According to a recent study published by CoreLogic, loans originated in the fourth quarter of 2016 had the highest rating since 2001. The average credit score for purchase loans was 737, average Debt-To-Income ratio was 36%, and the average loan to value was 87.1%.
The above characteristics contribute to a low default risk and healthy secondary mortgage market.
Our world is evolving, advancing and surging forward at a rapid pace. Are mortgage loans the same as they used to be? Believe it or not, many buyers today still believe they need 20% down to purchase a home, but as our world evolves so do loans. Today, there is an arsenal of loan programs with down payment options less than 20%! For instance, if you’re serving, or served in the military, it’s possible you can get into a home with 0% down (VA Loan). If you’re a first-time home buyer, it’s possible you can get conventional financing with as low as 3% down (conventional loan) and if you’re a repeat buyer you can buy a home with as little as 3.5% down using an FHA loan or 5% down with a conventional mortgage loan!
There are two main categories which impact how much cash a buyer needs for closing: down payment and closing costs. How much are closing costs? Generally, a good rule of thumb for estimating closing costs is between 3 – 3.5% of the purchase price. If you’re a repeat buyer and are going with a down payment option of 3.5%, you’ll need to add roughly another 3.5% for closing costs bringing the total to 7% of the purchase price.
However, if there is something nice about closing costs, it’s that the buyer doesn’t necessarily have to pay for them. It’s possible for a buyer to negotiate in an offer that the seller will pay for all, or a portion of closing costs. On an FHA loan, the seller can pay for up to 6% of closing costs and on a conventional loan with less than a 10% down payment, the seller can pay up to 3% of closing costs.
So, what is the minimum amount of money you need to purchase a $150,000 home with an FHA Loan? The answer is $5,250. The seller can cover all the closing costs for the buyer, which means the buyer would only have to cover the minimum 3.5% down payment!
What if a buyer doesn’t have money for a down payment, but a family member will give them the money? This would be considered a gift and is potentially an acceptable source of a down payment.
Call today for more information on mortgage loan programs with low down payments!!
The United States Department of Housing and Urban Development (HUD) announced Monday that the mortgage insurance premiums on loans insured by the Federal Housing Administration (FHA) will be reduced by 25 basis points for loans closing on or after January 27, 2017. The most popular down payment for an FHA mortgage loan is 3.50%, which currently carries MIP of .85% annually. With the new change, MIP will be reduced to .60%, saving someone with a $200,000 mortgage approximately $500 annually. This will result in huge savings for FHA borrowers and will also help lower debt-to-income ratios, ultimately leading to higher affordability for FHA borrowers.
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The VA loan was designed to help eligible veterans purchase a primary residence with long-term financing by offering more flexible credit terms. Veterans can qualify for a VA mortgage loan with up to a 103.3% loan-to-value ratio without paying private mortgage insurance and interest rates are lower than conventional loans. There is an up-front funding fee for a VA loan which ranges from 0 to 3.3% of the loan amount and is paid to the Veterans Administration. The up-front-funding fee for the VA loan can be financed into the loan amount, resulting in a higher loan to value ration than 100%; this fee is waived for veterans who are receiving 10% disability or more for their time in the service. In addition to the low down payment, debt-to-income ratios on a VA loan can go higher than a conventional loan. This means that a buyer can qualify for a higher monthly mortgage payment in relation to their monthly income than they could for a conventional loan. The maximum VA loan guarantee varies by county. Currently, in Lee County, Collier County and Charlotte County the maximum guarantee is $417,000 at a 100% loan to value. VA loans are the most lax when it comes to credit history: no foreclosures or short sales within the last 2 years (opposed to 7 and 4 for a conventional loan respectively) and bankruptcies must be 2 years from discharge of chapter 7 (opposed to 4 years for a conventional loan). Credit scores can go below conventional loan, but most lenders require a minimum credit score of 620.
Veterans who are looking to purchase a condo must make sure the condo is approved for financing by the VA. A list of approved condos can be found at: https://entp.hud.gov/idapp/html/condlook.cfm.
D&V Home Mortgage offers VA home loans, FHA home loans, conventional home loans and jumbo home loans in Lee, Collier and Charlotte counties. If you are looking to get a mortgage loan in the Southwest Florida market, give us a call today to see if you qualify!