I have clients who’ve recently worked with some of my non-preferred lenders, and I found some of their practices to be questionable.
When a buyer starts working with a lender, they’re required to give them a disclosure of all mortgage loan costs so they know their interest rate and estimated closing costs. Throughout the lending process (you may change the rate or loan program you’re looking at), you’ll see subsequent copies of these numbers. Sometimes, though, lenders don’t review these numbers with you, so you need to look very closely and make sure you understand them. The last thing you want to do is get to the closing table and see a numbers that don’t make sense or that you were not expecting.
You should consider your Realtor a trusted resource throughout the process and have them review these documents as well. We do it all the time for our clients. Ask your lender to review these documents with you to make sure you understand them. If anything, you should get to the closing table and be delighted to discover that what you’re supposed to pay is significantly less than what you expected.
“The last thing you want to do is get to the closing table and see a bunch of numbers that don’t make sense.”
So, please check your numbers closely to make sure the lender is not all of a sudden charging fees you weren’t aware of, like a fee to buy down your interest rate.
This is exactly the kind of thing we at Real Estate Experts do to help our clients, so if you’d like to know more about this topic or have any questions, don’t hesitate to contact us. We would be happy to help in any way possible.
On Sunday, March 15, 2020, the federal government cut the federal interest rates down to zero percent. This is the second federal rate cut in response to the Coronavirus crisis. Mortgage rates are not directly tied to the federal interest rates. However, the mortgage interest rates will be affected by moves that investors make and other factors.
Federal Rates Cuts and Other Economic Stimulation Activity
The government is fearful that the economy will fall into a deep recession if they don’t make moves to stimulate it. That’s why they lowered the federal interest rates to zero. There is more economic stimulation legislation that should help during this COVID-19 crisis, as well.
Bonds and Other Safe Assets
Many investors have been buying bonds and other safe assets as a result of the federal interest rates cut. The 10-year Treasury note has been pushed to new lows.
Quantitative Easing Program
The government has also initiated a $700 billion program to help ease some of the economic hardship that Americans are facing. Part of this program, the federal government’s Coronavirus Aid, Relief and Economic Security (CARES) Act, states that all adults will receive $1,200 and an additional $500 for each child. They are currently finalizing the details on how to distribute this money to the American people.
They have also cut emergency lending rates to .25 and have extended loan terms to 90 days. This will help in an emergency.
Stock prices are falling at record speed. They should recover long-term; however, people may need to cash them in and tap into their investments just to pay day-to-day living expenses. Hopefully, the money people will receive from the easing program will be spent and put back into the economy to help.
Foreclosures and Evictions
The federal government has passed legislation that foreclosures and evictions cannot be filed for now. This will help homeowners and tenants keep their homes during these trying times.
The federal government is also being more lenient with student loans. They originally stated that students would pay interest only and not have to keep paying down their principle. Now they are stating that no federal student loan payments are required until further notice.
Cutting the federal interest rate should also make credit card interest rates go down. Americans are advised to call their credit card companies to see if their interest rates have been lowered.
What’s Happening to Mortgage Rates?
Mortgage interest rates have fallen to historic lows. The economic activity indicates that mortgage interest rates will fall even more. The mortgage rates are typically tied to the 10-year Treasury note. The hope is that people will still purchase houses. The real estate industry has been deemed an “essential” industry during the Coronavirus pandemic. The 2020 spring real estate market started off strong in January, February and the beginning of March. Now, with many “stay at home” orders in place it has slowed down. There are still many people who have to find a place to live or sell their homes for one reason or another.
First Time Home Buyers
The group of millennials that are now turning 30 years old, make up the largest percentage of first time home buyers. These people tend to take more risks. They are out on the front lines purchasing homes at great mortgage interest rates right now.
This is a great time for investors to add to their real estate portfolios. Money is extremely cheap to borrow right now. Also, rent prices continue to increase.
Adjustable-rate mortgages (ARMs) are the most closely tied to the federal interest rate cuts. Most variable rates are tied to the prime or London interbank offered rate (LIBOR.) This means that the people who have variable interest rates will see reductions to their mortgage bills.
The government is hopeful that the emergency cuts in the federal interest rates and the historically low mortgage interest rates will stimulate the economy and keep the United States from a recession. The government and banking is working hard to ensure that the COVID-19 pandemic doesn’t economically affect Americans in the long run.
Do you have Real Estate questions and would like to talk to an expert? Contact Us below.
How can you make a down payment of 20% or less and avoid PMI?
To start, you must have really good credit. In other words, your credit score must be in the high 700s. There’s a strong correlation between your credit score and how much mortgage insurance you pay—stronger than the correlation between your credit score and your interest rate.
For example, let’s say you purchase a house for $230,000, you put down less than 5% for a conventional loan, and you have a credit score in the 700s. In this scenario, your PMI will be a little over $2,600. Lenders have different programs for all types of buyers, and if you have good credit, there are plenty of options available to you, but in this case, you have three choices in terms of what you can do with that PMI.
First, you can take that entire $2,600 sum and add it into your loan. In effect, you would finance it, but you wouldn’t pay it on a monthly basis, which would leave your regular monthly payment at about $1,056. Second, you can just pay it monthly, which would increase your monthly payment to $1,105. Lastly, you can pay the $2,600 sum up front with your 5% down payment, which would decrease your monthly payment to $1,044.
This was an actual scenario one of my clients faced recently, and she chose option No. 1. Keep in mind, though, that this is a simplified scenario because with each option there will be different interest rates and cash-to-close amounts, depending on which programs your lender offers.
Whether you have good or bad credit, there are all types of programs available to you, so the best thing you can do is talk to a good lender and find out which one best suits you. To find a good lender, reach out to your Realtor and have them help you. Odds are, they work with plenty that they’d be happy to recommend to you.
Here at Real Estate Experts, we work with an excellent selection of lenders that we can put you in touch with, so if you’d like to know more about this topic or you have any other real estate questions, feel free to give us a call or send us an email. We look forward to speaking with you.
What type of loan do you need to get when doing a 1031 tax exchange?
To recap, if you sell an investment property, a 1031 tax exchange allows you to defer paying a capital gains tax on it as long as you use the funds to purchase another investment property. In other words, you can keep that money invested in the new property and watch it grow.
To qualify for this exchange, you need to be investing in a “like-kind” property, meaning it can’t be your residential home or a second home.
The type of loan you need for this exchange depends on how you hold title to the original property—do you own it in your own name or did you purchase it in the name of an LLC?
If you own it under your name, you can use a conventional loan. If it’s owned on behalf of an LLC, then you need to purchase your new property on behalf of that LLC, and you can’t use a regular residential loan—you need a commercial loan (a client of mine recently found this out the hard way).
It’s very important that you work with a knowledgeable agent when doing a 1031 tax exchange. If you’re thinking of doing a 1031 tax exchange and you need any assistance, don’t hesitate to give us a call.
As always, if you have any other real estate needs, feel free to reach out to us as well. We’d love to help you.
FHA loan limits and conventional loan limits have increased for 2018. The new loan limits take effect on January 1, 2018. FHA loan limits vary by county. These limits are determined by the Department of Housing and Urban Development (HUD).
In the Raleigh-Durham-Chapel Hill metro area, the 2018 loan limits increased significantly. In 2017 the limits increased by 2.6% in Durham, Orange and Chatham Counties and 4.4% in Wake County.
The FHA loan limits for 2018 increased 8.2% in Durham, Orange and Chatham Counties and 3.12% in Wake County.
These caps increase based on the size of the property, or specifically the number of units. For instance, higher limits are usually allowed for two-family duplex homes as compared with single-family properties.
The FHA program can be used for single-family or multi-family properties with up to four units. Anything more than four units is generally considered to be commercial real estate.
2017 vs 2018 FHA Loan Limits
Source: Housing Wire, December 2017
The National Mortgage Limit for FHA-insured Home Equity Conversion Mortgages, or Reverse Mortgages, will also increase from $636,150 to $679,650.
If you are looking to buy a single-family home or a multi-unit property, it is important to know that the FHA and conventional loan limits have increased. This gives you – the buyer – more buying power!
As a quick reminder, the benefits of getting an FHA loan over a conventional loan is that an FHA loan has lower down payment requirements and less stringent credit score requirements.
Conventional loans have advantages. If you make at least a 20 percent down payment for your home, you will not have to pay private mortgage insurance (PMI). An FHA loan-– no matter the amount of down payment — requires an upfront premium and also a monthly premium for the life of the loan.
Don’t forget that the upfront premium can be paid for by the seller! All you need is a great buyer’s agent who will negotiate this for you in the contract. This is exactly what we at Real Estate Experts are here for.
Remember, FHA mortgage insurance is not cancelable. Conventional mortgage insurance is cancelable once the home has 20% equity.
Conventional Loan Limits
For those of you that want a conventional loan, the 2018 limits are 6.8% higher than the 2017 limits.
2017 vs 2018 Conventional Loan Limits
Source: Academy Mortgage
The higher conventional loan limits mean that the loan can be higher, e.g., up to $453,100 for a single-family home, and not require a jumbo rate. This is very significant because jumbo loan rates are higher than non-jumbo rates. The higher loan amounts coupled with the lower rate give you the buyer more buying power at a lower cost.
If you are in the market to buy, we at Real Estate Experts are happy to guide you through the process. We partner with fantastic, experienced lenders who know how to distill the complexities of getting a loan.
Our skilled buyer agents also know how to guide you through the home buying process so that you understand everything along the way. We do everything we can to ensure a smooth home buying process.
Many people are in the market for a home, whether they’re renting or buying. Of all the potential home buyers, many people think they need to put 20% down on the home. That’s a pretty difficult feat, and it’s intimidating to think of the amount of money you’ll need to save, spend, and borrow. Even the National Association of Realtors says, “the most difficult step in the home buying process is saving for a down payment.” While that might not be comforting, there are many resources potential home buyers can tap in to. These programs can help take away some of the intimidation factor when it comes to down-payments, mortgages, loans, and buying a home.
There are more than 2,400 home buying assistance programs in our country. They’re diverse enough to suit lifestyles all over the country, and sometimes they’re unique to specific areas. In fact, North Carolina recently began supporting a Wells Fargo initiative called “NeighborhoodLIFT” in January, 2017.
Courtesy of National Home Buyer’s Fund Inc.
Interest rates are low, which is to say it may be a good time to buy a house if you’re financially ready. So, you have your financial affairs in order, you’re ready to make the jump, but you’re stumped with the actual down payment. How are you going to afford it? Affording this financial hurdle may not be as difficult as you think. There may be an assistance program out there for you.
Common Home Buyer Assistance Programs
Now that we’ve discovered home buying assistance programs and financial support, we can discuss what kinds exist, what they do, who offers them, and common eligibility qualifications.
Who Offers These Programs?
The good news is there are many organizations that offer home buying assistance. They range from employers, to non-profits, housing authorities, State Housing Finance Agencies, and even cities or counties with criteria adjusted for that specified area. These organizations are committed to making home ownership affordable.
What Financial Support Do They Offer?
There are several types of home buying assistance programs, but the financial assistance typically comes in the forms of: grants, second mortgage loans, and tax credits.
Grants, in simple terms, are funds you don’t have to pay back! While that sounds simple, there are mild stipulations like you don’t have to pay the grants back, as long as you own the home and you stay in it for a particular period of time. Easy, right?
Second mortgage loans are a very common source of financial assistance for home buyers. They have low or no insurance rates and payments are over a specified time span. What’s more? In certain cases, these second mortgage loans are forgiven completely.
Finally, tax credits work to help you get more money upfront. These credits are issued by state or local governments and they help diminish the amount of federal income tax you pay. More money becomes available for you at the closing of your new home this way.
What Do These Home Buying Assistance Programs Look Like?
There are three really common types of home buying assistance programs. Here’s what they look like, and what they might offer.
Down Payment Assistance Programs
These programs are normally in the form of second or third mortgages, and grants. The actual financial support can range hundreds to tens of thousands of dollars to put towards the costs of purchasing a home. Some of these costs can include closing costs and repairs. Their restriction is based on household income as well as sales price. These factors range city to city, and even state to state so you can tap into local resources to find out if you’re eligible.
2. Affordable First Mortgages
Anything with the word “affordable” in it has promise. Some financing agencies will offer first mortgages which usually have a low interest rate. You might even be able to reduce some closing costs with it, too.
3. Mortgage Credit Certificates
These guys are federal income tax credits. Issued by the state or local government, MCCs claim part of their mortgage interest as a tax credit. They are supposed to help first-time home buyers, offering up to $2,000 a year for every year the owners spend in the house. Previously occupied homes are eligible for up to 30% annual interest paid, whereas new homes are eligible for 50%. As long as the buyer stays in the home, they may continue to receive the tax credit.
You can find out if you’re eligible for down payment assistance with this tool.
Down Payment Assistance Update: the NCHFA will continue to offer assistance
The North Carolina Housing Finance Agency is continuing to offer down payment assistance. Up to 5% of the total loan! Are you qualified for this down payment assistance?
First time buyer
Anyone who makes less than $87,500 annually
Has a 640+ credit score
Looking for a fast turn-around? Loans through the NCHFA down payment assistance are approved in less than one day. Owning a home is one of the most expensive investments you’ll make, but it doesn’t have to break your bank.
If you need any more information or assistance navigating this program, don’t hesitate to reach out!
Real Estate Experts
“We as a city have prioritized affordable housing. The city is growing by leaps and bounds which also means it’s getting more expensive,” said Mayor Nancy McFarlane, regarding the NeighborhoodLIFT program recently making its way into the Triangle.
If you’re interested in knowing more about down payment assistance programs local to the Triangle, don’t hesitate to reach out. Give us a call at 919-813-6449or send us an email to [email protected]to find out more about living in the Triangle, and visit our website to view current homes for sale in the area.
Overcoming the financial hurdles to home ownership doesn’t have to be a difficult experience. At Real Estate Experts, we’re ready to work with you, and help you find the best solution for what you need in both a home, and a mortgage.