Changes to minimum down payment loans

January 10, 2020 by

It’s a new year! With a new year, always expect changes in the mortgage industry. This blog discussed some changes last month:

Why stop there?!? We will keep it going for a conventional loan programs with small down payments. I’ll touch base on the new guideline compared to the previous requirements.

NEW: When making less than a 5% down payment on a conventional loan, if all borrower’s on the loan are first time home buyers, one of the borrowers must complete a homeownership education course.

Previously there was no education requirement for those putting less than 5% down to purchase a home. Note if one of the buyers has previously owned a home, then there is no education requirement regardless of the down payment amount.

For those keeping score at home, a “first time home buyer” is defined as anyone who has never owned a home OR has not owned a home in the past three years. If the last home you owned was more than three years ago, then you are now a first time home buyer.

NEW: Home Ready loans no longer require the homeownership education course if one of the occupying buyers has previously owned a home (again, means has owned a home in the past 3 years).

Prior to the change, one borrower had to complete the education course even if they had previously owned a home.

NEW: The homeowner education course is free if the borrower’s use this link – https://educate.frameworkhomeownership.org . Note if using another accepted education course, there may be a non-refundable fee of $75.

Prior to this change, the cost of the course was $75 to everyone regardless of where the course was completed.

New years… new changes… a lot to keep up with… your head spinning? Don’t worry! It is my job to keep up with the changes.

The Spring Market is upon us. If you are ready to get out and purchase a home in 2020, contact me  today. If the property is in Georgia, I can get you ready to make an offer in just a few minutes. You can be well on your way to owning a new home faster than you’d ever expect!

Gen Z’ers Want to Own a Home!

January 7, 2020 by

Here’s some good news for people working in the real estate and mortgage industries – a recent study by Freddie Mac shows that members of Generation Z tend to have stronger home ownership motivations than do Millennials.  Freddie Mac surveyed consumers between the ages of 14 and 23.  The results show that, on average, Gen Z’ers have a more positive perspective on home ownership.

Eighty-six percent of survey responders stated they want to own a home, and respondents plan to buy a home by the time they are 30 years old.  The current median age of first time homebuyers is 33.  Survey respondents cited the greater control, independence, and privacy that home ownership delivers relative to renting.

While showing enthusiasm for home ownership, survey participants also noted the challenges they face, including increasing home prices, saving for a down payment, and unstable jobs or job changes.  They also note student loan debt as a challenge for those planning to attend college.

Sixty-five percent stated they are not confident in their mortgage knowledge.  Of these, seventy one percent stated they would consult a parent to learn more about mortgages, while only forty one percent said they would consult a mortgage professional.

Now here’s a stat I really like:  seventy-nine percent would prefer to handle the mortgage process face-to-face with a professional, rather than online.  I love meeting my clients, shaking their hands and looking them in the eyes.  This statistic warms my heart.

As a mortgage professional and father of two Gen Z’ers, here are my recommendations to these aspiring home buyers:

  1. Create a reasonable budget that includes saving for a down payment.  Implement this savings strategy now so it becomes habitual and easier down the road.
  2. Pay your bills always on time to build your credit score.  This may sound silly, but many people don’t realize how important it is to pay back credit cards when they first start using them.

Do you know a Gen Z’er who wants to talk with a mortgage professional so they can better understand the process?  I would LOVE to meet them – I’ll even talk with them in a relaxed coffee shop environment.  Connect them with me and I’ll be happy to coach them now, even if it may be a few years until they are ready to buy a home.

New FHA max loan limit

December 12, 2019 by

In early December, I mentioned the maximum loan amount for conventional loans will increase from $484,350 to $510,400 in 2020. FHA followed suit and increase their maximum loan amounts.

One thing to remember about the maximum FHA loan amount is the amount varies from county to county. The max loan is based on the average home values in each market. The loan amount range across the US goes from $331,760 to $765,600.

To find your area, you can use the search tool created by HUD. Be sure to change the Limit Year from “CY2019” to “CY2020” in order to see the new maximum amounts.

For the Atlanta metro area, the new maximum FHA loan amount will be $401,350. This is about a 5% increase over the current limit of $379,500. With these increases, a buyer can now purchase a home in metro Atlanta:

As we celebrate the new year, it is also time to celebrate more buying power in the housing market!

Are you thinking about buying a home in 2020? Want to get a head start? I’m already working with clients who are ready to purchase home. The spring market has started! If you are buying a home in the state of Georgia, contact me today. You can be ready to make an offer on a home in no time at all.

Big VA Loan Changes for 2020!

December 12, 2019 by

Exciting new changes are coming for VA loans that close after January 1, 2020.  These two major changes will make it easier for military veterans to purchase a home.

The first change is that the threshold for VA jumbo loans will rise from $484,350 to $510,400.  This rise aligns with the increase in the conventional conforming loan limit.  This means that the higher VA jumbo interest rates will now apply only to loans exceeding $510,400.

The second change is expected to be 0% down payments on all VA loans.  The VA hasn’t officially released details on their max loans as of this post. Again, the expectation is no down payments will be required on VA loans in 2020.

Until now, veterans will full eligibility could obtain zero down loans on principal amounts only up to the VA jumbo threshold.  So the maximum zero down loan in 2019 is $484,350.  Loan amounts above this threshold have previously required down payments.  I won’t bore you with the complicated calculation now.  The key point is that veterans can now obtain 100% financing on homes priced up to $950,000.

This is a GREAT change for one of my current clients.  My client served for over 10 years, but the military doesn’t pay top dollar.  He and his wife were not able to save much money during his military days.  He recently started a very high paying job in Atlanta.  His credit score is over 800.  With his strong income, his debt to income ratio on a $750,000 home would fall well within VA underwriting guidelines.  He can make the monthly payments and he has a strong record of paying his bills on time.  He just has not been able to save for a significant down payment with his prior military pay.  Starting January 1, he will be able to buy that $750,000 home with zero down!  He is the “poster-child” for this VA loan change.

Do you know a military veteran here in Georgia?  Perhaps you see the Army, Navy, Air Force, or Marine Corps stickers on her car in the office parking lot.  When she complains about her commute, ask her how her life would change if she cut her commute by 30 minutes each way.  Then introduce her to me.  I’ll work to get her a great deal on a VA loan, taking advantages of the benefits she earned through her military service.  A new home closer to the office will make her life much better.

Conforming loan limits rise again

December 3, 2019 by

For the fourth consecutive year, the conforming loan limit is rising for 2020!

Historically, this is the normal trend of conforming loan limits as the maximum conventional loan amount increased almost every year from 1980 to 2006. Then 2007 arrived…

From 2007 to 2016, the conventional loan limit remained steady at $417,000. With the housing crash and slow recovery, FHFA held the maximum amount steady for a decade. We experienced a modest increase in 2017 followed by more substantial increases for the next few years.

  • 2017 max limit was $424,100 (up from $417,000 for only about a 2% increase)
  • 2018 max limit was $453,100 (about a 7% increase)
  • 2019 max limit was $484,350 (another increase of about 7%)
  • the new 2020 maximum conventional loan limit will be $510,400, which is just over a 5% increase from this year.

Since one only needs a 3% down payment to qualify for a conventional loan, this means buyers can purchase a $526,000 home with only a $16,000 down payment! With 2020 just around the corner, we can begin using the new limits.

With the conforming loan limit increase, we can also expect the maximum FHA loan limit to increase as well (currently at $379,500 for metro Atlanta). Once FHA makes their formal announcement, The Mortgage Blog will update you on it too!

Ready to get a jump on the spring market for 2020? The spring market is already starting! If you are looking to purchase in the state of Georgia, contact me today. I can get you prequalified and ready to make an offer on your new home in minutes!

Owning Makes More Financial Sense than Renting

December 3, 2019 by

A recent Census Bureau report showed that construction began for 11,000 single-family built-for-rent houses in the second quarter of 2019.  Mind you, these are not apartments, but single-family homes built specifically to rent.  A recent National Association of Home Builders blog post stated that renting by choice is gaining popularity among millennials.   

The CEO of a build-for-rent developer stated, “What we were shocked to find out was it was people that had great credit, they had money for down payments, they had great incomes but they just didn’t want to own a home.”  So their renter clientelle does not consist of people experiencing job loss, credit challenges, etc.  They could buy a home, but they choose to rent instead.  It’s a lifestyle decision.

Here’s a negative consequence of this choice.  William Wheaton, a MIT housing economist, recently made said to NPR, “Owning still makes much more sense.  If prices continue to rise, buying will be a money tree.”  Even home price appreciation occurs at low levels, that growth serves to build personal wealth for the home owner.  So home price appreciation builds homeowner equity.  In addition, the principal component of every mortgage payment also builds homeowner equity.  A tenant’s monthly rent checks are expense only – there’s no wealth building when it comes to paying rent.

From a long-term wealth perspective, owning builds wealth better than renting (especially with today’s low interest rates and strong home affordability).  If you are renting in Georgia now and wonder if owning would benefit you financially, give me a call.  We’ll run some numbers and see if home ownership is better for you financially.

Is a Housing Boom Coming?

November 19, 2019 by

Stephen McBride, a contributor for Forbes magazine, posted an October article titled, “The Biggest Housing Boom In History Has Just Begun.” McBride approaches the subject from an investor perspective, but as someone employed in the home finance world, the article is very relevant to my job.

One of McBride’s sources stated, “The most important driver of home prices is supply and demand.  And right now, there is a chronic undersupply of homes in America.”  Since the late 1950’s, the US has seen an average of 1.5 million homes built annually, according to Census Bureau data.  However, since the Great Recession started in 2008, new home construction has averaged only 900,000 units annually.  That’s a shortfall of 600,000 off the historical annual average for 10 years now.  So we have a cumulative undersupply of 6,000,000 homes relative to historical data.  The article goes on to state, “fewer homes were built in the last decade than any decade since the ’50’s.”

On the demand side, the focus is the Millennial cohort.  The Millennials are the largest generation in American history.  Now the median age of the Millennial cohort is 34.  This historical average age of people buying their first home is 33.  According to the National Association of Realtors, one-third of home buyers are now Millennials.  The article goes on to state that “Every year for the next decade, tens of millions of Millennials will hit home buying age.”

Put these two factors together and you have a tight housing supply coupled with increasing demand.  Supply and demand analysis therefore predicts that home prices will rise.  (This makes me want to buy another house or two!)

I earned my economics degree a long time ago, but the supply and demand basics have not changed.  This appears to be the perfect storm for rising home prices.  And that could mean significant wealth growth for home owners over the next several years.

Want to get into the market now while mortgage rates are near historic lows and before home values start rising quickly again?  Give me a call at Dunwoody Mortgage.  We will get you prequalified quickly and help you close with the best financing for your current situation.  You can buy a home with a minimum 3% to 3.5% down payment and a credit score of 620+.  Now could be the perfect time for you to buy a home.

A good time to buy a home!

November 6, 2019 by

The holiday season is upon us! We are on the other side of Halloween, headed toward Thanksgiving and then the month full of holidays – December. Guess it is time to stop looking at homes…

Not true!

This time of year is a great to both sell a home and purchase a home. Here are some reasons why someone should consider purchasing a home now.

  • There is less competition on the market for sellers during this time of the year. The same is true for buyers as there are fewer people looking to buy a home.
  • This means both buyers and sellers are serious about making a real estate sale – no tire kickers this time of year. Everyone is buys with holiday planning and events.
  • Thinking spring market? Well, a lot of buyers and sellers are thinking the same thought. Meaning, by the time the new year rolls around, there will be plenty of more homes and buyers out – more competition on both sides.
  • Rates are still low. Mortgage rates are lower now than last year and close to their yearly lows of 2019.

On a personal note, I’ve personally purchased a few homes. The time I purchased during the holidays was easier than when I’ve looked and bought homes during the spring/early summer. Less inventory means a more focused search for finding a home. Fewer buyers meant the seller only had a few offers to consider instead of a dozen or more!

While the year is coming to an end, the housing market never really does end. It just keeps going and going. Now is a great time to get out there and find that home. If you are buying in the state of Georgia, contact me today. You can get prequalified in a few minutes, and a pre-approval in just a few more minutes. You’ll be ready to make an offer on a home in no time at all!

Home Affordability at its Highest Point in Years

November 1, 2019 by

According to a recent report by Black Knight, Inc., home affordability reached its best level in years in August 2019.  This follows a consistent decline in home affordability from late 2016 through late 2018.  Home affordability hit a nine-year low in November 2018, as mortgage rates rose to the 5% range.  At that time, the national home payment to income ratio rose to 23.7%.  According to Black Rock, this led to an extended slow down in home price growth.

Since November 2018, mortgage rate declines plus this slower home appreciation has greatly improved home affordability.  The national payment to income ratio has dropped to 20.7%.  This ratio means that the monthly principal and interest (P&I) payment on an average-priced home now requires only 20.7% of the national median income.

Put another way, interest rate declines between November 2018 and August 2019 has increased home buying power by about $46,000. In August 2019, a home buyer would pay the same P&I amount on a $246,000 home mortgage as she would have paid on a $200,000 home mortgage in November 2018.

On the other hand, I found websites and recent articles showing that Atlanta-area rents have risen around 4% in the preceding 12 months.  In short, owning a home in Atlanta has gotten more affordable while renting has gotten more expensive.

Do you rent your home in Georgia?  Has your rent increased making money tight?  Give me a call and let’s talk about mortgage affordability.  You don’t need perfect credit to buy a home, and you will need only a minimum 3% to 3.5% for your down payment.  (Military veterans can obtain VA loans with a 0% down payment.)  With the current low mortgage rates, you might be able to buy more home than you thought you could, for a lower monthly payment than you thought you would have to make.  And with buying a home, you will get the equity / wealth benefits from potential home appreciation.  It’s a GREAT time to buy a home in Georgia!!

Changes to the VA Funding Fee

October 31, 2019 by

There are a few certainties in life… death, taxes, leaves changing colors in the fall, and loan guidelines changing. Well, we have some new changes with VA loans pertaining to the funding fee. 

Currently the VA funding fee is as follows:
– 2.15% of the loan amount for first time usage and 3.3% subsequent use when making less than a 5% down payment. 
– 1.5% of the loan amount for first time usage and subsequent use when making a 5% down payment. 
– 1.25% of the loan amount for first time usage and subsequent use when making a 10% (or larger) down payment. 

The funding fees are slightly higher if the buyer is part of Reserves/National Guard vs being part of the regular military. 

Beginning in November the fees change to:
– 2.3% for first time use and 3.6% for subsequent use when making less than a 5% down payment. 
– 1.65% fee when making a 5% down payment
– 1.4% fee when making a 10% down payment. 

Some notes on this:
1. The increase is roughly 0.15 across the board. 
2. There are still funding fee exemptions for disabled veterans. 
3. There is now no difference between being in the regular military, reserves or national guard. 

Now I know a thought that may be going through the reader’s mind… the funding fee is going up. What is a funding fee?… great question!

VA loans do not have a monthly mortgage insurance payment. They do have an up front premium for obtaining the loan (similar to FHA loans). VA loans still do not have monthly mortgage insurance payments, the the funding fee (required on all VA loans unless the borrower is considered disabled) is going up. 

Are you a veteran living in Georgia looking to buy a home? Never considered using your VA eligibility? Maybe it makes sense. Maybe it doesn’t.  To find out, contact me today. There’s only one way you’ll know which loan program makes the most sense for you – asking the question.