For every home purchase, most loan programs require a down payment. It all depends on which program you can qualify for.
Lets go over each program:
1. FHA: Minimum Down Payment Requirement 3.5% of Purchase Price
2. Conventional: Minimum Down Payment Required: 5% of Purchase Price
3. HomeReady/HomePossible: Minimum Down Payment Required: 3% of Purchase Price.
1. Lets go over the FHA program and who, in my opinion, is ideal for. This loan is ideal for borrowers who have higher debt and lower credit scores. Most lenders will accept a credit score of 580. There is a one time funding fee of 1.75% of the loan amount either added to your loan or you may pay it out of pocket. The mortgage insurance factor is always 0.85% of the initial loan amount, no matter what credit score. The downside, currently, you are not allowed to remove the mortgage insurance without refinancing to a conventional loan. There is also a maximum loan amount that FHA allows per county, so please make sure what is the limit in your county. I recently read an article stating FHA is trying to pass a rule to allow borrowers to remove the mortgage insurance, but as of today's blog, there is no certainty if it will pass. If you believe your credit score is less than average but more than 580 and/or your monthly debt is more than 50% but no more than about 57% then this may be your loan.
2. For the Conventional Program, this is your standard Fannie/Freddie Loan with a minimum 5% down payment. Most lenders require a minimum of a 620 credit score. Your mortgage insurance rate is based on your credit score, so the higher the score, the lower the mortgage insurance. Most lenders allow up to 50% DTI (Debt to Income) Ratio also depends on your credit score. You are allowed to remove the mortgage insurance once you surpass 22% equity either by paying down the principal or appreciation of value. This will be determined by your lender/investor. There are also maximum loan limits per county, so please make sure what is the maximum before the loan turns into a Jumbo Loan.
3. HomeReady/HomePossible: These are conventional programs created by Fannie/Freddie to compete with FHA. The minimum down payment for these loans is 3%. Most lenders require a minimum of a 620 credit score. There are income limits per area so please visit the HomeReady website, (https://homeready- eligibility.fanniemae.com/homeready/). Input the address of the property you are purchasing/refinancing and see what the income limits are. Before, there were some areas with no income limits, but both companies have removed the "No-Limits" as of the end of July of 2019. Once you have the income limit for your home, you can proceed if you fit their income limit. The mortgage insurance is also dependent on your credit score, so if you credit is in the lower range, prepare to pay. You are allowed to remove the mortgage insurance once you surpass 22% equity either by paying down the principal or appreciation of value. This will be determined by your lender/investor.
I have not mentioned this program as this will only qualify if you are in a designated rural zone. I am talking about the USDA program. This program is 0% down....yes you read it correctly....0% down. Most lenders require a credit score of 620 with a monthly DTI of 45%. There is also an income limit for each zone, so please visit the USDA website and input the address of the subject property. There is a funding fee of 1% and a monthly insurance factor of 0.35%.
Please contact us with any questions about these loans and other loans we offer here at GDM Mortgage Corp. (407) 930-4490
Lets Achieve Grand Results!!!
Many clients ask me if they have a new job, can they qualify for a new home?
The clear answer is yes and no....;)
Yes: If you have a full 2 year work history with minimal gaps. So, if you were working at your previous employment for lets say 1 year and 10 months and you are at your current employment for 2 months, then that will equal the 2 year employment.
Let's say you have 5 years on your previous employment @ $15 per hour and only 1 week for your current employment @ $20 per hour....the answer is yes you can use the current income for your employment to qualify.
Other exceptions is if you were attending college of a technical college for 2 years, and now found a job for about 30 days, then you would qualify with your new employment, since you were in school for 2 years.
No: If you started your employment but do not have a 2 year history with any employer.
These scenarios are for employees and not self-employed borrowers. That will be discussed on our next blog. Stay tuned!
If you still have questions, please call us, and we can advise you on how to proceed.
Thank you! :)
What a year it has been.
As we turn into the new year, many clients ask me to refinance their homes. The first thing I ask them is, "What is your goal? Are you looking to lower your rate, lower your payment, cash out, or all of the above?"
Values have been increasing as high as the mid 2000s, and now, more and more homeowners have equity to use to pay off their bills, do home improvements, etc.
Now with that being said, are you a homeowner with the same question...do I need to refinance? The first thing to ask yourself is do you have an FHA loan or a Conventional loan? If you have a FHA loan, chances are you are stuck with that mortgage insurance and would like to get rid of the mortgage insurance. That is a good reason to, but there is more to that. If you have a rate is the 3%-3.5%, is it worth refinancing to get rid of your mortgage insurance? Well, maybe.
If you are trying to refinance your way out of the FHA mortgage insurance, here are some tips to consider before you do:
1. What are today's conventional rates and compare your new monthly payment to your current one. Feel free to use our mortgage app to do some calculations.
2. How is your credit is score? Chances are you have made purchases after your closing and/or opened up new credit accounts so make sure your credit is acceptable to conventional standards.
3. What is the value of your home? You may search online to obtain a value, but the best way is to hire an appraiser and have a full custom report of your property.
If you have a conventional loan, then here are some questions you may ask:
1. Will I receive a better rate?
2. Will I lower my total monthly payments?
3. Do I need cash now for a home improvement, family emergency, etc.
I always recommend to stay away from your home equity to buy luxury items. By "luxury", I mean things you really don't need.
Once you have these questions answered, you will be able to make the best decision on moving forward.
If you have any questions, please call us now....(407) 930-4490 and we can advise on your next step.
Should I buy down the rate?
We receive many questions about what is buying down the rate and is it worth it? The concept of buying down the interest rate is a way to give the lender an advanced interest at current cost. In order words, the present value of money.
For example, let’s say you have an interest rate of 4.5% but you are comfortable paying on a rate of 4.125%. In exchange for the lender to give you the 4.125%, the lender would charge you points, (A point is equal to one percent of the loan amount), or advanced interest on the loan for the lower rate. It will cost more money upfront, but you will lower your payments long term. Makes sense?
So, is it worth it for you to buy down the rate? I like to make this very simple with a math calculation:
If (CxB) is less than (A) the cost to lower the rate, then it is NOT a good investment.
If (CxB) is greater than (A) the cost to lower the rate, then it is a good investment.
If you have any questions, please feel free to contact us (407) 930.4490 and we will be happy to help.
With our current booming economy, more and borrowers are starting businesses or taking on freelance work. That’s a great thing for the economy, but not so great when applying for a loan. Here are some pointers when applying for a loan as a self-employed borrower:
1. If you are not 100% owner of the company, but are trying to use company income to qualify, the lender will not allow 100% of the income to be used for qualification. Usually, when you open a Corp or an LLC with two or more people, you must specify the percentage amount of ownership. This is the amount you can use to qualify. If you do receive a salary from the company, then that salary can be used as your personal income in addition to your percentage of the profit from the company.
2. If you have paid yourself W2 and are less than 25% owner of the company, then you can use the most recent W2 income to qualify instead of averaging the two years. If you have paid yourself a 1099, then a two-year average is needed to qualify.
3. You can use business funds for your down payment. It is better if you are 100% owner, but if not, the other partners/shareholders must write a letter of explanation informing the lender that the withdrawal of funds will not harm the company in any way.
4. Most lenders require the business to be open for a minimum of two years. I have had a situation where the borrower has closed his business and started another one because he/she failed to pay the annual corporation fee. By doing that, they could not use the previous company to fill in the two-year history. If you need to open up a new company, one way is to have the new company take over the old company as an asset, and then you can document continuation and support the two-year work history.
5. I have had situations where the income from the previous year was more than the recent year. Most lenders tend to shy away from these borrowers. To circumvent this, you may be able to write a letter of explanation based on a hardship which was not under your control. If you can provide a current P&L Statement showing the income is equal or more than the previous years, then the lender may consider it.
I Hope these tips help you in your goal of home ownership. To read our latest blog post, click here If you have any questions, please contact us (407) 930-4490. We are happy to help.
Ok, so, you are ready to sell your home. You know you need to make some improvements, but budget is tight, and you want to make the property more appealing.
I know the feeling…
With my experience as an appraiser and as a real estate broker, I have come up with five items that will help in raising the value of your home while also generating appeal for your new buyers.
The kitchen is the most important area for the buyer . If the kitchen has not been updated in about 15 years, chances are it will need some refreshing.
The first item I would change is the kitchen hardware. This means door knobs and door hinges. By changing these items, you would make the kitchen look updated without breaking a sweat. If the kitchen doors are not leveled or closing correctly, this also doubles as a great fix.
Second, insert a Sticker tiled back splash. Installing a back splash not only refreshes the kitchen, but also makes it more appealing to your buyers. You can find the back splash in home depot for less than $10 a sheet. If you are handy you can install them yourself. If not, Home Depot provides classes on this. You can also easily find a suitable tutorial on YouTube.com.
Bathrooms are the 2nd most important area for your buyers. While There are many things you can do to your bathroom, the most cost effective changes are the ones dealing with hardware. By updating the hardware…meaning the knobs, faucet, shower head, toilet seat, lighting, and mirror, you can change the whole feel of the bathroom.
Home Depots offer many options for your hardware. You can First go online to the home depot website and see which options appeal to you. Then you can go to the store to see what they carry in person. The lighting should be very fun to choose. There are literally hundreds of options.
If you currently have a border-less mirror, it's time to make the upgrade. Depending on your preference, you can choose one long picture framed mirror, or two side by side picture framed mirrors. Make sure you choose the frame and color to go with your current look. Amazon.com also has great choices and prices.
3. AC filter, vents, and Clean up.
If you have a home with dirty vents, I recommend hiring a company to clean out the dust in the vents. Once those vents are clean, replace the Air Filter and make sure you do the monthly maintenance. If you are not aware what the monthly maintenance is, I'll gladly tell you…change the filter and insert 1 cup of vinegar with 1 gallon of water through the insert near the ac handler. Done.
Once you complete that, change the vents on the ceilings. This makes a huge difference. I'm not saying change all of them, but you would do well to change the ones near the entrance, kitchen, and living areas.
4. Front Yard
If the kitchen is the most important room inside the home, the front yard is the most important area outside the home. This is because the yard is the first place your buyers will see. You may be able to get away with having a poorly designed front yard while having a great interior, but first impressions count!!
Have you ever heard the saying, “You can’t judge a book by its cover”? Well, this does not necessarily apply to real estate. You need to grab the buyer with a “WOW” factor in order for them to stop the car and desire to see inside of your home. One easy way to do this is By simply adding red mulch or white rocks to the front yard. Why red or white? Well, if you drive by a home that has brown or black mulch/rocks, does it stand out?......Didn’t think so. What you want to do is create an attention-grabbing contrast between your home and the front yard. The colors red and white are perfect for achieving this result.
Lastly, you can insert various plants and flowers to give your yard an "at home" feeling. Color goes a long way here as well!
Paint, In my opinion, is one of the "WOW" factors that buyers notice when it's new. This is especially true inside of the home. Most paint usually fades after 5 years +/-. Once you slap on a new coat, not only will you get rid of all of the markings from your kids ( bumps, scratches, etc.,), but also make your walls appear as if they where built and finished the day before. Try and let me know.
I hope these tips are helpful to you. They have worked for me many times. To read the latest blog post, click here. If you have any questions please feel free to contact us (407) 930-4490. We will be happy to help.