Dariany Santana: Hey guys, we’re here at Carrara Pastries, in Moorpark to answer some top finance questions. I’m your host, Dariany Santana. And today we have with us Jamie Cavanaugh she’s a financial expert and the COO of Amerifund Home Loans. How are you, Jamie?
Jamie Cavanaugh: I’m doing great Dariany, thanks for having me today.
Dariany Santana: Thanks for having me, and thank you for all of these amazing pastries.
Jamie Cavanaugh: Can we just talk about how delicious Carrara Pastries are? And look at this cup of coffee with the beautiful heart on top; I am so excited to try some of this delicious stuff today.
Dariany Santana: I’m excited to have more, but that’s not what we’re here today. We’re here to talk about all things, loans and mortgages and stuff to buy a house, which I’m very interested in.
Jamie Cavanaugh: No worries. Well, the purpose of today is to break it down for you and help you to understand what it takes to get into your first house.
Dariany Santana: So, when should I start thinking of purchasing, whether it’s a home or a condo or any kind of property?
Jamie Cavanaugh: The best place to begin is to understand the process. So start before you’re ready. Let’s help you understand what it takes to get pre-approved so that when the time is right for you, you know where to begin.
Dariany Santana: So, I do want to purchase my first house. Where do I even start?
Jamie Cavanaugh: Well, there’s no right or wrong place to start. Some people start by looking at homes online and talking to a realtor, and other people start by talking to a lender. Chances are, no matter where you start you’re going to wind up talking to a mortgage company at some point. What is important for you to know is that before you write an offer on a property, you should have a pre-approval. The best chance you have of getting an offer accepted is to show the owner of the property that you can qualify to buy their home. Sellers know the difference between pre-qualified buyers and buyers who haven’t. And they know that pre-approved buyers have the best chance of success at closing escrow their home.
Dariany Santana: Okay. So again, I’m just going to follow up; this is interesting to me. So when you go to buy a house, you tell the seller, Hey, I already have a pre-approved loan?
Jamie Cavanaugh: That’s right! So, if you go through the pre-approval process, what we’re going to do is give you a pre-approval letter. That shows both your real estate agent and the owner of the property. That you’re writing an offer, that you’ve gone through the process; of having your credit looked at, looking at your income, looking at the money you have for a down payment. And that you qualify to buy their home.
Dariany Santana: Okay, So, the pre-approval is for the loan, and that loan is for the mortgage?
Jamie Cavanaugh: That’s right. Are you wondering what a mortgage is?
Dariany Santana: It’s like the rent of a house, I feel.
Jamie Cavanaugh: Well, let’s break it down a little bit. So let’s say Dariany that you have a home to sell, and you’re asking $500,000 for it. And I want to buy your house. Unless I have $500,000 in cash either sitting in the bank or I have a generous family member that wants to give me some money. Chances are pretty good that I’m going to need to make up the difference between what I have in my savings and that $500,000 sales price. So that’s where a mortgage comes in. A mortgage bridges that gap between the money I have available in cash and the amount of money that the seller is asking for the home. So, a mortgage is literally a loan. That helps me when added to my down payment, give the seller a hundred percent of the price they’re asking for that.
Dariany Santana: So, I didn’t know this. So, because you have whatever in your savings and the mortgage. The seller at that time does get a hundred percent of the money that they are selling their house for.
Jamie Cavanaugh: That is correct.
Dariany Santana: I don’t have $500,000 in the bank. So what would I need to do to qualify for a mortgage?
Jamie Cavanaugh: Well, there are a few key factors, but it doesn’t have to be scary or complicated. So let’s break it down. Let’s start with your credit. You don’t have to have perfect credit to qualify for a mortgage, but you do have to have some established credit. So those would be things like a car loan or a couple of small credit cards. The important thing to know is that we have loan options for people with credit scores down into the range of 580. There are lots of ways for you to qualify for a loan with less than perfect credit or with limited credit.
The next thing is the income. People have all sorts of different jobs and different ways that they earn money. And as long as you can show that you have a stable source of income and that you can repay the loan, that’s all that lenders are looking for.
And lastly, let’s talk about your assets again, you don’t have to have 20% down or a huge down payment to buy a home. We have loan options for as little as three percent (3% )down conventional loans, three and a half percent (3 1/2%) down for FHA. And if you’re a veteran VA loans offer little as zero down.
Dariany Santana: What is FHA?
Jamie Cavanaugh: FHA stands for The Federal Housing Administration. It’s basically a government-backed loan that is geared for folks that are first-time homebuyers; who may have challenging or limited credit; or even people that just don’t have a lot of down payment funds to put down.
Dariany Santana: Okay. So in terms of down payment, this down payment goes directly to the loan?
Jamie Cavanaugh: So it goes to the seller. Basically, what we’re doing is we’re taking that down payment that you have; and we’re adding it in with the mortgage, and at the close of escrow, that seller is going to get a nice big check for the total amount that they’re asking for the home.
Dariany Santana: If you’re just joining us now, we’re at Carrara Pastries, and we’re talking about some serious mortgage and home loan questions, and I have a lot more questions. So, once I have my mortgage, what else do I have to pay for upfront?
Jamie Cavanaugh: I’m glad you asked because a lot of people think that the down payment is all that they have to plan for. And it’s important to know that there are a lot of different service providers that are involved in any loan transaction. So, when you’re buying a home. The state of California requires that an escrow company handles the transfer of the funds between the lender, between you and the seller of the property. Also, the title company is going to need to be involved to run a title search on the property. And make sure that when you take ownership of that home, there are no hiccups on the title; that you’re taking a nice clean title home. That anything that the seller owed previously is taken care of. So all of these different service providers have their own set of fees. But here’s what you can do, talk to a mortgage specialist. It’s our job to help you forecast those costs and understand everything that goes into buying a home and all of the expenses that you should forecast for. That way you are comfortable, and you know what to expect, and you don’t have any last-minute surprises. And you can go out there and write an offer confidently and know exactly what you’re in for.
Dariany Santana: Okay. I always hear the word escrow; I don’t really know what it is. People always say like, it’s in escrow. It’s still an escrow. Is that a location? Is that a place? You get stuck there? What does that mean?
Jamie Cavanaugh: That’s a great question. So escrow is a neutral third party. Their job is to be the hub that makes sure that everybody in the transaction is doing what they’re supposed to do. So the escrow officer takes the purchase contract and makes sure that all of the deadlines are being met. That everybody has signed on the dotted line and all the areas that they need to sign. That when it comes time for the lender to put their funds in escrow for your mortgage. And for you to put your down payment in. That all of that money gets where it needs to go. To the seller. And that all of the title transfer deeds that need to be done. Get sent to the title company to take down to the County and record. Which basically puts your name on that home and makes you the official owner.
Dariany Santana: Okay. You mentioned a title when I think of a title, I think a car, but I guess apparently houses have a title too?
Jamie Cavanaugh: Yeah. And actually, it’s similar. So when you have your DMV title for your car, it tells people who owns the car, the same exact thing goes for homes, but there’s something to remember here. If I’m going to lend you $450,000 to help you buy your home and I’m going to hold a mortgage on it, I’m going to want to have a lien on that title of that house. So you are the owner of the home, but I, as a mortgage company, you will have a deed of trust recorded against your property to show that you do owe me $450,000. And you do need to pay me back at some point over the life of say 30 years or so. So the title company’s job is not just to make sure that when you close escrow, you’ve got a clean title to the property; and anything that the seller owed previously is taken care of but also that you’ve got a clean title. And the lender who’s lending you the mortgage has the proper deed recorded to ensure that their rights are protected.
Dariany Santana: Okay, that’s a lot. Is there any more that I should know before buying a house?
Jamie Cavanaugh: Well, I think it is important to know that every situation is unique. So, it’s critical that you talk to a mortgage specialist because the home search should be fun. So if you talk; to a mortgage specialist, you can understand your options. And feel comfortable looking at homes and writing offers knowing that you qualify and that the homes you’re looking for are affordable to you.
Dariany Santana: I can’t wait. Thank you so much. Thank you guys for watching. If you have any questions for Jamie, leave some comments below. I know I have a lot more. And also, where can people reach out to you?
Jamie Cavanaugh: You can visit our website at amerifund.com or give us a call at (800) 570 LOAN. That’s (800) 570-5626. Thank you so much for having me today Dariany. It was great fun. I don’t know about you, but I think we should get some of these pastries.
Dariany Santana: See you guys next time.
Jamie Cavanaugh: Bye