Posts Tagged ‘home ready’

Changes to minimum down payment loans

January 10, 2020

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!

Inventory levels still low

February 21, 2019

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.

  1. 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.
  2. 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.
  3. 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.