Posts Tagged ‘how much home can I afford’

Home inventory hits record lows

March 11, 2020

About that last post… seems with new data coming out, the housing inventory levels will not be as good as initially thought.

Last time on The Mortgage Blog, I discussed a report with forecasts of more inventory in 2020 and a more balanced market in 2021. This may no longer be the case.

As we move into the latter part of the first quarter, all of the stats/numbers are in, finalized, and reviewed from the fourth quarter 2019. The fourth quarter wound up being a busier time than normal as home buyers purchased more homes than usual. They took advantage of stabilized home prices and lower mortgage rates. An already limited inventory selection got even worse.

In fact, inventory levels hit a record low, according to a study by realtor.com. National housing inventory fell by 13.6% in January, the sharpest year-over-year drop in more than four years. With the volume of newly listed properties down by 10.6% since last year, the housing crunch shows no signs of abating in the near future.

The news is bleaker in the metro Atlanta area where builders are way behind on new construction due to all the rain. What can a buyer do in this ultra competitive market?

The best strategy isn’t a prequalification letter… nor a pre-approval… the strongest offer letter one can give is a credit approval letter. This means the file is underwritten prior to making an offer. All the client would need to close is a satisfactory appraisal, clear title, and insurance on the home.

Going this extra step lets the seller know this buyer has been thoroughly vetted and approved pending getting under contract to buy a house.

If you are looking to purchase in the state of Georgia, contact me today. We can get you prequalified for a home loan in 10-15 minutes, and we can also start down the road of getting your file underwritten so you can make a strong offer on your new home!

A banner year for home buying?

February 19, 2020

2020 is shaping up to be a great year for those looking to purchase a home. The past few years have seen housing inventory at lower than normal levels, which put pressure on those looking to purchase a home. This is shaping up to be the year in which inventory levels change.

Home builders seem to be confident. Recent construction numbers are surpassing initial estimates. According to the US Census Bureau, new construction housing starts sit at a 13 year high. December 2019 marked seven consecutive month housing starts have grown.

These positive developments along with a strong economic outlook caused Fannie Mae to revise its housing forecast for the better in 2020. Fannie Mae now expects over 1 million new homes to be made available by 2021. This will also increase the number of resales of existing homes.

In other words, the days of the seller’s market is coming to an end. The playing field is leveling, which will only help buyers in this competitive housing market.

Ready to get started on a home purchase for 2020? The Spring Market is already here! If you are buying a home in the state of Georgia, contact me today. Whether you get started with our online application, or give me a call, in a few minutes you can be well on your way to purchasing a home in 2020!

Proposed change to Qualified Mortgages

February 12, 2020

<<<For the history of Qualified Mortgages, see last week’s post.>>>

With 2021 right around the corner and no changes to Qualified Mortgages, the 43% maximum debt to income ratio cap is coming soon as the QM Patch provision is running out. The Consumer Financial Protection Bureau (CFPB) doesn’t want this to happen. What to do?

The CFPB definitely wants to keep Qualified Mortgages. The issue with the 43% debt to income cap is qualifying for a home. It is no secret housing values are continuing to rise – especially in metro areas. Also, student loan debt climbed unexpectedly since 2014. In fact, student loan debt is roughly 33% higher today than it was in 2014 (in terms of outstanding student loan debt).

Forcing the debt to income ration max to 43% (down from 50% on Conventional loans and 55% on FHA loans) would drastically impact those looking to qualify for a home loan. This is especially true of Millennials who carry the vast majority of the student loan debt.

To prevent this, the CFPB is proposing to eliminate the 43% hard cap requirement as they feel other measures can be introduced to take its place. The CFPB also proposes an extension to the QM Patch until the new provision gets implemented.

In other words, the CFPB agrees QM loans have been a good thing for the housing industry while also ensuring financially responsible loans that consumers must document they have the ability to repay. With foreclosure rates at a fraction of what they were during the crash and lower today than when QM loans were introduced, it is hard to argue.

As of this post, there is not a firm next step for the QM Patch expiration and the 43% debt to income ratio implementation. It is still set to start in 2021. This said, with the CFPB already proposing changes, it seems something will happen to ensure no harmful impacts happen to those looking to purchase a home.

Still concerned about the QM Patch expiring and how it could impact your ability to purchase a home? Contact me today. I’ll be happy to walk with you through the journey. If you are buying a home in the state of Georgia, I’m even happier to help you with the purchase!

The history of Qualified Mortgages

February 5, 2020

Six years have passed since the Consumer Financial Protection Bureau (CFPB) introduced Qualified Mortgages and the term “ability to repay.” For a loan product to be considered a Qualified Mortgage, it needs to:

  • not have excessive upfront points and fees
  • no “toxic” loan features (such as interest only, negative amortization, prepayment penalties, and balloon payments)
  • fully documented ability for the borrower to be able to repay the loan
  • maximum debt to income ratio of 43%.

The final item in the list drew the most attention. In 2014, the country was still recovering from the housing crash. Foreclosures rates were still high, and there were plenty of short sales. The CFPD didn’t want to introduce rules to hamper the housing recovery, yet standards needed to be set to ensure 2008 didn’t happen again.

The first three items in the list were obvious – especially the third item and the “ability to repay.” Loan products such as “stated income” and “no documentation” helped pave the way for the foreclosure crisis.

Making the maximum debt to income ratio at 43% also seemed logical too. The idea with the cap was to prevent home buyers from getting overextended with their debt. Again, logical as this was part of what led to the housing crash.

To prevent the debt to income provision from hampering the housing recovery, a “patch” was put into place for Fannie Mae, Freddie Mac, FHA, and VA loans allowing the 43% cap to be exceeded. The QM Patch would last seven years, and we’d see how Qualified Mortgages impacted the industry.

That was 2014… it is now 2020… so the QM Patch is coming to an end in 2021. How will this impact home buyers? Find out more next week.

Looking to buy a home in 2020? Concerned about how much home you could purchase? Think student loan debt will prevent you from owning a home? It probably won’t. If you are looking to buy a home in the state of Georgia, contact me today to find out exactly how much home you can afford!

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!

Conforming loan limits rise again

December 3, 2019

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

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.

A good time to buy a home!

November 6, 2019

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

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

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.