Finance 101: Affording Homes For Sale In The Central Valley

Couple jumping excitedly with a house frame around them

After waiting so long to make their move to buy a first home, many millennials skip the antiquated notion that a first home is always a fixer upper or tiny condo. As a first time buyer, you can easily afford new construction homes for sale in the Central Valley. Developers are busy at work, adding hundreds of new homes with upgraded features and amenities to Central California. According to an article by CNN Money, it’s easier to buy a home in 2015 because of low down payment programs for first time buyers and easier credit. As long as you have a steady income and decent credit score, you won’t run into the same obstacles experienced for many due to the subprime mortgage crisis. When it comes to financing your first home in the Central Valley there are a few “Financial 101” basics to know.

Understanding PMI

People who want to avoid paying PMI or private mortgage insurance in addition to their other mortgage costs put down the required minimum of 20 percent on a home. However, most first-time buyers can’t afford a hefty down payment. Fortunately, the Federal Housing Administration recently lowered the annual insurance premiums on FHA loans from 1.35 percent to 0.85 percent. Lenders require homebuyers to pay PMI as a sort of hedge or protection in case the buyer defaults on the loan. On the upside, most lenders remove the PMI once the owner has at least 20 percent equity in a home. With the values of homes in the Central Valley steadily increasing, you may see your PMI comes off of your mortgage sooner than expected.

Going with Fannie or Freddie

First-time buyers often choose to go with the government-backed mortgage companies, Freddie Mac or Fannie Mae because of their less stringent lending requirements. The companies recently began offering 3 percent down payment programs for first time buyers. Many conventional loans require much higher down payments. Because a down payment is often a major barrier to home ownership, the government began offering the FHA program in 2015 to spur home buying.

Choosing loan terms

In addition to deciding whether you want to opt for a conventional loan through a private institution or a FHA secured loan, you need to decide on the loan terms and length. An article by outlines different types of home loans including fixed rate mortgages. Length of loans range from 10 to 30 years, but the 30-year is still the most popular. With a fixed rate, you know your interest rate will never change even if the Fed raises the prime rate. If you don’t plan to live in your home for more than 5 years, you could consider an adjustable rate mortgage or a hybrid product with a fixed rate that changes to an adjustable rate after 5 years.

Getting a down payment together

If you plan on putting just 3 percent down on a home, you may have enough money in savings. When buying a new construction home, you don’t need as much money set aside since the home is under warranty. However, you may want to buy new furniture or decorate. According to a Trulia report, half of home buyers in their 20s and 30s had no problem asking relatives or friends for down payment assistance. Two in five millennials said they planned to put less than 10 percent down on a home.

If you are looking for a fabulous new home for your family, consider San Joaquin Valley Homes. San Joaquin Valley Homes is working on a number of projects including San Marino, which includes 95 lots in northwest Visalia. If you want to skip the “starter home” phase, consider their move-up homes with between 2,200 and 3,200 square feet and high-end amenities. For more information on new homes for sale in the Central Valley at a variety of price points, please contact us.

Lisa Walker