When Shopping for a California Mortgage Online

According to California based mortgage consultants, residents of the state need to keep a close eye when trying to use the internet to do the heavy lifting for them.

A spokes person for Home Loan 2Day, said, “Sometimes, these Internet services might work fairly well for certain people, but the one-size-fits-all approach they offer is going to leave a lot of people with loans that aren’t the best for them, or even worse, they may be shut out of the process altogether.”

“The problem with these services is that they never really get to know anything about your financial situation other than your credit history and income level so basically what winds up happening is that you’re reduced to a number to them. And if they don’t like whatever that number is, you’re out of luck,” he added.

Here are the three things that one should look out for when shopping for a California mortgage online:

* Most of the mortgage websites do not have the physical manpower to work with every individual borrower. This means you would not receive the attention you’d need for your unique situation. You would basically wind up with a bad loan since there was no one available online to check and see if they could have gotten you a better deal.

* If you have special financial circumstances, such as being self-employed or damaged credit, most of these sites would not want to work with you unless you meet their rigid criteria.

* It’s also important to know if these websites provide advice when choosing between loan products. You don’t want a website that is only gathering offers and throwing advertisements at you, making you feel pressured.

Here the solution:

Use the internet to educate yourself on the mortgage industry, and then work with a real human, or a well respected website where there is always someone to speak to.

The California Housing Market

According to first quarter data for this fiscal year 2012 in the state of California, roughly 55 percent of occupied housing is owner-occupied, with the remaining 45 percent being renter-occupied. Of those who are statistically classified as owning a home, over 75 percent carry it with a mortgage and about 35 percent, or about 5,100,000 homes are near negative equity. It’s no wonder such a large number of people are choosing to rent homes in California when a majority of those who “own” a house would likely end up paying to sell. With the largest number of residents in the United States, California is actually a top spot for negative equity, with some 257,000 homes listed as being in foreclosure. Unlisted are roughly 500,000 homes that comprise state’s vast shadow inventory.

Recent data from the latest Census indicates that median household income in California is $57,000, while median net worth of a Californian household is $61,000 based on [outdated] figures from 2008 when the numbers were even better than they are now. Here in the Golden State where women herald Louis Vuitton and Prada and every other person drives an expensive luxury car, these numbers seem a gross underestimate. However, FHA insured loans that require only a 3.5 percent down payment allow people with little savings to buy homes and hidden $800 lease payments on those foreign cars only add to the image of affluence that Californians seem bent on maintaining. Clearly it is not just the bubble contributing to this trend of negative equity, but psychology as well.

The median income to median price of a home is extremely important because it shows what investors can afford in a home price. Typically the banks are going to require that you have a 40% – 45% debt to income ratio in order to qualify. This means that all of your debts including car payments, credit card payment, house payments and more cannot be more than 40% – 45% of your income in order for you to qualify for financing. Since the median income in California is $57,000 then the maximum amount of debt one can pay (including the mortgage payments) is $1,900 – $2,138 per month. Take a $400 per month car payment out, $400 per month in credit card payments and $400 out for other payments and you are left with a maximum mortgage payment of $700 – $1,118 which equates to a house worth $138,000 – $221,000. The current median home price in Southern California is about $270,000 which means prices still have to come down in order for people to qualify. The professional flippers I know are finding it is taking an av rage of 2.5 buyers to sell their home at market value due to these financing issues.