So you have made the decision to enter into the real estate market - you want to buy a home. This opens a flood gate of questions. One of the first that needs to be addressed is, “How will I pay for this investment?” Many people lock themselves out of the real estate market because they do not think they can afford to buy, but there are many loan options for buyers.
The most common loan is a conventional loan. The conventional loan uses Fannie Mae or Freddie Mac guidelines for conforming loans. As of right now these guidelines look like the following: The minimum down payment for a loan up to $417,000 is 5%. From $417,001 up to $625,000 the minimum down payment is 10% and from $625,001 or more - a jumbo loan - requires a minimum down payment of 20%. If the loan amount is between $3-4M the accepted minimum deposit is variable, but respectively higher as well.
As of right now you may be thinking ‘awesome I can get a loan for $200,000 and all I have to get together for a down payment is $10,000 - Maybe I can swing this!’ There are secondary fees to consider and those include PMI, private mortgage insurance, and bank fees. In short PMI is an insurance paid for the bank taking the risk on a homeowner to make good on the loan payments. It insures the bank for up to 80% of the home’s value if the homeowner defaults on the loan if the loan if for the full value of the home.. PMI can be between 0.3 - 1.15% of the original loan amount per year.
Using the same example as above that would be $200,000- $10,000= Loan amount of $180,000
$180,000 * avg 0.725% PMI = $1,305 per year. /12 months=$108.75 per month.
Tack that onto your $890.77 mortgage payment and you have your monthly payment.
Once the loan amount is less than 80% of the value of the home the PMI can be eliminated.
A popular loan for first time home buyers is the FHA. This is a popular loan for 1st time home buyers because generally speaking 1st time home buyers have less saved funds, have not built as much credit and this program has a lower credit score requirement, less money down, and more lenient debt to income requirements. However FHA loans have some drawbacks to protect the lenders. Foremost, there is a 1.75% upfront fee at closing along with a 0.5% annual renewal premium paid annually over the life of the loan that will not be suspended if the loan-to-value changes as the PMI does. The home also must appraise for the cost of the loan and must meet basic condition requirements. Back to the benefits though! The minimum down payment is only 3.5%, so back to the earlier example that is only a $7,000 down payment on a $200,000 loan! Some people that use this option do so as a way of entry into the market. After some time of making good payments and building good credit, you can refinance for a conventional loan and if your loan-to-value has risen you may not even need to pay the PMI, as well as the renewal premium you will be rid of.
There are many other loan types out there, but having knowledge of the two most common will help you on your way to getting your new home and a great investment.
Buyers in DC's competitive real estate market will likely find themselves in a multiple offer scenario. It's a stress-inducing situation...you've finally found the perfect listing, and now lots of other buyers want it too! What's the best way forward? First off, it's important to understand how most multiple-offer-scenarios play out.
Often times, when the listing agent feels confident there will be more than one offer, they will set an offer deadline. The deadline gives potential buyers a chance to huddle with their agent and lender to make their best possible offer, which is oftentimes referred to as "highest and best" in the real estate industry. Writing a winner offer is simple...offer more than the asking price, all cash, with no contingencies,
An overview of title insurance when it comes to owning a home.
When you buy your home, you receive a deed, which shows that the seller transferred their legal ownership to you. Legal ownership is called the “title.” Title insurance protects you in case there is any legal trouble down the line.
Title insurance is crucial when it comes to completing your home purchase. It protects you and the lender from the possibility that your seller (or previous sellers) don’t have total ownership of the house and/or property. If they don’t, they may not be able to transfer full ownership over—but title insurance prevents that from happening.
A couple of questions to ask about title insurance include “is the seller pushing a specific title company?” or “who do
One thing that ultimately influences your mortgage rate is your credit score.
For first time home buyers, many aspects of home buying can seem daunting. We’re here to explain how your credit affects what mortgage rate you may be given once you decide to buy a home.
One thing that ultimately influences your mortgage rate is your credit score. Basically, the easiest thing to remember is: the higher your credit score, the lower interest rate on your mortgage.
A high credit score not only guarantees a lower mortgage rate, but sometimes it depends on whether you can get a home loan at all. Buyers below a FICO score of 620 have a miniscule chance of securing a mortgage, so step one to getting a home loan and low mortgage rate is working on that credit
If you're starting to save on a down payment for your home, you’ll want to build credit in the meantime. To get your credit report 100 percent ready to go, here are simple tips and tricks.
It's important to remember your credit report and credit score aren’t the same—but they’re definitely similar. Your credit report is your history of all the borrowing you’ve done but your credit score is the number that represents it.
To get your credit report in tip-top shape before home buying, here are some ideas for you to consider:
Spread out time between other big loans and a mortgage. If you’ve recently taken out a car loan, student loans or anything similar, you’ll want to hold off on those applications.
DC Open Doors Program offers first-time and repeat home buyers a Down Payment Assistance Loan that does not need to be paid back.
DC’s Housing Finance Agency, or the DCHFA, reconfigured its DC Bonds program called “DC Open Doors,” for new first time home buyer assistance, four years ago this summer. The program, which has given over $200 million in down payments for homes in the city, is now even more accessible. Those working in DC who want to live downtown but have trouble making the down payment can utilize this program.
The program and its funding are available to first time home buyers and repeat home buyers. The DC Open Doors Program is constructed around what’s called a “Down Payment Assistance Loan,” one that doesn’t have to be paid back.
Home loan programs that are offered for teachers in Washington, DC.
If you're a teacher in the D.C. area, did you know there are home loan programs available for you? There are many incentives too! Programs involve up to $800 in reduced closing costs for teachers and discounted real estate agent fees—combined with the discounted closing costs you can get up to $1,600 in credits while closing.
There’s priority loan processing and donations to your school. Up to $400 in donations can be given to your preferred school program. Teachers can even choose what particular program they want to give to—music, arts, science lab, you name it!
There’s also homes for heroes programs, or discounts of up to 25 percent of your realtor fee when you’re buying and
The pros and cons of the Federal Housing Administration (FHA) loan.
At times homebuying can get overwhelming, especially when it comes to loans. We’re here to make things easier for you by sharing the pros and cons of FHA loans.
FHA loans are government insured loans from the Federal Housing Administration. This means FHA guarantees your loan but doesn’t actually lend out the money. When you take out loans, they need to be with FHA approved lenders. Some benefits of FHA loans include less down payment required, more forgiving debt to income ratio and less restrictions on bankruptcy and foreclosure.
One of the main advantages of an FHA loan is that a very large down payment is unnecessary. Loans can be as low as 3.5 percent, which is great for
The District of Columbia Association of REALTORS®(DCAR) announced the First-Time Homebuyer Tax Benefit has been passed and funded by the DC Council. The First-Time Homebuyer Tax Benefit allows first time home buyers in DC to pay a .725% recordation tax on homes no more than $625,000 that earn less that 180% AMI beginning this October.
So what exactly does that mean?
First let’s talk about the recordation tax. Recordation tax is part of various closing costs and based on the purchase price. If the sale price is $399,999 or less than the DC transfer and recordation tax rate is 1.1%. Sales of $400,000 and above are taxed at the rate of 1.45%. For example, if you bought a $250,000 home in DC, the buyer and seller would each pay $2,750 in DC transfer
Are you in the market to buy a home in Washington, DC? You may have heard of some of the many programs, lending options, and tax benefits that exist in the market today. To name a few: DC Opens Doors, Loan Programs for Teachers, and the Down Payment Assistance Program. You may have even heard of first-time home buyer tax benefits in the past, but they have not been renewed or implemented for years.
As recently as 2011, there was a DC first-time home buyer tax credit in place that reduced the buyer's recordation tax by 50 percent. This credit saved many first-time home buyers thousands of dollars. There may be good news on the horizon for first-time buyers in DC. On October 6th, a few DC council members proposed a new first-time home buyer tax
Affordability: Loan rates have been locked in by buyers as low as 4% in the past month. Interest rates have climbed from around 3.5% last year to an average of 4.25% right now, and are predicted to continue to slowly climb.
It’s a better investment than renting: The average rent per one bedroom is $1,850 in a neighborhood like Adams Morgan. The average sales price in that neighborhood is $578,774.00 With a 4% interest rate on a conventional loan and putting 20% down, the monthly mortgage payment is $2,210.41. The year-over-year increase in sales price is 20% in that neighborhood! If sales continue on that trend the same home could be sold for $694,528.80 next year.