Posts Tagged ‘how much home can I buy’

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!

 

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Taking on the spring market

April 16, 2019

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:

  1. Mortgage rates are lower this year than they were last year at this time. Right now, they are lower by roughly a half point!
  2. 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.
  3. 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.
  4. 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.

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.

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!

Atlanta Home Market Update

September 26, 2018


A new report on the Atlanta housing market shows a significant decline in home sales, year over year, along with a much greater decline in Atlanta home sales as compared to the national housing market.  The number of August Atlanta home sales declined 7.1% from 2017 to 2018.  The national decline in home sales was only 1.1% for the same period.  The data shows varying results for different parts of the metro area:

  • Cobb County sales declined 9%
  • DeKalb County sales declined 8%
  • Clayton sales declined 17%
  • Gwinnett County reported a more than 10% sales decline
  • On the other hand, Fulton County sales increased 14%

Atlanta home prices continue to increase, even while the number of sales decrease.  One example of this is the Old Fourth Ward section of Atlanta.  From 2017 to 2018, the number of home sales declined 19%.  But at the same time, average prices in the Old Fourth Ward have risen by about 35%.

Atlanta’s housing challenge is an inventory shortage, especially at the lower end of the home price spectrum.  ReMax reported that the supply of homes listed for sale in metro Atlanta was down 13% in August as compared to August 2017.  Ultimately, buyers compete against each other for desirable homes and this forces prices up.

From my experience, it seems that homes priced under $300,000 have seen strong competition this year.  One client found a home priced around $260,000 in an attractive Gwinnett neighborhood.  My client’s offer was one of about 20 offers on this one house.  Some Realtor friends have told me about making offers on Atlanta condos where the listing agent received 12 – 15 other offers.

It is very tough for buyers to compete in this market.  I have several clients who have decided to put home ownership on hold until 2019.  It takes patience and persistence to keep going.

For pointers on how a lender can help a buyer compete, see this prior Mortgage Blog post:  https://wp.me/p1Gub-YJ.  Buyers should talk with Realtors about other ways to make their offers more attractive.  Effective ideas include:

  1. If cash is available, the buyer can offer to pay the purchase price regardless of the property’s appraised value.
  2. The buyer must have a flexible schedule to visit homes and make offers right when they hit the market.
  3. The buyer can consider writing a personal note to the seller explaining why the house is perfect.  (I’ve seen this work before.)

Experienced Realtors can offer more effective tips for winning the contract.  If you have a friend or coworker wanting to buy a home in Atlanta, ask if they want their lender to help them beyond financing a house by helping win the contract.  Then refer them to me.  We at Dunwoody Mortgage will do all in our power to help them win the contract and close on the purchase, and we will do it quickly too.


Conforming Loan Limits going up!

December 5, 2017

For the first time since 2006, there is a significant increase in the conventional loan limit. The new maximum loan amount for conventional loans will be $453,100. Technically there was an increase from 2016 to 2017 (from $417,000 to $424,100, which is less than a 2% increase). This time the maximum limit gets a more significant increase.

What does this mean?

Buyers can purchase a $477,000 home with only a 5% down payment. If using a 3% down conventional loan, then the buyer can purchase a home as high as $467,000 in value. Prior to the increase, if a buyer wanted to purchase a home at $500,000 and avoid a Jumbo loan, then the down payment needed to be 15% to get the loan down to $424,100. Now a $500,000 home can be purchased with less than a 10% down payment.

This increases the purchase power for home buyers, and these new conventional loan limits can be used now! The start date for the conforming loan limit increase is January 2018, but the loan process can start today and close after the start of the new year!

Looking to buy a home in the state of Georgia? Wanting to use a conventional loan to purchase $500,000 or so home using a small down payment? Now you can! Contact me today and we’ll get going on your new home!

 

Beyond the Down Payment…Cash to Close

August 30, 2017

In the last post, we debunked the myth that home buyers must make a 20% down payment to buy their home.  There are many programs enabling buyers to close with 5%, 3.5%, or even 3% down payments.  But there is one other factor to consider regarding the cash you have available to buy a home…your “cash to close.”

Cash to close includes your down payment, PLUS the closing costs and prepaid escrow.  In short, you need more cash than just the down payment to close the purchase.  Here is a quick description of the other items:

  • Closing costs are the actual costs of transferring title and obtaining a mortgage loan.  Closing costs include items such as appraisal fees, transfer taxes, intangible tax, attorney fees, title insurance, etc.  Some of these costs are fixed while others increase with the home purchase price or loan amount.
  • Prepaid escrow represents the cash needed to pay the first year of homeowners insurance and to prefund your escrow account to pay future property taxes and homeowners insurance premiums.  These typically increase as the home price increases.

So what options does a buyer have when he has scraped together that 3.5% down payment, but does not have enough cash to cover the remaining cash to close?  Here’s where a proactive lender, working as a consultant to help the buyer, can make a huge difference.  Typically, the buyer has 4 options, and the lender should explore them all with the buyer:

  1. The seller can agree to contribute cash towards the closing as part of the purchase contract.  There are limits regarding how much the seller can contribute based on the loan type and down payment percentage, but a seller contribution can be a huge help.  Note that the seller contribution cannot be applied to the down payment.
  2. The buyer can choose a “no closing cost” loan.  Many buyers choose not to use this option because it involves a higher interest rate and monthly payment, but it can be a good option for some buyers who have limited available cash.
  3. The buyer can receive a gift from a relative.  We must carefully document the gift, but this is a great way for parents and grandparents to help a young adult get started building equity.  The gift can be applied to the down payment.
  4. We can combine the 3 options above to resolve a cash shortfall.

The key here is to remember (1) more cash than just the down payment is needed to close a mortgage and (2) there are creative ways we can solve a cash shortfall.

If you know a renter with a good job but not much cash, refer them to me at Dunwoody Mortgage Services.  We will work closely with your referral and his / her Realtor to structure a mortgage that best meets their financial situation.

Geographic Income Limits for Home Ready Program

May 1, 2017


One potentially limiting aspect of the Home Ready program is that income limits are specified by census tract.  (Notice I said “potentially.”  We will get back to that point very soon.)  To qualify for the program, the borrower’s income must be less than or equal to the income limit set for the geographic area of the subject property.  Fannie Mae specifies and publishes the geographic income limits as part of the program.  Many areas in Metro Atlanta have an annual income cap of $67,200, but there are many other areas that do not have an income limit.  Now back to the word “potentially.”  If the home you want to buy lies in a no-income-limit area, you could make a million dollars per year or even per month and still qualify for a Home Ready loan for that house.

Two key points to remember here:  First of all, the income limits are based the subject property’s location, so you can have varying income limits in different parts of the same county.  In fact, the eligibility maps go down to the street level, which means that houses on one side of a street could carry a $67,200 income limit and houses on the other side of the same street could have no income limit.  Secondly, the income limits apply only to borrowers on the loan.  If two employed people plan to live in the home, but only one of you is on the loan, then the other occupant’s income does not count toward the income limit.  Of course that means that the sole borrower must qualify for the loan using his or her income only.   

So how can you determine whether you qualify for the Home Ready program’s low down payment / low-interest rate / low mortgage insurance benefits?  You can call me at Dunwoody Mortgage!!  We will first discuss your income and the geographic area where you want to buy.  I can look up the area online and determine whether your income qualifies for Home Ready in that area.  If you meet the geographic income limits, we will complete your loan application, pull your credit report, and run your application through our Automated Underwriting System (“AUS”).  The AUS findings will then determine if you do qualify for Home Ready’s great benefits. 

Buying a house in Georgia and curious whether you can obtain a Home Ready loan?  Give me a call and we will review Home Ready and your other loan options.  Don’t think you will qualify?  We at Dunwoody Mortgage have secured loans for many customers who initially thought they would not qualify.  Don’t assume you cannot win loan approval!  Call me and let’s discuss your situation.  We might just surprise you!! 

 

 

 

3% Down and a Great Interest Rate!

April 24, 2017

National mortgage giant Fannie Mae offers the Home Ready conventional loan program that can be very helpful for qualifying home buyers.  Home Ready enables qualified buyers to obtain a mortgage with a 3% down payment, so it’s great for people with limited available cash.  In addition, when the buyer has an average credit score, Home Ready provides lower interest rates and mortgage insurance premiums relative to standard conventional loans.

One important point is that this program is NOT limited to first time home buyers.  If you have owned a home before or if you have an ownership interest in another property, you may still qualify for a new Home Ready loan, as long as you plan to occupy the new home as your primary residence. 

Home Ready requires that at least one of the home buyers complete an online home buyer education course.  This course costs $75 and takes about 4 to 6 hours to complete.  The course topics include:

  • Home affordability and budgeting
  • Credit ratings and credit improvement
  • Real estate agent selection
  • Mortgages
  • Offer letters
  • Home inspections
  • The closing process

The prospective home buyer will receive a certificate of completion after passing a final quiz and submitting a feedback survey.   Passing the quiz requires a score of 80%, and the buyer receives three attempts to pass the quiz.  If the buyer does not pass the quiz in three attempts, an additional approximately 30 minute telephone educational review session is required.   After obtaining the certificate of completion, the buyer should send a copy to his / her selected lender.

Here are a couple of additional program benefits:

  • Non-occupant borrowers are permitted.
  • Non-borrower household income from a family member (parents or siblings, for example) can be used to support a higher debt to income ratio than the borrower can obtain alone.

Future posts will cover Home Ready’s geographic income limits, and we will give an example scenario to highlight the program benefits.  But keep this in mind for now, if you want to buy a home in Georgia, but your credit score is less than great and you don’t have much available cash for a down payment, Home Ready could be the program that makes home ownership a reality for you.  Call me to discuss Home Ready and other options.  Or if you have a friend or family member who could benefit from Home Ready, forward this blog post to them.  We at Dunwoody Mortgage love to make home ownership a reality for everyone, and it’s especially fun for people who initially think they can’t qualify!

 

Down Payments Basics for Home Buyers

February 23, 2017

Blog HeaderA recent home ownership survey showed that 3 times more first time home buyers than repeat buyers say they lack enough money for a down payment.  Perhaps this is due to folks not truly understanding down payment requirements.  Many people believe you must make a 20% down payment to buy a home.  That is a myth!! 

Home buyers can purchase a home with as little as 3.5% down for a FHA loan.  Depending on your credit score and available cash, you may be better off going with a 5% down conventional mortgage.  In certain cases, you may be able to qualify (depending on your income and geographic area) for the low interest rate, low cost mortgage insurance “HomeReady” program, for as little as 3% down.  (Certain geographic areas have no income requirements.)

So what if you don’t even have 3% – 5% available for a down payment?  Are there options?  The first question for you is, “Do you have a relative who can give you the down payment?”  If you do have a loving person who will give you the down payment, we can use that with the proper documentation.  Note that the giver must be a blood relative or a spouse.  Generous ex-spouses are not considered family members so they cannot provide a gift.

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If you lack the available cash and you don’t have a giving relative, do you have a 401K or similar retirement account?  Depending on your plan’s rules, you may be able to borrow against your account to help fund your down payment.  Talk with your plan administrator for the details.

If these options are not available to you, you may need to wait and save.  But the time needed to save 3% to 5% is much better than saving for the 20% many people think is required.  Note that you must have 20% to avoid mortgage insurance, but if you can handle the mortgage insurance included in your monthly payment, you can buy a home with much less than 20% down.

Do you need coaching on the best loan / down payment option for you?  That’s what I do!  Call me at Dunwoody Mortgage.  Together we will evaluate your situation, review your options, thus allowing you to make the best decision for you and your family.

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