California Real Estate Tips

How can I buy California real estate via foreclosures?

For a California first-time homebuyer, one way to buy California real estate is via foreclosed homes. Foreclosures can represent savings if you understand the process and the fact that many of those homes will require repairs.

The first step is to locate a California real estate agent or broker that works with foreclosures, REOs and other bank-owned property. A good place to begin is to use the HomesAndLand.com agent finder tool and search for REOs, repo's or other related information. Most foreclosures and REOs require a bid to be submitted by a listed agent or broker so it's not something you can do alone. Also, you will need someone who understands the specific paperwork and other issues related to buying foreclosed property.

To find California homes priced at lower rates, you may have to spend considerable time searching listings. Be sure to include repairs and time into the equation. The process can be time-consuming and almost all properties require some amount of repair or fixing up, however, with a knowledgeable real estate agent, it's possible to find California real estate at bargain prices.

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Is California land for sale a good investment?

When viewing California land for sale there are several things to keep in mind.

1. How long do you intend to hold the land before selling or building? Unlike property with a home already built, raw land cannot be lived in or typically used as a rental to offset the cost of insurance and taxes. If you don't intend to build or sell right away, then calculate your "holding costs" including average rates of tax increases to decide if you really want to buy now.

2. California land for sale by owner may be a good way to purchase land for later use, but be prepared to spend more on financing if you can obtain financing at all. Often a buyer must come up with significant down payments with higher interest rates in order to finance vacant land.

3. Liability. Just because nothing is built on it doesn't mean something cannot happen to increase your liability or exposure. Children playing on a vacant lot or other issues arise so be sure to get a price quote in order to purchase an Umbrella policy or other insurance to cover the land.

To find California land for sale use the HomesAndLand.com property listings search and filter for land. It's always helpful to find a real estate agent that deals in vacant, unimproved or raw land for that area.

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Is California real estate still a good purchase?

California real estate listings attract more attention than almost any other real estate market in the nation even though the price of housing is considered to be more expensive than average. After all, there are homes to be bought in various locations like Buffalo New York or parts of Ohio for a fraction of the cost. Part of the information any California first-time home buyer needs to understand is "why".

One reason for the difference in home value has to do with location. Often, when you see low priced homes in other areas of the nation, those locations have been losing people due to poor economic conditions and high tax rates for the few remaining homeowners. On the other hand, even the most modest investments in California real estate have resulted in dramatic appreciation.

The first step is to know which states are projected to continue growing and which are stagnating or even losing people. By all means, you certainly don’t want to buy in an area that is losing people each year. Even if the monthly payment is less, you are locked in and often unable to find a buyer due to poor job market, high tax base and high competition among sellers who are desperate to unload a property.

California home prices reflect the healthy state economy, great weather and tremendous growth of the state. According to research by the U. S. Census, California now represents approximately 10 percent of the entire nation's total production with strong expansion expected for the coming years.

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What contract clauses should I be aware of ?

When making an offer to purchase California real estate, California first-time home buyers would do well to consult with a professional real estate agent or broker who can walk them through the negotiation, buying and home loan process step-by-step.

One of the most important functions of a real estate agent is presenting the offer. Most offers have several "contingency clauses" that benefit both the buyer and seller. As a buyer of California real estate, you will be interested in these all important clauses:

1. The price. The offer must be agreeable to both parties for the deal to be made, but that is just the beginning.

2. Ability to obtain an acceptable rate. When shopping for home loans you want to make sure the rate and terms are agreeable. Stipulate the maximum you are willing to pay rather than just "obtain financing" so your deposit isn't contingent upon obtaining any financing, but rather acceptable financing.

3. Inspections and Appraisals. Justifying the home value is important both for obtaining home loans, but also to make sure you have adequate reserves for any required repairs.

4. Closing dates. Here is one area where you agent really makes a difference. Scheduling and meeting with inspectors, appraisers, and other associated paperwork can literally make or break a deal especially if your work schedule doesn't allow much time away. Stay in close contact with your agent to assure all contract dates are met.

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What is amortization?

Applying for home loans can seem daunting especially if you are a California first time home buyer. Understanding what mortgage lenders are seeking and the terminology associated with home loans doesn't make it any easier. One of the most often encountered terms, that many new homebuyers are unfamiliar with, is loan amortization.

Amortization, in its most simplistic terms, is how a loan is paid off in regular payments over the life of the loan. There are several parts to the monthly mortgage payment:

1. Principle. This is the amount that goes toward the principle each month. The principle is that amount of the loan you borrowed to pay for the house.

2. Interest. This is the amount of interest you are paying each month. When a home loan is taken out, the biggest risk for non-payment is during the early part of the loan, which only makes sense. The longer you own the house the more equity you usually have in the house. For this reason (among others), mortgage lenders charge more interest in the early stages of the loan than later. If you hold the loan for the entire term of the mortgage, then you will pay the quoted interest rate.

3. Taxes and Insurance. Some loans are escrowed to include the taxes and insurance while others are not. If taxes and insurance are not put into escrow, you are responsible for making sure they are paid on time.

You can request an amortization table when applying to mortgage lenders for home loans. These tables will show you the monthly payment amount including PITA (Principle, Interest, Taxes and Insurance) with the amount that is applied to each category monthly for the life of the loan. For example, if you have a 30-year loan then there will be a total of 360 payments due assuming you make each payment as scheduled.

You will quickly notice that the first several years most of your payment goes toward paying interest with very little going toward the principle pay down. In recent years there have been other types of amortization schedules that reflect various types of home loans; negative amortization home loans, unamortized loans and delayed amortization, to name just a few.

When shopping for home loans, request an amortization table from the mortgage lender. It's an informed way to compare your loan options!

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Do I need a jumbo loan to buy Southern California Real Estate?

Because of increased home values, many California homes for sale will require what is known as a jumbo loan which is different than many other home loans.

When trying to obtain a home loan, it's important to understand the basic types of loans available. Most guidelines are established by Freddie Mac or Fannie Mae, quasi-governmental underwriters which stipulate a loan limit of approximately $417,000 otherwise known as a conforming loan. However, above that amount, you will need a jumbo loan or non-conforming loan.

Jumbo loans have different requirements, funding levels, down payment requirements and other stipulations required by each mortgage lender. To obtain a home loan you may need a more significant down payment or other requirements so be prepared in advance by asking about the requirements and cut-offs for conforming and non-conforming loans provided by your mortgage lender.

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What do I need to know about obtaining a home loan?

Home loans are getting a little more difficult to obtain so it's more important than ever to understand what mortgage lenders are searching for in a buyer.

1. Credit Score. There are three main credit reporting agencies and each have slightly different ratings. As a consumer you can request one free credit report per year to find out what your score is. In general, the better your credit score the more favorable rates mortgage lenders are willing to extend.

2. Debt to Income Ratio. Your annual income compared to the total amount of debt and monthly payments both before and especially after the purchase of your new home will set the limit on how much a mortgage lender is willing to approve toward the purchase of your California new home. The lower your debt to income ratio, the better. You can afford a larger house payment if you don't need to worry about making big car payments or consumer credit card debt.

3. Loan to Value Ratio. Even if you have zero debt and a great credit score there is still a very real limit to how much the mortgage lender will approve toward the purchase of your new home. Home loans are highly dependent upon the loan to value ratio. Mortgage lenders want to know the house is worth more than the loan so they don't lose money if you default.

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