The Federal House Finance Agency announced a new refinance product, which should be available sometime this summer. This program focuses on low-income borrowers with single-family mortgages backed by Fannie Mae and Freddie Mac.
Under the new refinance program, lenders must ensure that the borrower saves at least $50 a month in their mortgage payments while simultaneously dropping their interest rate by at least 0.500%. The program also requires lenders provide a $500 credit for appraisals if the borrower is not eligible for an appraisal waiver.
The program will be called RefiNow, and will even include waiving the controversial adverse market refinance fee (introduced in the fall on 2020 by Fannie Mae/Freddie Mac) for borrowers with loan balances at or below $300,000.
At least a half a point drop in rate…. either no appraisal OR a credit to cover the appraisal… this all sounds great! How does one qualify?
To qualify for RefiNow, a borrower must:
have a loan backed bay Fannie Mae or Freddie Mac
have an income at or below 80% of the area’s median income
be current of their payments for the last six-months (with no more than one payment missed in the last 12)
the max loan to value of 97% (meaning, there must be 3% equity)
a credit score of 620+
What does 80% of the area’s median income mean?
In the metro Atlanta area, most of the median area income is $82,000. Meaning, to qualify the borrower’s income must be at/below 80% of this amount (roughly $65,000). This is not a refinance program for someone with a $500,000 loan making six figures. It is indeed targeted to lower income borrowers.
Fannie Mae has a lookup tool for their Home Ready loan program. I expect they will have something similar for the RefiNow program. To check out to see the median area income for your property, you can use the lookup tool:
Again, this is not the official “RefiNow” lookup tool. It should give someone an idea of what their max income can be and still qualify for this program.
RefiNow – Yet another exciting way for homeowners to take advantage of super low rates for a refinance coming soon to a Loan Officer near you.
More Covid related news… this week a large nation wide bank stated they were changing conventional loan requirements for buyers. Instead of using Fannie Mae and Freddie Mac guidelines, now buyers will need at least 20% down and a 700 (or higher) credit score.
Is this a growing trend in the mortgage industry? Is this bank acting alone?
The real question is “what are Fannie Mae and Freddie Mac saying?” Fannie and Freddie have made no changes to their guidelines in terms of existing credit scores or minimum down payments.
3% is still the minimum required down payment for conventional loans
620 is the minimum required credit score
While there have been changes to credit score requirements on government loans, increasing the down payment and credit score on conventional loans is not in play. Until Fannie Mae or Freddie Mac change their guidelines, this is an isolated event and not a trend.
Wanting to purchase a home in the spring market? Needing to buy a home with below average credit or a small down payment? Those loans still exist! If you are looking to buy in the state of Georgia, contact me today. I can get you prequalified in a few minutes, and we can have a talk about the landscape of the mortgage industry in the time of Covid.
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!
Home buyers continue to make assumptions (most of which are bad) when it comes to buying a home. Meaning, the options for education for buying a home are not as good as they should be.
That is why you have The Mortgage Blog!
This misinformation is undoubtedly holding some back from even looking to try and purchase a home. Let’s take a look at a recent survey by Fannie Mae to see some of the false assumptions buyers have about purchasing a home:
most buyers assume the minimum credit score is higher than what is actually required to qualify
most buyers assume the down payment is higher than what is actually required as a minimum down payment
few home buyers are aware of low down payment programs such as Fannie Mae Home Ready requiring only 3% down
Under these assumptions, many potential buyers assume home ownership isn’t even an option and therefor do not do any further investigating into possibilities of buying a home.
The Mortgage Blog has covered all of these topics and more:
The Mortgage Blog has your back! Reading over these, one will learn a large down payment is not needed to buy a home (as little as 3% down on a conventional loan and 3.5% on an FHA loan), perfect credit is not required (down to 620 on FHA and conventional and sometimes as low as 580 on FHA), and there are programs out there for first time home buyers.
Been wanting to own a home but confused at all of the misinformation out there? Just want a straight answer or two? Contact me! I will be happy to answer your questions about home ownership. If you are looking to buy in the state of Georgia, I can get you prequalified and on your way to owning a home!
Fannie Mae has a great loan product called Home Ready. Potential home buyers can qualify even if not a first time home buyer. The blog covered the details of Home Ready in the past. Check out those posts:
One aspect to pay attention to is the income limit. To qualify for Home Ready, a potential buyer’s income can’t exceed 100% of the area median income (AMI) for the area. There are also some areas with no income limits. These areas are determined from the census track (where household income and people are counted in geographic areas).
Here is a handy website where one can look up a property to see about qualifying income limits:
Starting July 20, 2019, Fannie Mae will implement changes to the program. Gone are the no income limit areas. Another change is the qualifying income reduces from 100% of the AMI to 80%. What does this mean:
some metro Atlanta areas have no income limits, so a buyer could have an income of $200,000 and still use Home Ready. After July 20th, that will no longer be the case.
If an AMI is $80,000, the qualifying income will be now $64,000 (80% of the AMI) instead of the $80,000.
It seems Home Ready is narrowing the pool of potential buyers who can use the program. If you are looking to use Home Ready, talk to your loan officer to see if these changes could impact your home search.
Looking to buy in the state of Georgia, if so, contact me today. We can get you ready to make an offer on a new home in minutes, and see if Home Ready is a program you could take advantage of with your home purchase.
Fannie Mae and Freddie Mac offer conventional loans. Their guidelines are almost completely identical, yet there are some unique differences that can come in handy under the right circumstances.
Here are some differences between Fannie and Freddie:
Freddie Mac:
Often only requires one bank statement (Fannie requires the two most recent bank statements).
When doing a refinance, the borrower can take the greater of 1% of the loan amount or $2,000. If the loan is $400,000, then the borrower could get up to $4,000 back and not be a cash out refinance (Fannie Mae has a $2,000 limit).
Employed by a family member? Only one year of tax returns are required (Fannie Mae requires 2 years).
Student loans in deferment have a payment calculated by taking 0.5% of the total balance (Fannie Mae is 1% of the balance).
Self employed buyers only need one year of tax returns if the business is over 5 years old. If less than 5 years, then two years are required (requirements for Fannie Mae are not as straight forward as Freddie Mac*).
If a buyer has a second job that loses money as shown on a filed tax return, the loss can be ignored with Fannie Mae so long as the job is not in the same line of work as their primary job (Freddie Mac counts all income losses from tax returns).
Student Loan Cash Out – a homeowner can do a cash out refinance to pay off student loans without taking the interest rate increase from doing a cash out refinance.
DACA recipients eligible to purchase a home with a Fannie Mae conventional loan (Freddie Mac does not allow DACA buyers).
Normally requires fewer months of reserves than Freddie Mac.
Next time you apply for a home loan and look to do a conventional loan, you may not think it matters if it is a Freddie Mac or Fannie Mae loan. As you just read, choosing Fannie or Freddie under the right situation can make all the difference in the world. That’s why you want to work with a Loan Officer who is aware of these small differences.
Looking to get prequalified for a home purchase in the state of Georgia? If yes, contact me today. I’ll ask very specific questions about your situation and make sure the correct conventional loan product is chosen.
*With Fannie Mae, self employed buyers may only need 1 year of tax returns regardless of how long the business has been open. The default is two years of tax returns, but could be one year under the right circumstance (low debt to income ratio, high down payment, excellent credit, etc.).
It is definitely spring, and the housing market is heating up. It is time to take advantage of new homes on the market. What am I seeing this year that is different from last year:
Mortgage rates are lower this year than they were last year at this time. Right now, they are lower by roughly a half point!
The rise in home values has slowed each month for the past 10 months. The combination of slowing home values and a drop in mortgage rates gives buyers roughly 6% more buying power today than they had this time last year.
I am seeing sellers begin to give money toward closing costs. Don’t read this statement as sellers are paying ALL closing costs again. What I mean is instead of every purchase contract I see where the seller is giving $0 to the buyer for closing costs, now I am seeing contracts with the seller giving a few thousand to the buyer.
Homes sitting on the market for sale for too long are now getting price reductions. Last year, homes weren’t sitting that long and few were getting price reductions.
What to make of all this information? While still a seller’s market, the market is softening and buyers have more purchasing power. Now is the time to act!
I know what you may be thinking…
I don’t have enough money to put 20% down… Not a problem. Did you know a $500,000 home can be purchased with about a 3% down payment. While one’s target may not be $500,000, 3% is all it takes to get into a home.
My credit isn’t perfect… Again, not a problem. You don’t need perfect credit to purchase a home. Conventional and FHA loans allow for credit scores down to 620, which is below average credit.
I just started a new job, so I can’t buy a home… Not necessarily. A new job doesn’t mean someone lost their chance at buying a home. Being able to qualify for a home depends more on how they are paid (W2, hourly, salary, 1099) versus how much they are paid.
Don’t let what you’ve read on the internet get you down. Just because you read it online, or someone in the office break room told you something doesn’t make it true. It is easier to buy a home than many people think. If you are looking to buy a home in Georgia, contact me today. Let’s get the process started. In just a few minutes, we’ll be well on our way to getting you into a new home.
A recent Bankrate.com study showed a majority of Americans still consider owning a home part of the American dream. The survey found close to 80% of respondents chose this as the number one indicator of achieving the American dream. This comes in ahead of other goals such as achieving retirement, having a successful career, and owning a car. If owning a home is still a goal, how do we achieve the goal of home ownership? Here are some steps to consider.
#1. Plan Ahead – whether one is self employed or in a salaried job, planning ahead is key. This way one will know options to consider and obstacles to avoid.
#2. Apply Early – getting prequalified is one option, but being pre-underwritten is a better option. In this seller’s market, being able to make an offer stating the loan is approved pending an appraisal and clear title helps the offer stand out in a crowded playing field.
#3. Know your loan programs – Sure, most of us have heard of conventional loans or FHA loans. Do we know the details of them? For example:
One could have below average credit and yet still get a great rate and a small down payment option using an FHA loan.
Conventional loans normally require a first time home buyer in order to get a 3% down loan, but that isn’t always the case. The Home Ready and Home Possible programs allow for anyone to use the 3% down payment option.
For current home owners, qualifying to buy a new home without selling a current home isn’t as difficult as one may imagine.
With these three items in mind, you can be ready to move quickly when the property you want becomes available. And you better be ready as good homes move fast in this market.
While potential condo buyers aren’t on pins and needles waiting to hear from HUD like we would be for who wins an election, still, buyers would love to know the direction HUD will go with FHA loans and condos. Current loan guidelines for buying condos with FHA loans are tough. The condominium project must be pre-approved by HUD to use an FHA loan. Then during the loan process, the condo project is re-certified; meaning, the criteria needed to get pre-approved is double checked to make sure the condo is still within the guidelines for its pre-approval.
Basically, buying a condo with an FHA loan is a lot of work. The condo homeowner association (HOA) must go through the hoops to get the complex approved for an FHA loan. Most HOAs don’t want to deal with the burden. Then repeat the process for the loan itself – twice the work for the same payout. Hopefully this will change soon.
A proposal was made a few years ago to HUD that would open up the number of condo complexes eligible to use FHA loans. The loosening of guidelines would also reinstitute spot approvals (similar to what conventional loans do for condos). This makes buying condos WAY easier with FHA loans.
This change will benefit home buyers with average to below average credit making a smaller down payment. Currently, almost all condos are purchased using conventional loans. While someone can qualify for a conventional loan with a credit score of 620+, the mortgage rate and monthly private mortgage insurance rates (for loans with PMI) are significantly higher than an FHA loan. The difference is big – easily over a half a point higher in rate and almost double the monthly PMI (depending on the down payment being made). Home buyers with average to below average credit could be in a position soon to save a couple thousand dollars annually.
Seriously HUD…. What’s the latest?
Looking to buy a condo in Georgia? One program we could use instead of an FHA loan is the Fannie Mae HomeReady loan. This has some advantages over a normal conventional loan that helps those making a minimum down payment on a home purchase. Contact me today, and we’ll see if you qualify for HomeReady whether buying a condo or not.
If you think you’ve heard this before… it is because you have. Inventory levels are still low across the country. Low inventory levels push home values up due to the simple application of supply-and-demand. This is one of the main reasons home values have jumped so much in the past couple of years. How did we get here? There are a couple of reasons:
During the Great Recession, very few homes were being built. After many years of very little new construction (coupled with more people wanting to buy homes), a squeeze on inventory occurred.
While unemployment was high during the Great Recession, many people put off buying a home until their financial situation was more stable. This creates a pent up demand on those wanting to buy homes. This increases competition for the few homes available on the market.
Homeowners are remaining in their homes longer. We are at the highest rate of owners keeping their homes in 18 years. The length of time is now up to 7 years, which is a 10% increase year over year.
There are many reasons why people may choose to remain in their homes longer (they have a low rate on their current home, fear of finding their new home, tighter loan qualifying guidelines), but one new factor are baby boomers choosing to live/age in place. As baby boomers remain in their current homes (instead of down sizing or moving into assisted living), it again tightens the amount of available inventory. Of course, this will not always be the case. Baby boomers (along with the silent generation) own over 50% of the homes in America. As they age, we may find ourselves in the exact opposite situation – too much inventory.
Until we get there, how can someone make their offer stand out? There are a couple of things to do.
Make a non-contingent offer on the purchase. For those who own their current home, qualifying to carry two mortgages means an offer can be made without a contingency. A seller with multiple offers would find that more attractive. Homes are going fast, so it is not very likely one would carry both home loans for an extended period of time. For those who need equity from the current home for the down payment on the new home, there is always the method of recasting the loan after closing. A future post will cover recasting.
Get pre-underwritten prior to making an offer. In this method, the buyer applies for the home loan with a “to be determined” property address. Once approved, the offer letter to a seller simply says the buyer is ready to close pending an appraisal and final underwriting approval. This is a quick close and the seller knows the buyer is legitimate. Rodney Shaffer covers this more in-depth with this post.
For first time home buyers (and repeat buyers too), look to use Home Ready. This is a conventional loan requiring only a 3% down payment. Some sellers would prefer not accepting an FHA offer, so Home Ready allows for a smaller down payment than FHA (3% vs 3.5%), and is still a conventional loan. Couple this with the “pre-underwrite” option and have even more power behind potential offers. There are conventional loans with only 3% down that are not Home Ready loans, but Home Ready has some advantages over the “standard” 3% down conventional loan that buyers would want to take advantage of if they qualify. Here is a case study on a Home Ready loan.
Yes, it is a tight market when it comes to available homes to purchase. That doesn’t mean buyers should despair. There are ways to help make the offer more attractive to sellers. Looking to buy in the state of Georgia? If so, contact me today. We can start talking about any or all of these potential options.
Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services and a writer for “the Mortgage Blog.” If you would like to be a guest writer for "the Mortgage Blog" please contact Clay for details.
Next time you apply for a home loan and look to do a conventional loan, you may not think it matters if it is a Freddie Mac or Fannie Mae loan. As you just read, choosing Fannie or Freddie under the right situation can make all the difference in the world. That’s why you want to work with a Loan Officer who is aware of these small differences.
busino
clayjeffreys
Rodney
vanpurser
The Mortgage Blog 