Home prices stabilizing

I started the year saying now is a great time to buy a home. For the month of February, I’ll include a series of posts expanding on this thought process. We’ll touch on affordability, housing prices, and the shortage of homes.

Let’s start with affordability. Zillow, Seattle, said U.S. home values are easing down, starting to provide relief for potential home buyers facing affordability challenges. Zillow reported the typical U.S. home fell to $357,733 in November, and is now down 0.5% from the peak peak last year.

Add on the fact mortgages rates improved to end 2022/start 2023, monthly costs for home ownership went down for the first time since July, and for only the second time in the past 19 months.  

We are not at a point of home prices dropping (more on this in the next post). But for the first time in several years, we aren’t seeing double digit appreciation.

Zillow Senior Economist Jeff Tucker said November’s news is a positive sign that affordability may at least stabilize in 2023, helping households budget and plan for housing decisions in the months and years ahead. Tucker said, “The two big questions are whether mortgage rates will continue to decline, and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition.”

As I said to start the year, the articles saying 2023 is a bad time to purchase a home aren’t talking about the lack of competition. The quote from Zillow’s Senior Economist is spot on for those who are looking, and they are seeing contingencies, sellers doing repairs on homes, and seller concessions.

Beginning to think 2023 may be a good time to buy a home? If you are buying in the state of Georgia, contact me today! I can get you pre-approved quickly and have you out making offers in no time!

Taking on the spring market

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.

Cash to close

Our next video focuses on the cash needed to buy a home. It is more than just the down payment. Let’s discuss closing costs.

To contact any of us at Dunwoody Mortgage Services, click here!

Buying a home with little money down

So you are looking to buy a home with as little down as possible. You have some savings, and would like to wait to save more money, but circumstances are speeding up the time frame on when you need to buy a home. Maybe you need a bigger home for your growing family. Perhaps you are moving into a new city for work. Regardless of the circumstances, you need to buy a home now.

Unless you qualify for a VA or USDA loan, you’ll need to make a small down payment. Then what about closing costs, prepaids, etc.? Let’s take a look at the minimum down payment and ways to cover the other costs of buying a home.

While the seller can give money toward paying a buyer’s closing costs and prepaid items (more on that in a moment), the seller cannot give any money toward the down payment. The down payment itself can be as little as a 3.5% down payment using an FHA loan, or 5% if using a conventional loan.

What if you don’t have the down payment today? One option could include borrowing money from retirement accounts. Most retirement accounts allow for you to borrow money without penalty to long as you are buying a home AND you pay the money back into the retirement account. Another option would be to get a gift from a relative/acceptable gift source for the loan program.

Using one of those options (or a combination of them) will take care of the down payment, now let’s focus on finding ways to pay the closing costs (costs associated with buying a home/getting a loan) and prepaids (insurance and property taxes on the home).

As mentioned earlier in this post, the seller can contribute money toward paying your closing costs and prepaid items. The exact amount depends on the purchase price and loan program. FHA loans allow the seller to contribute up to 6% of the purchase price toward closing costs and prepaids. Conventional loans allow 3% of the purchase price when making the minimum down payment.

Another option would be doing a no closing cost loan. Between these two options (seller paying money toward closing costs and prepaids AND doing a no closing cost loan), we can get closing cost and prepaids covered.

As you can see, there are several options available to help someone buy a home without having a lot of assets at the start of the loan program. The best option is to work to save money up prior to making the home purchase, but sometimes “life happens” and you buy a home sooner rather than later.

This is why you need to work with the professionals at Dunwoody Mortgage Services. We can use any one or combination of the options outlined in this post to help get you into your new home sooner rather than later. If you are looking to buy in Georgia, contact me today to get started. We can talk about options, go through the prequalification process, and get you ready to buy your next home!

 

Even more changes to FHA loans

In my previous post, we discussed an FHA change that is soon to be implemented. There are a couple more being proposed or recently approved, which include:

• Reducing seller contributions to closing costs: FHA guidelines allow for a seller to give up to 6% of the purchase price toward closing costs (lender fees, attorney fees, etc.) and prepaid items (setting up escrow account, home insurance, etc.). The seller cannot give any money toward the down payment. So even if the seller were willing to give the full 6% to the buyer, there has to be enough closing costs and prepaids to cover the contribution OR it goes back to the seller.

With today’s guidelines, even on a smaller purchase price, 6% would be enough to cover the closing costs and possibly some (or perhaps all) of the prepaid items. The proposed change would limit seller contribution to the greater of 3% of the purchase price OR $6,000. This sounds scary, but let’s look at the numbers.

If you take the greater of the two, then the minimum is $6,000. That is enough to cover closing costs and some of the prepaid items on the smaller loan amounts and the same can be said on purchases all the way to $200,000. Once we pass a purchase price of $200,000, then the seller contribution will go above $6,000. Once we get past this point, the numbers get even better.

For example, a purchase price of $250,000 gets you $7,500 toward closing costs/prepaid items. Again, this is enough to cover all closing costs and most of the prepaids. At a purchase price of $300,000, now the buyer gets $9,000. That is enough to cover closing costs and possibly all of the prepaids.

Why is this being made into a big deal? In states that have higher closing cost, this is going to make it more difficult for buyers with fewer assets to qualify for an FHA loan. In states such as Georgia, the impact will be miniscule.

• Increase the up front mortgage insurance: for the first time in the history of FHA, there is a projected deficit in the mortgage insurance funds for FHA loans. This money is set aside to deal with foreclosures. With the slew of foreclosures over the past few years, the fund has dwindled. Once the fund is empty, FHA will have to ask the government for money in order to continue funding new loans. In addition to increasing the monthly mortgage insurance, FHA approved increasing the upfront mortgage insurance premium from 1% of the loan amount to 1.75% of the loan amount. This begins on all new loans date April 9, 2012 or later.

These are the items primarily being discussed. We know the upfront increase is approved, and as soon as a decision is made on the seller contribution, The Mortgage Blog will certainly update you!

In the meantime, how does this affect a potential buyer? From reading this post, you know the cost of getting an FHA loan is going to increase. If you need an FHA and are thinking of buying a home, go ahead and get the process started today. With the option of getting more money for contribution AND it costing less money from the mortgage insurance, FHA loans will only become less attractive in the coming months. If the property is in the state of Georgia, I can help get the ball rolling toward buying your new home!