First-Time Homeowner (CalPERS v.s FHA loan)?

homeowner loan

My wife and I are preparing to purchase our first home within the next coming months. We were planning to have 3.5% available for an FHA loan down payment but then our agent told us that we should also have another 3% on top of that for closing costs. We were not planning on paying the closing costs because a lot of sellers are paying for that right now or at least splitting it and paying half.

If we have to pay the entire closing costs ourselves then we will not have enough money to get a home like we had planned. However, we just found out that we can get a CalPERS loan because she is a city employee for the Police Department and we are allowed to take out 50% of her current retirement balance to help purchase our first home.

Apparently they will loan you 105% for financing to cover the downpayment needed but will not help with the “closing costs”. That is fine because we can use our $12,000 for the closing costs if they are covering our down payment from her retirement savings.

But I have heard that using CalPERS is not the best idea because it takes a very long time to close and most banks will pass on a couple using CalPERS for another couple who are using a traditional lender.

Any advice on this? And whether we should use the CalPERS loan or just go FHA with our $12,000 for the down payment and hope we don’t have to come up with closing costs?

Sell and Rent Back

Categories : homeowner loan



CalPERS is better sometimes, and sometimes not better.

The advantage is that they have maximum closing costs and fees that usually beat banks. Mortgage brokers can usually beat both.

As long as you are pre-qualified, CalPERS loans can close just as quickly as banks. The CalPERS website can give you lender referrals or you can call them for more help.

August 20th, 2009 at 12:50 pm

First thing you want to do is get written estimate from each lender. Compare the interest and fees. Do you have to pay MIP (mortgage insurance premium) on the CalPers loan? Compare apples and apples and by all means shop your FHA loan. I just had one deal almost go south and I flipped the buyer (I represent the Seller) over to a lender that I know and trust. Same loan (FHA) but the fees the first lender was charging were over $4000! Needless to say, the buyer went with the other FHA lender whose fees were 75% lower. There are some unscrupulous people out there.

As for closing costs, most sellers are willing to pay them in this market. Certain REO properties have a limit that the seller is willing to pay, such as Freddie Mac’s 3%.

When your Realtor structures your offer, they will put the amount of requested seller-assistance in your offer. This amount may be countered by the seller. IF the Seller counters…you are free to accept, counter back or not respond. Your obligation ends if the Seller counters you back. Think of it as a new offer. If the numbers don’t work for you, you counter back and see what happens. Keep in mind that during the countering process, the seller is free to accept another offer. Don’t get emotionally involved until your offer is accepted! You may need to write several offers on several properties before one gets accepted. In this market there are often multiple offers and your FHA loan with closing costs may get blown out by a conventional buyer with 20% down. Be patient and don’t get discouraged!

It is most important that you engage the services of an experienced Realtor and a good lender.

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