's were reserved to the fact that they would not be able to buy a home in Orange County any time soon, if ever.

Fast forward to February, 2009. With the blow up of the mortgage industry and all the crazy loans that were being used to qualify people for more than they could actually pay, property values have dropped by nearly 40%. Homes that were $600,000 only a few years ago were now on the market for $400,000. For the first time in years, the rent payments are similar to a home payment. (for a similar home.) After making offers on several homes the Garcia's got an accepted offer on a 3 bedroom 2 bath single family home in Placentia, CA.  The purchase price was $410,000. The escrow period was set for 30 days.  Time to get the loan going.

It used to be recommended that home buyers get PreApproved prior to making an offer on a home. Now it is all but required. There are too many reasons for an escrow to fall apart for a seller to even consider an offer from a home buyer who hasn't already submitted paperwork to a lender. In this case, the Garcia's had been PreApproved by an Orange County FHA Direct Lender prior to making the offer.  Now, with the offer accepted, they already had a big head start on the closing. The lender already had a completed loan application, 2 years tax returns and W2's, paystubs for the most recent 30 days, and bank statements for the most recent 2 months. Credit had already been run. On day 1 the FHA appraisal was ordered. Also, the Garcia's ordered a Home Inspection, which, although not required by the lender, is a smart thing to do when buying a home.  The termite inspection was also done in the first few days of escrow. Within 1 week the lender had the completed appraisal, escrow instructions, and the preliminary title report. The termite inspection was also turned in.

Everything seemed to be smooth sailing except for a few minor items that needed repair per the Termite Report. One issue that did come up was regarding the down payment funds. The Garcia's were getting a $10,000 gift from their parents. FHA is very concerned with down payment funds and where they come from. There needs to be a clear papertrail of where the money comes from. It cannot come from a credit card advance or be a loan from a friend. It also cannot come from cash "under the mattress." You cannot document cash to a lenders satisfaction.  It was important that the Garcia's properly document the gift. Per the recommendation from their Expert FHA Loan Officer, the gift funds were wired directly from their parents bank account to the escrow company. This made it easy for the lender to make sure the funds came directly from the parents.

When escrow closed 30 days later, the Garcia's were able to move into their new home. In this case, the Garcia's also qualified for the $8,000 First Time Buyer Tax Credit. They immediately filed an amended 2008 Tax Return in order to get their $8,000 as quickly as possible. And of course, a House Warming party was planned.

This all worked out well for the Garcia's. There were definitely a few bumps in the road, but because they did their homework up front and got PreApproved for an FHA loan before they even began seriously searching for a home, they were confident escrow would close.

 

Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

* Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.