Posts Tagged ‘get prequalified’

Homebuyer Economic Analysis

February 20, 2019

Recent economic reports show interesting data and forecasts regarding home buyers.  A survey of 100 economists by Zillow and Pulsenomics, LLC reported that almost 60% believe that home values are more sensitive to changing interest rates than in prior years.  One economist noted that if mortgage rates rise to 5.5%, a home buyer would need a $35,000 lower home price to keep the same monthly payment.  Buyers on tight budgets would have a more limited available home inventory, and others might stretch their budgets rather than lowering their target price.

Even with interest rate uncertainty, a majority of economists surveyed expect increasing first-time buyer activity this year.  These economists forecast that the homeownership rate will climb above its historical average over the next five years.

What is the difference between first-time buyers who actually buy versus those who want to buy, but don’t?  The answer is about $30,000 of annual income.  A recent study by RealEstate.com showed that the first-time home buyers have a $72,500 median income.  Their income is significantly higher than those people who want to buy their first home but do not actually buy.  The latter group earns a $42,500 median income.


This higher income helps buyers in two ways.  Firstly, they can afford larger monthly payments based on underwriting debt to income guidelines.  Secondly, the higher incomes allow these buyers to save more money which they use for down payments and closing costs.  A recent Zillow study reports that first-time buyers make a median 14.5% down payment.

Ultimately, financing a home purchase is challenging for many buyers.  These buyers need a mortgage professional to structure the best loan possible.  The loan structure will determine the interest rate, mortgage insurance, and the amount of home the buyer can purchase.  And special programs exist that offer discounted interest rates with a minimum 3% down payment for home buyers who qualify.  Getting into the best loan program, a slight down payment change, or paying off another debt at closing can help the home buyer save thousands over the loan’s lifetime.  That is a key reason why selecting the right mortgage professional is so important. 

Do you have a friend or relative who wants to buy a home in Georgia?  Refer them to me at Dunwoody Mortgage.  I will help them structure the best loan for their financial situation.


Advertisements

Help With Down Payments

January 23, 2019


Restating the main theme from the prior post, people who want to buy homes do not need “great” credit scores or large down payments.  Home buyers can obtain mortgages with as little as 3.0% down.  What about those people who have not saved enough for the low down payment plus closing costs plus prepaid escrow?  Do they have any options to help cover their required cash to close?  The answer is, “YES!” Here are some options for cash-strapped buyers:

  • Request that the seller contribute cash at closing to help cover the closing costs and prepaid escrow.  Mortgage guidelines allow the seller to contribute specific percentages of the home sale price to cover transaction costs and escrow, but not the down payment.  If the buyer’s agent can negotiate that the seller helps cover these items, then it can be done within the guidelines.  The greater the down payment, the more the seller can contribute.
  • Borrow from an employer-sponsored retirement account.  In many cases, home buyers with 401K or other retirement accounts may be able to borrow against the account balance to help purchase a home.  These are loans – the home buyer signs paperwork agreeing to repay the retirement account.  Different retirement plan managers have different rules, so home buyers should check with their HR departments and retirement plan managers to determine their eligibility.  Buyers can use retirement funds to cover down payment, escrow and loan costs.

  • Obtain a cash gift from a blood relative.  Parents, grandparents, siblings, and other blood relatives are allowed to give cash to help home buyers.  “Give” is the key word because all parties must sign documents stating the funds are a gift and not a loan, so no repayment is expected.  A recent Wall Street Journal article notes that now more first time buyers obtain relative gifts to help buy their homes.  Buyers can use gift funds to cover down payment, escrow and loan costs.
  • Government down payment assistance programs.  These programs are available from many state, county, and city governments.  They often require home ownership education classes and other commitments from home buyers.  These assistance programs may have income requirements.

The good news here is that cash-strapped home buyers can obtain low down payment loans and many can use one of these options to help close their loan.  Do you know someone who wants to buy a Georgia home but has limited cash?  Connect them with me.  We at Dunwoody Mortgage will help them explore all available options to buy a home sooner rather than later.


Low Down Payment / Credit Score Mortgage Options

January 16, 2019


Joe Tyrrell, an executive with mortgage software company Ellie Mae, recently stated, “People still have the misunderstanding that they need a FICO score above 720 and more cash for a down payment, so they don’t apply for loans because they assume they’ll be denied.”  These would be borrowers are self-selecting themselves out of the home buying market based on false assumptions.  So let’s clear up some mortgage myths.

Firstly, borrowers do not a need “great” credit score to win mortgage approval.  Conventional loan guidelines allow credit scores down to 620.  FHA loan guidelines allow credit scores down to 580.  And now non-traditional loans exist that can approve borrowers with scores down to 500 and derogatory credit events (e.g., bankruptcy or foreclosure) in the last two years.  Note that the lower one’s credit score, the higher the interest rate the borrower will face.  But FHA interest rates for lower credit score borrowers are not ridiculously high relative to rates for higher credit score home buyers.


Secondly, winning loan approval does not require home buyers to break their proverbial piggy bank and make a large down payment.  Home buyers can obtain FHA loans with a minimum 3.5% down payment, and they can win conventional loan approval with a 3% down payment.  And if the home buyer qualifies, he / she could obtain a low-interest Home Ready or Home Possible loan with a 3% down payment.  Qualifying military veterans can secure 0% down payment VA loans.  Buyers in rural areas can receive 0% down USDA loans in approved counties.

What may confuse potential home buyers about down payments is the fact that conventional loans require a 20% down payment to avoid mortgage insurance.  But as long as the buyer can win loan approval with the added monthly mortgage insurance expense, the buyer can get their mortgage with a down payment of only 3%.  This 20% down payment myth  requirement is widely held.  Even some financial journalists hold this incorrect notion, as shown by this statement in a recent Wall Street Journal article, “While conventional mortgages can require buyers to put down as much as 20% of the purchase price up front, FHA buyers can pay as little as 3.5%.”  Regardless of what some journalists write, I can help home buyers win conventional loan approval with a down payment as low as 3%!!

Home buyers should remember that they will have to pay closing costs and prepaid escrow in addition to the down payment.  So buyers should plan to invest more cash than just the down payment at closing.  But buyers have options to help with their cash to close needs.  We will explore those options in the next post.

For now, do you have a friend or co-worker who wants to buy a house but is concerned about the down payment or credit score requirements?  Connect them with me and I will help them obtain the best mortgage for their financial situation and home needs.

New FHA max loan limit

January 8, 2019

Just as conforming loan limits rose again this year, the maximum loan amount for FHA loans got a bit higher too.

Remember the maximum loan amount for FHA loans vary from county to county; meaning, the max loan amount is determined by the county in which the property resides.

  • The new FHA loan limit for 2019 is $379,500 for the metro Atlanta area.
  • The non-metro max loan amount also increased to $314,827.
  • Georgia also has some counties with max amounts between those ranges (for example, Clarke county is $341,550).

For those who want to see their specific county, use this lookup tool provided by HUD. Just choose your state and county then press “send” to get the exact amount.

The new limit for metro Atlanta counties means a buyer could purchase a $393,000 home and make just a 3.5% down payment. Buyers can look to purchase a home for more than $393,000, but they will need to make a larger down payment. For example, a person could buy a $400,000 home using an FHA loan. Since the max loan is capped at $379,500, the down payment will need to be about 5% instead of the minimum 3.5%.

I know what you may be thinking… why put 5% down and use an FHA loan? Wouldn’t a conventional loan be better? True. Maybe. Remember for those with credit scores under 680 who make a 5% down payment, the private mortgage insurance for a conventional loan is higher than the monthly mortgage insurance for an FHA. Also, the mortgage rate is higher for the conventional loan versus the FHA loan.

This is why it is imperative to speak with a licensed mortgage lender about the differences in loan programs instead of assuming an FHA loan is only for first time home buyers OR never consider an FHA loan if you can make a 5% down payment. The specific details of each client’s situation could make one program more attractive than the other even if it goes against what most people would consider normal.

Looking to purchase a home in the state of Georgia? Unsure of the loan program that is right for you? Contact me today. I can get you prequalified for a home loan in a few minutes, and we’ll discuss the pros and cons of each loan program to ensure the best fit for your situation.

VA Mortgage Volume Grows (Again)

December 28, 2018

For the seventh straight year, the number of homes purchased using VA mortgages has increased.  VA home purchase loan volume has increased dramatically in the last five years – up 59%.  610,000 VA home loans have been closed in the current fiscal year, generating $161 billion in loan volume.  According to Chris Birk, director of education at Veterans United, “More Veterans have used this $0 down loan in the last five years than in the prior dozen years combined.”  VA loans now comprise about 10% of the residential mortgage market.

Many experts consider the VA loan to be the “most powerful home loan on the market.”  One key reason – low interest rates.  Industry researchers report that VA loans have consistently had the lowest interest rates for 53 straight months.  A second key reason – veterans can obtain a loan with a zero down payment.  That enables many veterans to buy now instead of waiting several years while saving money for another loan program’s minimum down payment.  A third reason – VA loans require no monthly mortgage insurance payment.  Combining these three factors can make a home purchase much more affordable for American military veterans.

 

 

Given the many VA loan benefits, any veteran considering a home purchase should investigate the VA loan option.  The first question a veteran should ask is, “Do I qualify for a VA loan.”  A prior Mortgage Blog post from 2016 addresses this question in detail.  See the post, VA Loans:  How to Qualify, by Clay Jeffreys.  The key update to this post is that the 2019 VA loan limit will be $484,350, as opposed to the $417,000 amount valid in 2016.  A quick summary is that VA loans are available to the following people:

  • People who were on active duty for 90+ days during wartime.
  • People who were on active duty for 181+ days during peacetime.
  • People who served 6+ years in the National Guard or Reserves.
  • Spouse of a service person who died in combat OR resulting from a service related disability.
  • Some people who have served as public health officers or in the Coast Guard.

To qualify, veterans must submit service related documents to the VA, which then provides a Certificate of Eligibility (“COE”) to the mortgage lender.  For example, active duty personnel submit the military form DD-214 to obtain the COE.  The VA requires different documents for National Guard and Reserves personnel.

Instead of standard monthly mortgage insurance, the VA charges a funding fee, based on the home buyer’s service record and down payment percentage.  The lender simply adds the funding fee to the loan balance.  See the post, VA Loans:  Funding Fee, by Clay Jeffreys for a more detailed funding fee explanation.

Do you know a veteran considering a Georgia home purchase?  We at Dunwoody Mortgage love helping veterans buy homes.  We deliver these great VA loan benefits with the excellence service all Dunwoody Mortgage customers receive.  Tell veterans you know to call me.  We will treat them with the honor, respect, and excellence they deserve.


Mortgage rates continue to improve

December 20, 2018

The federal reserve completed their fourth rate hike of the Federal Funds Rate this week. Guess that means mortgage rates are up? Nope! They are not. Mortgage rates have improved.

In fact, mortgage rates improved by over a half a point better coming off their 2018 highs in early November. Why? This blog covers the topic often, but not often enough as a lot of people believe mortgage rates flow with the actions of the Federal Reserve.

While mortgage rates may get worse when the Federal Reserve raises the Federal Funds Rate, mortgage rates themselves are actually determined by the value of mortgage backed security bonds. As these bond prices go up, mortgage rates go down (and vice versa). The Federal Funds rate impacts rates on car loans, credit cards, and home equity lines (second mortgages). We’ve seen those rates get higher this year as the Fed raised rates a full point in 2018.

What is causing mortgage rates to improve? It’s the usual suspects:

  • When mortgage rates were at their yearly high, stocks were at an all time high. Since the Dow his 26,800, it has lost 4,000 points (15% of its value) as of this blog post. Money is coming out of stocks and going into bonds. As bond prices go up, mortgage rates go down. It’s no coincidence rates were at their highest point of 2018 when the Dow was just like rates are now improving as the Dow pulls back.
  • Stocks are slowing their historic run due to bad economic news. There are signs the economy is potentially headed toward a recession (some believe it will happen in 2019). Bad economic news sends investors from higher risk/higher reward stocks into the safer investment/less reward bond market.
  • The Federal Funds Rate itself – as it moves higher, inflation is slowed. Mortgage rates hate inflation, and combating inflation is a way to help mortgage rates improve.

What to do with this rate improvement? If buying a home, rates are still low and headed back near their levels at the start of 2018. Purchasing a home with these improved rates gives the buyer a 6% increase on their purchase price. Now is a great time to start looking. The spring market for buyers/buying power is already upon us. If you’ve considered doing a refinance to pay off an equity line whose rate is going up and up this year, now is a much better time to consider making this move.

Owning or buying a home in Georgia? Ready for that mortgage conversation? Contact me today, and we’ll get started!

Rents on the rise

December 11, 2018

Rents are still going up and just hit an all-time high, again. The U.S. Census Bureau reported that during the third quarter, the nationwide median asking rent topped $1,000 for the first time ever. According to the Census data, the median asking rent during the third quarter was $1,003, an increase of $52 over the second quarter and an increase of $91 over the same time period last year. That’s an increase of nearly 10% in just one year, when rents checked in at $912.

The increase has been dramatic over the last few years. Just three years ago, the asking rent was a full $200 less per month than it is right now.

Since we are a Georgia based company, I try and bring these topics back to the local area.

  • The Bad News: Rents are going up in Georgia.
  • The Not as Great News: So are home prices for buying.
  • The Good News: Metro Atlanta is a city where it is cheaper to own that rent.

A recent study by Trulia has Atlanta around the 60th cheapest metro area to rent (out of the top 100), and in the top 40 for cheapest metro area to own. While rents are going up, by living in the metro Atlanta area, you have the opportunity to own a home, build equity, and have your monthly housing payment go toward your financial goals (instead of your landlord’s).

Now here is the question – should I buy a home? To answer that question, ask yourself how long you plan to be in the home? Atlanta is a transient town, so maybe your time here is only for a year or two. In that case, renting could be the better option. If you plan to stay in a home for 3 years or more, that same Trulia article mentioned earlier says it is cheaper to buy than rent. Three years seems to be a good number for judging whether or not to consider buying a home or continuing to rent.

So… how long do you plan to stay in the home?

If you are looking to buy in the state of Georgia, contact me today! I can help get you prequalified for the home purchase. More importantly, we can discuss how much home you should buy versus how much home you qualify to buy. Often the amount one can qualify isn’t the amount one wants to pay each month as a mortgage payment. We’ll tackle those topics and more!

Conforming loan limits rise (again!)

December 4, 2018

For the third year in a row, conforming loan limits are increasing.

  • In 2017, the limit increased from $417,000 to $424,100.
  • In 2018, the limit increased to $453,100.
  • In 2019, the new conforming loan limit will be $484,350.

Over three years, the max limit has increased by roughly 16%. This is quite a change as the limit stayed at 417,000 from 2006-2016. One thing though, I gotta say, what is the deal with no rounding up or down?!? I think it would be a lot easier to just say $453,000 or $484,000. Is the extra $350 going to make that big of a difference? Oh well…

Why the increase? Conforming loan limits are set by the Housing and Economic Recovery Act passed in 2008. This set the baseline loan limit of $417,000, and stated this baseline cannot increase until home prices return to pre-housing decline levels. With home prices still on the rise across the country, it is fitting the limit increased. Now a home buyer can purchase a $500,000 with roughly a 3% down payment. This opens up more homes for buyers who have stable jobs/strong income, but may be lacking in assets for a larger down payment. Congratulations!

We can also expect FHA mortgage limits to rise too. Currently for metro Atlanta, the limit is $359,950 (again, round up. Is $50 going to make that big of a difference :-). If we see a similar increase in 2019 as we did in 2018, expect the new FHA loan limit in metro Atlanta to be roughly $385,000. Expect a new blog post once FHA makes the official announcement.

Higher loan limits are great for consumers as housing prices continue to rise due to demand and low inventory levels. Looking to buy a new home in the new year? Is that home in Georgia? If yes, contact me today. I can get you prequalified in a matter of minutes and on your way to making an offer in no time!

Credit freezes are now free!

November 1, 2018

A new law recently took effect allowing consumers to freeze and unfreeze their credit with the three main credit bureaus – Equifax, Experian and TransUnion. The push for this changed started in 2017 with the the massive data breach at Equifax, which exposed the personal information of more than 145 million consumers to hackers.

What is a credit freeze? When a consumer “freezes” their credit, they have essentially locked their credit. No one (not a person, bank, car dealership, etc.) can access a consumer’s credit while frozen. This means new credit accounts cannot be opened, and is the surest way (not a 100% guarantee) to prevent fraud. Freezes can become problematic when a consumer needs to apply for credit as one has to go through the process of unfreezing their credit before applying.

The change was put in place by the Economic Growth, Regulatory Relief, and Consumer Protection Act signed into law earlier this year. Before the change, every state had their own rules about credit freezes. It could cost as much as $10 to freeze (and throw on another $10 to lift a freeze) one’s credit. The days of fees are gone. Some other highlights of the new law:

  • As discussed, consumers can now freeze and unfreeze their credit for free.
  • Parents can put a freeze on their children’s credit for free (applies to children under 16).
  • Guardians, conservators, and those with a valid power of attorney can also get a free freeze for their dependents.
  • Fraud alerts placed on a consumer’s credit file will be extended from 90 days to one year.

It hopefully just got a little more difficult for scammers to abuse someone’s credit information! How to put a freeze on your credit? Consumers must contact each of the three major credit agencies independently to place a credit freeze on their accounts.

Mortgage rates rise again

October 16, 2018

Mortgage rates are on the rise (from the dead?!? 🎃🎃🎃Happy Halloween! 🎃🎃🎃) again in the month of October. Mortgage rates jumped sharply to yearly highs and to levels not see in over seven years. Mortgage rates for a 30 year fixed loan are nearing 5%. What is going on!?!

Mortgage rates rising can be scary!

A year ago, mortgage rates were just under 4%… that is about a full point lower than they are today. I know what a lot of people think… “it is because of the Federal Reserve raising rates.” Not exactly.

The Federal Reserve raised rates three times so far this year at 0.250% each time. That means the Federal Funds Rate is up 0.750% on the year, but mortgage rates are up almost 1%. Why the difference?

  • the Federal Funds rate directly impacts the rate on second mortgages, car loans, credit card rates, etc.
  • bond values – specifically mortgage backed security bonds (or MBS bonds)- impact rates for first mortgages. As these bond values decrease, mortgage rates increase.

That is what we’ve seen this year. Stocks are up on the year, the economy is better, and MBS bond values are down… meaning, higher mortgage rates. Remember the reason we saw all time historic lows for mortgage rates was two-fold.

First, the economy went through the Great Recession. In this environment, investors move money out of stocks and into bonds. The more money into bonds mean those values go up, and mortgage rates go down. As the economy improved, more money is going into stocks and out of bonds (bond values drop and mortgage rates rise).

Second, the Federal Reserve purchased bonds (quantitative easing or QE) to help push rates down to stimulate the housing market. The economy is now doing well, the Federal Reserve ended QE, and the Feds are now selling off some of the bonds they bought during QE. All of the factors pushing rates to historic lows are gone, and the current environment on rates is pushing them up. This trend doesn’t look like it will change anytime soon.

What can we expect? Earlier this year, mortgage rates jumped 0.75%, but recovered about half of those losses. We can expect to see some market fluctuations, and possibly some positive improvements in mortgage rates. Those looking for rates to get below 4% again? Those days are long behind us now, and probably not returning anytime soon.

Worried about rates going up even more? Considering buying a home but waiting for the right time? If you are buying in Georgia, contact me today. Let’s talk about what buying a home would look like for you, and see how the current dynamics in play will impact your next home purchase.