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.
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…
Title insurance is one of the least understood components of the real estate process. What exactly does it do, you may ask? To put it simply, title insurance protects lenders and owners against unforeseen problems with titles and mortgage liens. There can be hidden defects in a title that not even the most experience settlement agent will catch. A lender’s policy is required by every public mortgage lender and protects for the amount of the loan. This does not cover buyers, who must purchase their own policy to be covered.
Title insurance is not a recurring cost and does not have annual fees; it is paid once at the time of settlement and is good for the duration of the time one owns a property. There are four basic steps to what happens when title…
Are you worried about the cost of a down payment on buying a property in Washington, DC? Well, there is a new initiative called the DC Open Doors Program that could be a huge help. It is open to anyone with a total income of less than $123,295, and all District neighborhoods are in play. DC realizes that the housing market has skyrocketed and the cost of making a down payment has become out of reach for many of those with a decent income. While DC Open Doors can help lower income buyers, it is just as geared towards helping middle income buyers with their down payments for FHA (Federal Housing Administration) loans. In addition to the salary cap, you must also have a credit score of 640 or above and not currently own a property, although it is not just…
“What is a short sale?” Well, we’re glad you asked. First off, it is NOT a foreclosure. A short sale is different from a foreclosure in that the owner is still controlling the sale, not the bank. The seller is putting their home up for less than they owe on their mortgage. The process can take awhile, but it can be an asset both to buyers and sellers in certain situations. Real bargains can be found in short sales for buyers, and sellers can minimize their losses on a property without foreclosing. We are committed to helping both buyers and sellers with the short sale process. We have experience with short sales, which is extremely important in getting through it all smoothly. We also know and can recommend real estate attorneys and title experts who are…
What are the steps to buy a home in DC? If you find yourself pondering this question, you may feel overwhelmed, but we’re here to help you through the process whether you would like to buy in Adams Morgan, Petworth, Arlington, Silver Spring, or another neighborhood in the DC area.
One of the first steps to buy a home in DC involves selecting a realtor to guide you in your home search. It’s important to enlist a real estate agent with experience in your market. This person will listen to your needs and desires about number of bedrooms and bathrooms, features, location, timing, budget, and more. Feel free to contact me as you begin your home buying adventure.
After establishing your budget with your lender, it’s time to start looking at homes.…
The DC Housing Finance Agency (HFA) has a new program called DC Open Doors to help with down payment costs. Generally, such programs are targeted to low income residents, but DC Open Doors assists potential homeowners with incomes up to $123,395.
With an Area Median Income of $107K and an average home price over $450K, HFA realized that they needed a program to encourage homeownership and help people over the hurdle of a down payment. The $123,395 income limit only applies to the borrower, not the entire household.
DC Open Doors is a mortgage program offered through participating lenders, including Wells Fargo Bank and First Home Mortgage, among others. HFA offers residents a down payment assistance loan (DPAL) for 3% (with an HFA Preferred loan)…
Your personal finances are a critical part of securing a mortgage. One important part of your finances is your credit; a higher credit score can lead to a lower cost mortgage.
It’s important to have open lines of credit with no debt, which can increase your credit score. Lenders typically look for at least three open trade lines, such as a Mastercard or department store credit card. Paying your credit card bills on time leaves your credit report with “paid current” for each line of credit and no derogatory items or delinquencies. It’s also critical to show a consistent payment history over time, so keep your credit accounts long-term.
On the other hand, payment obligations can reduce your ability to qualify for the mortgage amount you want. If you…
According to a recent study, it’s 31% less expensive to own a home rather than rent in the DC metro area.
The study examined identical homes for sale and rent to calculate average prices across the metro area. The study also took into account the costs associated with homeownership including closing costs, maintenance, insurance, taxes, and more. For rentals, the study included the cost of renter’s insurance and a security deposit.
The underlying assumptions that make it 31% cheaper to buy than rent in DC are the ability to get a 30-year fixed-rate mortgage at 4.8% with a 20% downpayment, deduction itemization on federal taxes, a 25% tax bracket (income between $72,500 and $146,400 for married joint filers), and plans to stay in the home for seven…
DC foreclosures have almost come to a halt due to the Saving DC Homes from Foreclosure provision passed by the DC City Council back in November 2010. The 41-page bill requires lenders to provide a four-month mediation period to homeowners at risk for foreclosure, as well as file copies of notices with the DC Department of Insurance, Securities and Banking. Before this law, some foreclosures happened in as little as 30 days.
Borrowers can elect to participate in the in-person mediation, but lenders are required to do so. The mediation period allows delinquent borrowers to discuss payment options in order to avoid foreclosure. These options could include renegotiation of the loan terms, loan modifications, refinancing, a short sale, deed in lieu of…
203k renovation loans offer funds for the purchase and renovation of homes and are considered important tools for neighborhood revitalization and homeownership opportunities, according to the U.S. Department of Housing and Urban Development.
Many lenders have issued 203k renovation loans by partnering with state and local housing agencies or nonprofit agencies that renovate homes, and they’ve been quite successful. They’ve found ways to get money into homeowners’ hands with other financial opportunities, like HUD’s HOME, HOPE and Community Development Block Programs.
Other lenders grant 203k renovation loans to prove they are valuable players in low-income communities and to meet Community Reinvestment Act responsibilities. Properties that are…
Title insurance is one of the least understood components of the real estate process. What exactly does it do, you may ask? To put it simply, title insurance protects lenders and owners against unforeseen problems with titles and mortgage liens. There can be hidden defects in a title that not even the most experience settlement agent will catch. A lender’s policy is required by every public mortgage lender and protects for the amount of the loan. This does not cover buyers, who must purchase their own policy to be covered.
Are you worried about the cost of a down payment on buying a property in Washington, DC? Well, there is a new initiative called the DC Open Doors Program that could be a huge help. It is open to anyone with a total income of less than $123,295, and all District neighborhoods are in play. DC realizes that the housing market has skyrocketed and the cost of making a down payment has become out of reach for many of those with a decent income. While DC Open Doors can help lower income buyers, it is just as geared towards helping middle income buyers with their down payments for FHA (Federal Housing Administration) loans. In addition to the salary cap, you must also have a credit score of 640 or above and not currently own a property, although it is not just…
“What is a short sale?” Well, we’re glad you asked. First off, it is NOT a foreclosure. A short sale is different from a foreclosure in that the owner is still controlling the sale, not the bank. The seller is putting their home up for less than they owe on their mortgage. The process can take awhile, but it can be an asset both to buyers and sellers in certain situations. Real bargains can be found in short sales for buyers, and sellers can minimize their losses on a property without foreclosing. We are committed to helping both buyers and sellers with the short sale process. We have experience with short sales, which is extremely important in getting through it all smoothly. We also know and can recommend real estate attorneys and title experts who are…
