The USDA Guaranteed Rural Housing Development Loan (aka USDA RHD Loan) is extremely popular with Millennial Home Buyers. That’s because the program requires Zero Down Payment. That’s right… 100% Financing is available to purchase eligible properties in select areas of Connecticut.
And, it just got more attractive Just in time for the New Year, the USDA lowered its Up-Front Mortgage Guarantee Fee from 2.75% to 1.00%. And… it also reduced its Monthly Mortgage Insurance Premium from 0.50% to 0.35%
The USDA loan is now one of the most affordable home loans available, This fee reduction makes the RHD less expensive than FHA products. A USDA home loan can make owning a home less expensive than renting one and could be the avenue for Millennial Home Buyers to move into a new home in 2017.
What Is a USDA Loan? The United States Department of Agriculture partners with approved local lenders to assist homebuyers with competitive interest rates and loan terms to buy their primary residence in select areas of Connecticut
The Program Offers:
100% Financing – No Down Payment is Required. Coming up with a Down Payment is one of the biggest barriers to entry into the housing market for Millennial Home Buyers. A USDA mortgage eliminates that obstacle.
Closing Costs Can Be Rolled Into the Loan Amount. The closing costs associated with obtaining a mortgage can be included in the loan amount when the appraised value exceeds the contracted sales price.
Liberal Credit Scores. The USDA Guarantee allows lenders to approve mortgages that would not qualify under guidelines for other programs. Applicants with credit scores down to 640 are eligible for this loan.
Debt:Income Ratios: To qualify, you must meet debt-to-income requirements. The DTI ratio limits are 29% (for PITI) and 41%. The reduced fees make it easier to meet these ability to pay guidelines.
Millennial Home Buyers often chose the more expensive FHA loan program, even when they are buying in USDA-eligible areas. If you are buying in a suburban or rural area, it pays to check USDA eligibility maps. Choosing USDA can save you the 3.5% down payment that FHA requires. And, now that the reduced mortgage insurance fees are in effect, you can save money each month over FHA
Eligible home buyers should weigh the benefits of a USDA loan.
You don’t learn about how to buy a house in school. They don’t teach you what you need to apply for a mortgage, what kind of loan you’ll need, or what PMI is (it’s called private mortgage insurance)
And let’s not mention that you need to shop around for the best deal — or you can hire somebody to do that for you.
So here are some First Home Buyer Tips to help guide you through the home buying experience.
BEFORE YOU START LOOKING
♦ Have a conversation with your significant other about what you’re looking for, what you need and what you can do without. Standing in the living room during an open house with your real estate agent isn’t the time to argue about wanting three bedrooms instead of four.
♦ Know your financial records. What’s your credit score? How much outstanding debt do you have? What monthly payment can you afford?
How much money did you make last year? You’re going to need to know all of this information. Have all of your paperwork ready to go.
♦ Know your limit — if you can’t afford a $450,000 house, don’t go look at $450,000 houses.
♦ Shop around. There are dozens of real estate agents, attorneys, and mortgage officers so don’t settle. These people are going to work for you, their job is to make you happy. You’re going to be on the phone and meeting with them frequently, so make sure you like who you’re working with.
♦ Do your research. When you do decide on a real estate agent, he or she is going to want to know what your price range is, what neighborhoods you’re interested in, if you want to be close to schools, expressways, public transportation, etc. Know what you want and Get Pre-Approved!
WHILE YOU’RE LOOKING
♦ This is the big one you’ll be glad someone told you about.
Don’t get too attached to a house, because if it the deal doesn’t work out, for whatever reason, you’re going to be devastated.
♦ Be willing to negotiate, it’s a big part of the game.
♦ This goes hand-in-hand with negotiating: put your foot down and don’t let anyone take advantage of you. If the seller is asking for way more than you’re told the house is worth, or if they’re not willing to fix something that is broken or at least negotiate the cost, you have to be ready to walk away. There will be more houses, trust me.
♦ Don’t just purchase a house by its listing. Go look at EVERYTHING. A lot of houses look different in person than they do on-line, good and bad.
I have the belief that anyone that deserves to own a home should be able to do so. The American Dream is still attainable for those buyers who do their homework, establish a game plan and work hard to achieve that goal. I’m here to help.
Preparing To Own Your First Home
As a First Time Homebuyer, you’re about to make one of the biggest financial decisions of your life. For Millennials, a new home represents the most expensive purchase they’ll ever make. One of the best things you can do is read, research and learn about the mortgage application process. The more you prepare, the more confident you’ll feel about purchasing the home you want.
Being pre-approved by a lender gives you the confidence to shop for a new house, knowing exactly how much you can afford. You can avoid looking at properties that don’t fit your budget. The pre-approval helps you know exactly what is possible right from the start. In fact, most realtors expect you to be pre-approved.
How Much Can You Afford?
A good place to start is to look at your current expenses. You probably have both “fixed” expenses… i.e. car payments, taxes, or day care … and “discretionary” expenses… i.e. things like travel, clothing, entertainment, or other areas where you can decide how much to spend.
Then, make up a budget. You’ll see how much of your monthly income is already committed to “fixed” expenses, as well as how much you have to spend on a mortgage payment, taxes, and insurance for a home.
Of course, how much you can afford also depends on how much debt you have. Long-term debt – i.e. debt that will take more than 10 months to pay off – is what lenders are most concerned about. If you have long-term debt that is considered “excessive” for your income, it will probably limit how much you can borrow. If you have a lot of long-term debt, you may want to pay off some of it before you apply for a mortgage.
Remember: I’m always here to help make things easier. Reach out to Me at firstname.lastname@example.org to discuss your mortgage options and to take advantage of my FREE Jump Start Mortgage Pre-Approval service.
Changes in FNMA Guidelines Enables Norcom Mortgage to Close More Conventional Loans
Here’s What’s New …
1. Unreimbursed Business Expenses. Buyers earning <25% of their income from commission, bonus or overtime no longer have to account for a reduction in income due to unreimbursed employee expenses. That means tradesmen in particular may use their total gross income to qualify for a mortgage and not be penalized for taking advantage of legitimate business deductions.
2. Move Up Buyers. Buyers moving up to a bigger home and converting their current residence to investment property no longer need a minimum 30% equity position in the vacated property in order to use the rental income from the vacated property for debt service on the new home. All rental income from the former residence can now be used immediately.
3. Cash Reserves. Buyers using stocks, bonds, mutual funds and retirement accounts now can use 100% of their vested balances toward the asset reserve requirement. If those balances are >20% of the funds needed for the down payment and closing costs, buyers no longer need to show proof of liquidation for those funds. Less paperwork means faster closings.
Contact Me Today to Learn More! At Norcom, We Make Homes Happen!
The Mortgage Underwriter is one of the most important people in the Mortgage Application process. Without the approval of an underwriter, no lender will fund or close on a loan. It is the job of the underwriter to ensure a borrower can repay the loan they are applying for and to determine that the sales price is supported by the appraisal value before granting lending approval.
Approval of a Mortgage Application is based on several things: income, credit history, debt ratios, and savings.
♦ A borrower must be able to prove a stable income and job history needed to repay the loan.
♦ They also must have a credit history that reflects a stable record of repaying obligations and a balanced debt to income ratio. Additionally, a borrower’s monthly debt must fall within acceptable limits determined by the loan product’s guidelines.
♦ Lastly the borrower must show that they have enough money saved for their down payment and closing costs. It is also smart to have a few months of mortgage payments saved away in case of an emergency.
It is the Mortgage Underwriter’s job to make sure all of these factors meet particular loan guidelines. The underwriter will evaluate all of this information and sometimes ask for more information or explanations from a borrower to clarify and support their decision on the Mortgage Application.
Mortgage Underwriters also review the Appraisal to make sure it is accurate and thorough, and that the home is truly worth at least the purchase price. A property’s appraised value is also reviewed by the underwriter to ensure the value supports the amount of the loan you are requesting. A good underwriter will also take into consideration the condition of the property, the location of the property and how it may be affected by natural disasters, such as floods.
An Mortgage Underwriter does his or her best to evaluate the potential risk involved when lending to a borrower. In January 2014, the Consumer Financial Protection Bureau enacted stricter requirements on some mortgages, which included tougher background checks into your bank account, spending and employment history. If an underwriter does not follow all guidelines and makes a poor lending decision and the loan defaults, meaning a borrower stops making payments on their mortgage, it could result in a hefty cost to the lender.
The Mortgage Underwriter has final approval and final responsibility for the Mortgage Loan. They must make important decisions based on the facts presented in the file, their own judgments and similar application experiences. The Mortgage Underwriter has to take a calculated risk and do his/her best to determine if a file adheres to not just the letter but the intent of the loan program guidelines. It is not an easy job.
The Consumer Finance Protection Bureau (CFPB) has implemented certain laws decreeing that before banks grant a mortgage they must make a good-faith effort to determine that First Home Buyers, will be able to pay the loan back. The Ability to Repay Rule (ATR) went into effect in January 2014.
Why is the Ability-to-Repay Rule Important?