Posts Tagged ‘how much home can I afford’

The mysterious case of home ownership

July 9, 2019

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!

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Changes coming to Home Ready

July 2, 2019

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:

https://homeready-eligibility.fanniemae.com/homeready/

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.

Interest rates move lower

June 18, 2019

Interest rates/Mortgage rates (same thing) moved to a two year low earlier in the month. While rates have since rose a bit, they are much lower than the start of the year.

Rates are well over a half point better since the start of the year. This decrease is beneficial for two reasons. First, it is helpful for those out looking to buy a home right now. Let’s say someone was looking to get a loan for $250,000. With the improvement in rates, a buyer can now get a loan for $265,000 and have the same payment. More buying power!

The other is for existing home owners. The Chief Economist at Freddie Mac said with rates dipping below 4%, “there are over $2 trillion of outstanding residential loans eligible to be refinanced – meaning the majority of what was originated in 2018 is now eligible”

So… should I refinance? A couple of questions you can ask yourself:

  1. Did I purchase a home in 2018? If yes, then rates are definitely lower than when you bought. It would be worth looking into what a new payment could be with a lower rate.
  2. Are current 30 year fixed rates of at/below 4% better than a half a point or more than your current rate? If yes, then it is worth looking at the numbers.
  3. Considering taking some equity out for a home project? I am working with several clients doing a cash out refinance. With the drop in rates, these clients are getting a lower rate, cash out for home maintenance, and keeping a similar payment to what they are making now.

Do you fit into any of those questions? If yes, it might be time to review the numbers for a potential refinance. If you are a homeowner in the state of Georgia, contact me today! In a short phone call, we can decide if the time is right for a refinance. If rates aren’t low enough for it to make sense, we can set a target rate and I’ll contact you when rates move lower. It is that easy. If nothing else, it is worth inquiring to make sure you don’t miss out on this drop in mortgage rates!

FHA still looking to revise condo guidelines

June 13, 2019

A post earlier this year on The Mortgage Blog detailed some of the potential changes coming from the Federal Housing Administration for using FHA loans when purchasing condos. As with most things involving the government, they still haven’t finalized the details, but the final product is coming more into focus.

The FHA Commissioner stated the agency is currently working to revise its condominium approval rules and that he expects a final rule to be announced soon. These changes on condos are paramount has he called condos a “mainstay of affordable housing” for seniors citizens and first-time buyers.

With that in mind, here are some of the proposed changes:

  • allow owner-occupancy determinations on a case-by-case basis.
  • allow up to 45% of commercial space in a building without documentation.
  • increase the approval period from two years to five years (this would be amazing since condo complexes are seemingly always in a “get approved with FHA mode” since they only last two years).
  • still the possibility of allowing for spot approvals.

The goal for FHA loans and condos is the become more flexible, less prescriptive and more reflective of the current market than existing guidelines.

While these changes will be welcome, it is hard to get too excited. The FHA issued proposed changes to its condo rules in 2016 that promised to lift a number of restrictions and streamline the certification process, but it has yet to issue a final rule. 

If these can go into effect, it would be perfect for buyers with lower down payments and/or below average credit scores. While one can qualify to buy condo with 3% down using a conventional loan, the rate for someone with below average credit scores is 1% or more higher than doing an FHA loan. This would make condos more affordable to more buyers.

Looking to buy a condo around the Atlanta BeltLine? Maybe a live/work/play area with condos over businesses? Or perhaps just a good old fashioned high rise condo complex? If you are looking to buy a condo in Georgia, contact me today. We’ll get you ready to move into your new home in no time at all!

Differences between conventional loans

June 6, 2019

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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*).

Fannie Mae:

  • Higher likelihood of getting a Property Inspection Waiver using a Fannie Mae conventional loan.
  • 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.

spot-the-difference-worksheets-pandaNext 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.

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*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.). 

Buying a Home Earlier Delivers Long Term Wealth Benefits

May 22, 2019


It is common knowledge that many Millennials are delaying “life milestones.”  A recent study by the Urban Institute shows this by documenting the increase in young adults living with their parents.  People often assume that adults living with parents can save more money, better positioning themselves for a home purchase.  But this study reports that although the intentions are positive, the actual economic results tend to be negative.  The study concludes that adults who lived with their parents between ages 25 and 34 were less likely to form independent households and buy homes 10 years later, as compared with young adults who did not live with their parents.  And this result can negatively impact their future wealth.

The study reported that the percent of young adults living with parents almost doubled between 2000 and 2017 – growing from 11.9% to 22%.  This means 5.6 million more young adults live with parents now.  Reasons for this increase include, but are not limited to (1) Student debt – since 2000, student loan debt has more than tripled.  This debt burden makes it harder for young adults to live independently.  (2) Income – adults with lower incomes are more likely to live with parents.  (3) Housing costs – real rents are at historic highs, making it harder for young adults to live independently.  (4) Below average credit – in 2016, the median credit score was 640 for Millennials and 662 for Gen Xers.

So how does this trend affect young adults over time?  Studies show that home ownership is one of the best tools for building wealth.  And UI reports here that the biggest housing investment returns go to adults who bought homes at younger ages.  The study concludes, “our results suggest that living with parents has negative long-term economic consequences.”

As mentioned in a previous blog post, perhaps many of these young adults believe the many untrue myths that stop people from pursuing home ownership.  The fact is, buying a home with a small down payment, below average credit, and other debt can be easier than many people imagine.

Do you have friends in Georgia whose adult children live with them?  Do you know a young co-worker living with his parents?  Perhaps they fear they cannot buy a home because of below average credit scores or limited available cash.  Since the study shows these young adults may wind up better off financially if they buy a home sooner, refer these people to me.  We at Dunwoody Mortgage will do everything we can to help them buy a home and start building their wealth now, positioning them for a better economic future.

Still cheaper to own than rent

May 21, 2019

The trend continues – especially in Atlanta – it is cheaper to own than rent.

With the latest housing push over the past few years, homebuyers have fared better than those who continue to rent. In the recent CoreLogic report:

  • On average, renters tend to be more cost-burdened than homeowners
  • Across the US, monthly rents continue to rise.
  • Home loan payments and associated home ownership costs are lower.

Another stat from the study shows the rental index is up 36% from during the during the housing boom through today, yet home loan payments are down just shy of 5% over the same time period. The study looked at twelve metro areas. On average the rent increases ranged from 20-60% while reporting a drop in the home loan payments anywhere from 3-24%. Lastly, these are sound loans being issued today. With a combination of income growth during the economic recovery, home values appreciating, and sound underwriting guidelines, delinquency rates are lower than they’ve been in decades.

So what is preventing potential buyers from purchasing a home? Often it is misinformation. Too many people feel you must have 20% down to purchase a home (one can buy with as little as 3% down), perfect credit (loan approval can be obtained with a score as low as 620), and no debt (debt to income ratios can be as high as 50% for conventional loans and 55% on FHA loans). This is simply not true. Owing a home with a small down payment, below average credit, and other debt is easier than most imagine.

Contact me today. If the home you are looking to buy a home in the state of Georgia, you can be ready to purchase in as little as a 10 minute phone call. We can also start the process online. It can be that easy!

 

Trade wars and mortgage rates

May 14, 2019

Last week was to be the culmination of negotiations between the US and China about a trade deal. Then came some finger pointing, blaming, and honestly tactics you see as negotiations come to an end. What is all of this doing to the market? I’m glad you asked!

Stocks were all over the place last week and this week… down 500 points to open one day only to rebound and finish the day flat… down a few hundred points… down over 600 points Monday… up 350 points as I write this post. Stocks are all over the map.

Brace yourselves!

Mortgage rates are in a similar position. The talk toward the end of the year (slowing economy, trade wars, bad economic news) pushed mortgage rates lower. In fact, rates are well over a half a point lower today than they were this time last year. The many months of tariffs and speculation pushed stocks lower and rates higher.

What happens with the trade negotiations:

  • If a trade deal is reached, one would expect stocks to rebound back to their all-time highs. Obviously this depends on the final details of the trade agreement, but overall expect to see rates get a little worse.
  • If both sides walk away from the negotiating table, then expect stocks to get worse and mortgage rates continue to improve.

What to do? If considering a refinance, this is a good time to move forward. Mortgage rates are as low as they’ve been in over a year. If considering a refinance to lower one’s rate OR take equity out of a home, there hasn’t been a better time in quite some time to do it. If you’ve been sitting on the fence about buying a home hoping rates could go lower, this angle is trickier. On the one hand, sure, mortgage rates could improve should trade negotiations fail. On the other hand, rates were much higher than they are now when stocks were at all-time highs. If a trade deal is finalized, we could see stocks jump back up to or surpass the all-time high. If that happens, expect mortgage rates to rise. It’s no coincidence that mortgage rates improved towards the end of 2018 as stock values fell. The same will happen should stocks take off again.

With rates sitting as low as they’ve been in over a year, now is the time to take advantage of them whether you are looking to purchase or refinance. If you are in need of a mortgage in the state of Georgia, contact me today. I can have you ready to move forward on a purchase or refinance is a little over 10 minutes. It’s that easy!

Home Sales Sentiment on the Rise

May 1, 2019

Lower than expected mortgage interest rates in the first four months of 2019 have helped drive Fannie Mae’s Home Purchase Sentiment Index (HPSI) to its highest level since June 2018.  Economists and experts have predicted higher mortgage rates for the last few years.  Rates trended higher in 2018 until the stock market volatility happened in November.  Then interest rates declined to below 4.5% and have stayed there for the last few months.  Lower interest rates occurring when potential home buyers expected higher rates translates to great news for home buyers.

HPSI jumped 5.5 points in March to the highest level since last June.  Survey responses considering now a “good time to buy” rose 7% while responses considering now a “good time to sell” rose 13%.  And the study shows that more consumers expect interest rates to decrease further.

Doug Duncan, senior vice president and chief economist at Fannie Mae stated, “The results further corroborate the positive effect of falling mortgage rates on affordability, which we expect will help support a rebound in home sales.”  Duncan further noted, “job confidence…also continues to support housing sentiment, while income growth perceptions firmed from both prior month and year-ago levels, potentially supporting an uptick in housing demand.”  Ultimately, lower interest rates, job confidence, and growing income expectations are fueling the current housing market.

Personally, I am seeing more interested buyers and homes for sale than I have seen since 2016.  That is a great thing.  Ultimately, with the lower rates and positive overall economic news, now is a great time to buy or sell a home.

Do you have a friend who complains about high rent and an inattentive landlord?  Tell her that now is a great time to fire her landlord and start building equity in her own home.  Then have her call me.  We at Dunwoody Mortgage will deliver outstanding mortgage experience along with these great low mortgage rates.

 

 

Making dreams reality

April 9, 2019

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.

You could check out other posts in this blog where we talk about housing inventory levels (or the lack of inventory), qualifying with student loans, low down payment options, low credit score options, buying without selling, recasting…. OR you could give me a call to discuss further. If you are buying a home in the great state of Georgia, a 15 minute phone call and can you prequalified and well on your way to homeownership.

What are you waiting for? Being able to achieve the dream of home ownership is within your grasp!