Hey, This is Chris Trapani the Mortgage Pro.
You know, people ask me all the time, whether they are realtors or the consumer, they ask
me all about a CalHFA loan. Zero Down payment. Do those programs really work, do they exist?
Absolutely! And today I'm going to teach you about the Good, The Bad &the ugly.! Alright, a lot of people want to buy a house,
but they don't want to put a down payment or maybe they just don't have the down payment.
The CalHFA program is going to lend you, they're not giving you, they are lending you the money
for a down payment.
Now as an example, on a $300,000 purchase
on an FHA loan you would need a $10,500 Down Payment. What happens is, we have a program
tied to CalHFA called my home. And My Home is actually going to give you a loan for $10,500
for the entire Down Payment. Fantastic right! Now that loan is called a silent second mortgage.
You do not make monthly payments on that mortgage at all. Eventually, you have to pay this money
back. There are three reasons that are triggering events that would require you to pay this
off. What are they? Number 1 – you Sell the home. Obviously, if you sell the home all
liens have to be paid off this is a lien on the house. Option number 2 is if you pay the
house off in 30 years or even if you pay it off early it does become due and payable at
You'd have to pay it off or refinance or something to pay it off. Option number
3 – you Refinance hey a couple of years up the road you have some equity in the house
and you decide, hey I want to lower the rate or want to take some cash out or whatever
triggering event that requires you to do a refinance what happens is it will become due
and payable then. if you have enough equity you can just roll it into the payment.I'm
doing that for somebody right now. It's really simple.
OK! So now we have closing costs.
Closing costs are required on all loans. People don't understand, but there are 25 to 30 people
that work on every single loan. We have escrow and we have title and we have processors and
we have underwriters and we have assistants and we have appraisers and ther are so many
people that get involved in every transaction. Well those people don't work for free just
like you or I don't so we have to come up with the fees.
Now on you average loan you
are looking at on a $300,000 loan, you're probably looking at about $8,000 this loan
is more expensive as far as points because without charging points on this particular
loan there's no way the company would get paid and everybody would lose money nobody
would smile except of course you. Unfortunately, we can't do that. So we have a third mortgage.
It's called a Zip program. Now CalHFA offers a ZIP Program and what happens is they offer
a ZIP Plus 2 or a ZIP Plus 3 now a ZIP Plus 2 gives you 2% which is enough to pay the
points on the loan but we still have the other $8,000 Zip Plus 3 would Offer the 2 Percent
for the points and 1% for the closing costs, but we're still short about $5,000 roughly
on a $300,000 purchase.
Now, where is that money going to come from?
Well, that's always negotiable. Number 1 – You as the consumer maybe you have the money,
maybe you have it in a 401k, maybe Grandma can gift it to you, maybe your cousin Charlie
borrowed money 10 years ago from you and he's ready to pay you back or the Realtor that
we work with, maybe they can go back to the seller and ask the seller to pay $5,000 or
$8,000 in closing costs. This is very very common. Now it is more difficult in today's
market. Today's Real Estate Market is very aggressive. There's a lot of great things
happening but for every house in that $300,000 market, there are probably going to be 5 to
10 offers, so all the sellers – they just want the most money just like if you were
selling your house. Sometimes they're willing to pay closing costs, sometimes they're saying
"Hey, I'm not paying closing costs I want to maximize what I get. It's all a negotiation.
It takes time and that's one of the reasons a super professional realtor who knows what
they're doing with great experience can help you buy that house.
Now, we're talking ZERO
Money Down! You're talking about paying for an appraisal which sometimes if we have enough
closing costs money can even be reimbursed to you, but all of these things have to get
paid. That is a third mortgage the Zip Plus 2 or ZIP Plus 3 – it is also a silent mortgage.
You don't make the payment until you sell the house, refinance the house or pay the
house off – the same as the silent second.
So it's a great program for those people who
don't have any money! Now how do you qualify for the CalHFA program? Well, first of all,
you must have a 660 FICO score, it used to be 640, but recently CalHFA, that's a government
agency program, CalHFA basically raised it to 660 so if you don't have a 660 FICOscore,
hey you can reach out to us a lot of times there are things we can do there are tricks
to the trade, I've been doing this for 29 years we know what to do to raise your score
and sometimes it takes a month and sometimes it takes 6 months it all depends on what's
there. So, don't let that get in the way. We'll work on it till we get you there! Also,
number 2 there is a maximum income to qualify for CalHFA. That in San Bernardino and Riverside
County is $138,700 a year. So if husband and wife are both on the loan well their income
cannot be above that amount.
The third thing you need to do is you must take a first-time
homebuyer class. You must Number 1 – prove that you are a first-time homebuyer. And that
really means you haven't owned a home in the last 3 years. If you owned a home 10 years
ago, that's OK. You're still a first-time homebuyer if you haven't owned in the last
3 years. And you must take a class it's a very simple lass you can take it online but
you do learn some wonderful tools and wonderful things to get ahead.
So, let's recap a little bit.
Number 1 – the great thing things – No Money Down – We can
also cover some of the closing costs – that's a great thing! That's the good – Now there's
the bad. The bad is the interest rate could be a little higher or will be a little higher
than a standard program. So if somebody says to me, "Hey Chris – I have the down payment,
or Grandma is going to gift it to me or I can take it out of the 401k, I encourage you
to do it that way – Why? 1 you're going to get a lower interest rate. 2 you're not borrowing
the money you're just paying it and it's done, 3 the qualifications are different. As an
example – on a standard FHA loan for most people we can go up to a 57% debt ratio.
means take the house payment add the card payment add the credit cards the monthly payments
– the minimums – I'm sure you pay extra, but we use the minimum payment which helps you
qualify, any student loans any installment debts, child support, alimony let's add them
all together on a standard FHA we have to make sure that's not over 57% to get the approval.
On a CalHFA loan, you are limited to a 45% debt ratio, so you have to be in a little
bit better financial shape because remember, you're putting no money down no skin in the
Now there's always people who reach out to me when I make these videos who say
"People shouldn't buy homes if they don't have 20% to put down" Well you know what,
that's nice for you, but it's not nice for the little guy who wants to buy a house. Let
me teach you a couple of things about buying a home, do you know if you have children,
the children of homeowners score higher in school in math and in English than children
of renters! I don't know why – this is done you can google this it's a study – it was
also proven that they are 50% more likely to graduate from High School and 130% more
likely to graduate from college! The reason we buy houses is not just financial,
but we want to give our kids every opportunity and every advantage! That's another reason
to buy a home.
Look these programs are there for you! You can have $138,000 income which
is a lot of money and you can still buy a house with no money down. If you have the
money, I'm still going to recommend you put the down payment. Ok So my attitude is, you
have everything you need, as long as you have reasonable credit you have the income you
don't even have to have the down payment, what are you still renting for? Don't you
realize that rent goes up every year? But the house payment stays the same. And people
say but Chris, it's higher. Well yeah, sometimes it's higher initially. But let me ask you
a question, Are you going to get a raise next year? Maybe you're going to get a dollar an
hour raise, maybe your wife is going to get a dollar an hour raise – a year from now,
do you realize that a year from now you'll be making an extra $346 a month? So sometimes
we need to suck it up for a little bit of time.
When I was a little kid, I remember
my Dad saying, $272 a month! How am I going to make these house payments? You know he
only made about $7,000 a year in 1969. But what happens is over time you get a little
raise you get a little raise you get a little raise I bet you if you stopped eating out,
look at your bank statement go through all the ATM charges for eating out eating at a
restaurant eating at McDonalds eating at Applebees, go through and say how many times did I go
to Starbucks, leave your ATM card at home, every time you walk into a store say do I
want my own house or do I want those shoes or do I want my own house or do I want that
book If you start to think like that you are going to become a homeowner together we can
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