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How You Can Put Down Less Than 20% and Avoid PMI

How You Can Put Down Less Than 20% and Avoid PMI

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 Is Required for a 1031 Tax Exchange?

What Type of Loan Is Required for a 1031 Tax Exchange?

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.

2018 FHA Loan Limits and Conventional Loan Limits Increase in The Raleigh-Durham-Chapel Hill Metro Area

2018 FHA Loan Limits and Conventional Loan Limits Increase in The Raleigh-Durham-Chapel Hill Metro Area

FHA Loan Limits

FHA Loan Limits

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

 

County

2017

1 Unit

2017

2 Units

2017

3 units

2017

4 Units

Orange

$350,750 $449,000 $542,750

$674,500

Durham

$350,750 $449,000 $542,750

$674,500

Chatham

$350,750 $449,000 $542,750

$674,500

Wake $300,150 $384,250 $464,450

$557,200

 

County

2018

1 Unit

2018

2 Units

2018

3 Units

2018

4 Units

Orange

$379,500 $485,800 $587,250

$729,800

Durham

$379,500 $485,800 $587,250

$729,800

Chatham $379,500 $485,800 $587,250

$729,800

Wake $318,550 $407,800 $$92,950 $612,600

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

Units

2017 2018

Single Family

$424,100

$453,100

2 Units

$543,000

$580,150

3 Units $656,350

$701,250

4 Units

$815,650

$871,450

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.

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Have You Looked Into Down Payment Assistance?

Have You Looked Into Down Payment Assistance?

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.

down payment assistance

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.

down payment assistanceGrants, 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.

  1. 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
  • Move-up 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 919-813-6449 or 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.

 

 

Who Qualifies for a VA Home Loan

Who Qualifies for a VA Home Loan

Are you a Veteran or currently serving in the military? Are you ready to buy a new home? If you answered “yes” to both questions, a VA Home Loan may be the right home loan for you.

In 1944, the U.S. government created a military loan program to help service members purchase homes. The VA Home Loan is a mortgage issued by approved lenders and guaranteed by the Veterans Administration.  This program has helped more than 20 million veterans and their families get affordable home loans.   Our lender partner, Cunningham & Company located in Durham NC, offehouse-with-flagrs very competitive interest rates with amazing loan terms on VA loans.

To be eligible, veterans, active duty service members, National Guard members, and reservists must meet the requirements defined by the VA. Spouses of military members who died while on active duty or as a result of a disability related to their service may also be eligible.

VA home loans offer the following:  a 0% down payment, no funding fee or a low funding fee that can be financed, reduced closing costs, and no Private Mortgage Insurance (PMI).  You can finance your home for 15 or 30 years at a fixed or adjustable rate. If rates go down, VA borrowers can refinance through a streamlined process. In some cases, borrowers have the opportunity to refinance and cash out up to 100% of their home’s value.

Who To Contact About A VA Home Loan

If you are interested in finding out more about VA home loans and whether you qualify, we recommend that you contact Teresa Parker with Cunningham & Company  at (919) 697-2598 or [email protected]. (NMLS 453354, NMLS # 2024)

To see Real Estate Experts’ newest listings, click here, and feel free to give us a call anytime at 919-813-6449 or send us an email to  [email protected].

On behalf of Real Estate Experts, we thank you very much for your service to our country.

 

Conventional Mortgage, Who Qualifies?

Conventional Mortgage, Who Qualifies?

Conventional Mortgage

Home Loans

A conventional mortgage is the most common type of home loan and the right choice for many people. Typically, the interest rates are better, there are lower costs which give you more home buying flexibility. In fact, a conventional mortgage is the loan option of choice for 60% of all mortgage applications. Conventional loans are also known as “conforming loans,” because they conform to the standards set by Fannie Mae and Freddie Mac.

 

The Conventional Mortgage

Rather than being backed by a government program, conventional loans are offered, funded, and serviced directly by local lenders, like Cunningham and Company. With local decision-making and local processing, the loan process is streamlined since the borrower deals directly with the lender and isn’t dependent on government approvals. As a result, conventional loan applications typically have shorter and less complicated approval processes.

The Conventional Mortgage offer several advantages, including flexibility in the term of the loan (10, 15, 0r 30-year) and fixed or adjustable rates. Plus, if you make a down payment of 20% or more, you will not need to purchase Private Mortgage Insurance (PMI). PMI is required any time you put less that 20% down on a conventional loan. If you have good credit, PMI can cost less that FHA’s mortgage insurance. Since PMI is risk-based insurance, the better your credit history, the lower your premiums, similar to auto insurance. The interest rate of a conventional loan will depend upon your credit score, down payment, and the type of property you are interested in purchasing.

Properties Eligible For A Conventional Mortgage

There are many types of properties that are eligible for conventional financing, including single-family homes, condominiums, Planned Unit Developments (which consist of detached homes within a homeowner’s association), and 2-, 3-, and 4-unit properties. And unlike government loan programs, conventional loans can be used to purchase a second home or a rental property. Rental homes do require higher interest rates and down payments, but the conventional loan remains one of the few programs available to purchase this type of property.

It is even possible to be eligible for a conventional loan following bankruptcy. You will be faced with waiting periods, and you must demonstrate that you have re-established your credit. It is worth checking your eligibility.

For more information about conventional loans, contact Teresa Parker, Loan Officer at Cunningham & Company Mortgage BankersNMLS # 2024 at (919) 697-2598 or [email protected].

To see Real Estate Experts’ newest listings, click here, and feel free to give us a call anytime at 919-813-6449 or send us an email to  [email protected].

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