Arranging Home Financing in Agoura Hills, Calabasas, Camarillo, Lake Sherwood, Malibu, Newbury Park, Oak Park, Ojai, Oxnard, Santa Rosa, Simi Valley, Somis, Thousand Oaks, Westlake Village, Woodland Hills, Wood Ranch, and Ventura
GETTING PRE-APPROVED
Before beginning your home search, get prequalified to understand what you can afford. When you’re ready to make offers, seek preapproval. Preapproval verifies your creditworthiness and proves to sellers that you are a serious, qualified buyer—giving you a strong edge in competitive markets.
To secure preapproval, meet with a mortgage broker, banker, or lending institution. Referrals are available upon request. Prepare to present full financial documentation, including income, debts, and assets. Your lender will review this information thoroughly before issuing your preapproval letter.
This step streamlines the homebuying process and positions you to act quickly when the right home becomes available. The three main areas are:
1) Down payment–
The down payment equals the purchase price minus the mortgage. Typically, it ranges from 5% to 25% of the purchase price. Your lender will explain verification requirements and acceptable sources for the funds.
2) Credit report–
To obtain the best rates, maintain good to excellent credit. Poor credit may lead to a loan denial or require you to pay higher rates and fees. Pay for the credit report before ordering it. (See section below regarding your FICO score.)
3) Debt ratios–
Debt ratios determine how much of a loan you can receive. Generally, your monthly house payment (PITIA) should not exceed 28% to 32% of your total monthly gross income. Some programs allow higher ratios. PITIA includes principal, interest, taxes, hazard and mortgage insurance, and association dues. Your total monthly debts—including PITIA, car payments, loans, and credit cards—should remain below 36% to 40% of gross income.
FICO SCORE
A FICO score predicts how likely you are to repay a loan or make payments on time. It considers five main categories on your credit report. The score reflects all these factors, not just one or two.
1) PAYMENT HISTORY –
About 35% of your score depends on payment history. Lenders first check whether you have paid past credit accounts on time. This is one of the most important score factors. Occasional late payments do not automatically destroy your score, and a strong overall history can offset them. Having no late payments does not guarantee a perfect score. Your score considers: a) payment records on various accounts (credit cards, department store accounts, car loans, mortgages, etc.); b) public records like bankruptcies or liens; c) details of late or missed payments—timing, amounts, and frequency; d) the number of accounts without late payments.
2) AMOUNTS OWED –
Roughly 30% of your score depends on the amounts you owe. Having credit and using it does not automatically signal high risk. However, owing large amounts across many accounts can indicate overextension. The score measures: a) total owed; b) number of accounts with balances; c) percentage of credit lines used; d) proportion of installment loan balances remaining.
3) LENGTH OF CREDIT HISTORY –
About 15% of your score is based on how long you have maintained credit. A longer history often helps, but even shorter histories can earn high scores if other factors are strong. The score looks at: a) the age of your accounts; b) the time since you last used certain accounts.
4) NEW CREDIT –
Around 10% of your score reflects new credit activity. Opening multiple accounts in a short time raises risk, especially for those without long credit histories. Your score accounts for: a) number of new accounts; b) time since opening them; c) recent credit inquiries; d) time since lender inquiries; e) whether you have maintained good payment history after past issues.
5) TYPES OF CREDIT IN USE –
About 10% of your score considers the mix of credit types—credit cards, retail accounts, installment loans, finance company accounts, and mortgages. You do not need every type, and opening unnecessary accounts can harm your score. The score measures: a) the variety of accounts; b) how many you hold.
USING SCORE REASON CODES TO UNDERSTAND YOUR SCORE
When a lender receives your FICO score, up to four “reason codes” accompany it. These codes explain the main reasons your score was not higher, such as “Number of accounts with delinquency.” If a lender rejects your credit request, these codes can help you identify issues and possible improvements.
Reason codes often provide more insight than the score alone. They can reveal report errors and guide strategies for boosting your score. FICO scores offer the best credit risk guide available based solely on report data. Higher scores mean lower risk. While many lenders rely on FICO scores, each sets its own acceptable risk levels. No universal “cutoff score” exists.
DIFFERENT TYPES OF FINANCING
Many financing options exist in today’s marketplace. Common examples include:
Fixed-Rate Conventional Mortgage.
This loan offers a stable interest rate and monthly payment for the life of the loan—most often 30 years. Fifteen-year options feature slightly lower rates and work well if you plan to stay at least three to five years. Requires at least 5% down.
Adjustable-Rate Mortgage (ARM).
Rates may rise or fall based on a financial index such as Treasury bills, adjusting every six months or yearly. Initial rates are typically lower than fixed rates, making ARMs attractive during high-rate periods or for short-term ownership.
Five or Seven-Year Fixed-Rate Loan.
This hybrid loan stays fixed for five to seven years before converting to an ARM. It usually offers a lower rate than a fixed-rate mortgage but higher than an ARM, making it ideal for mid-term plans.
VA Loan.
Eligible veterans can borrow up to set limits with no down payment. While costs may be higher than conventional loans, sellers can cover many expenses, or they can be financed.
FHA Loan.
Insured by the FHA, this low-down-payment loan has higher costs. Sellers can cover certain expenses, or they can be financed into the loan, making FHA loans popular with first-time buyers.
Easy-Qualifier Loan.
Typically requires 20%–25% down and strong credit. Debt-ratio requirements are reduced or waived. Rates run slightly higher due to the relaxed rules.
80/10/10 Loan.
This option combines an 80% first mortgage with a 10% down payment and a 10% seller carryback, often avoiding PMI.
THE LOAN PROCESS
Most buyers need a loan, and while processes vary, lenders follow industry standards set by loan purchasers. These rules keep default rates—and interest rates—low. Expect to provide detailed, verified information.
Steps include:
1) The loan application.
Meet with a lender to complete a standard form and sign releases for verification.
2) Loan application reviewed.
The lender ensures you meet guidelines.
3) Assignment to a processor.
The processor orders reports, appraisals, verifications, and other documents.
4) Loan packaged.
The processor reviews the file for completeness.
5) Underwriting.
The underwriter reviews the file and either approves, conditionally approves, suspends, or denies the loan.
6) Order loan documents.
Upon final approval, the lender sends documents to escrow for signing.
The following pages will help make the home buying process smooth and straightforward:
