There is more than one way to buy a house in San Diego and knowing several mortgage hacks could save you some big time money as well as save you time and hassle.
Understanding different loan products could land you in a nicer, bigger house than you thought you could afford at a much better rate than you thought possible. It just takes some research to find the right one for you that meets both your housing needs and your budget.
There are types of loans everyone, especially those starting out with their first property, should know about. Some of the best loan deals are those from the federal government. USDA loans have helped millions of lower to middle-income people own property. There are some things you need to know about both to see if you qualify.
Here's a quick rundown of our list:
- Hack 1 - Look for a lender that will finance 100 percent to qualified applicants.
- Hack 2 - Keep paperwork of efforts to obtain a home loan elsewhere.
- Hack 3 - Look for homes less than 2,000-square-feet and with a market value less than the area's loan limit.
- Hack 4 - Find out what is considered rural for San Diego County.
- Hack 5 - Combine loan products, such as a direct loan with a home improvement loan.
- Hack 6 - Ask for the longest time period possible to pay back the loan.
- Hack 7 - Get a grant to do home improvements.
Most people associate the United States Department of Agriculture with farming rather than home loans. Yet, there are loan programs available to homeowners through this agency. The purpose of these loans is to get people to invest in a rural area. The office of Rural Development offers the loans and they target families with low to moderate incomes. So, this could be the loan for you if you meet that criteria and are willing to moving outside a metro city.
There isn't one set of eligibility rules for those seeking a USDA loan. Eligibility rules depend on which loan product you are seeking. The basic rules for any USDA product is that you must live in the home, the home address must be in an area the USDA considers rural.
Applicants must be either a U.S citizen or have permanent residency. You will need proof of a stable income, have a decent credit score at least over 600 and have a low debt-to-ratio. The key thing with USDA loans is you don't need a high income to qualify and you may not need as much, or any, money down.
There are three types of USDA loans: loan guarantees, direct loans and home improvement loans and grants. Loan guarantees are loans backed by the government, direct loans can get you payment assistance with interest as low as 1 percent and the USDA home improvement loans are helpful to those with a low income who can't get an affordable traditional loan to make repairs on a home they own.
There are seven hacks to use with the USDA program that will help you get a loan or grant.
Hack 1 - Look for a lender that will finance 100 percent to qualified applicants.
This will ensure you can meet criteria for the loan guarantee program and may mean you won't need any money down. In this program, the government backs 90 percent of the loan for lenders who finance 100 percent. The reduced risk benefits you and could reduce the amount you put down.
Hack 2 - Keep paperwork of efforts to obtain a home loan elsewhere.
Also, document the area's comparable home and rent prices. These are things that will help prove you need “decent, safe, and sanitary housing” and are unable to get a traditional loan. You must be unable to get a typical loan and find it difficult to obtain housing in order to get a direct USDA loan.
Hack 3 - Look for homes less than 2,000-square-feet and with a market value less than the area's loan limit.
Buying a smaller, cheaper home will grant you more favor with those making decisions on USDA loans.
Hack 4 - Find out what is considered rural for San Diego County.
Every area has its own set of rules on the definition of “rural.” You may be surprised at what is considered rural in San Diego. There is an interactive USDA map where you can check local information.
For instance, the current USDA site lists three areas in San Diego as rural areas that qualify for these type of loans. Areas in San Diego County listed as rural are Borrego Springs, Rainbow and Valley Center.
Homes in Borrego run from around $165,000 to $280,000 although one is listed at $65,000 and another at $475,000.
In Rainbow, homes are priced between $174,000 up to $1 million and Valley Center has homes ranging in price from $300,000 to $725,000.
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Hack 5 - Combine loan products, such as a direct loan with a home improvement loan.
This will help if you find a low-cost house that needs a lot of work. If you can get an exceptional deal on a house for $65,000 and then get a $100,000 home improvement loan to modernize it to up its value to $250,000, it may pay off to go that route rather than getting a house that is already improved.
Hack 6 - Ask for the longest time period possible to pay back the loan.
USDA loans will go beyond the traditional 30-year fixed rate loan. They will extend payments as long as 38 months, which will keep your payments low. As long as the interest rate is low, it would be worth it to take longer to pay it back especially if you are on a tight income.
Hack 7 - Get a grant to do home improvements.
Those who are 62-years-old or older and who are unable to pay for repairs or repay a repair loan can qualify for a grant to get the work done. Senior citizens could also do a combination USDA product of getting a home loan to buy the property and a grant to repair it. Just be sure to document your lack of suitable housing currently and your income before you apply.
Checking into a USDA loan for a home purchase in San Diego County is worth it. You could end up in a home that meets all your needs and more while keeping a low interest rate and paying no money down. It's a great way to provide a home for yourself or your family on a smaller income.
If you need more information about USDA loans and what qualifies in this area, please give me a text or call to (760) 297-4539
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