Monthly Archives: June 2017

Private Mortgage Insurance: Pros and Cons

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Why Private Mortgage Insurance Is a Good Play

For many home buyers, putting 20 percent down on a home makes little financial sense, yet consumers resist using private mortgage insurance (PMI). Here are a few reasons why PMI is a good move.

PMI protects the lender and you. PMI protects the lender in case you default on your loan, allowing you to borrow hundreds of thousands to buy a home with as little as three percent down for a conventional loan.

Interest rates are low. With rates in the low four percent range, the borrowing costs to buy a home are ridiculously low compared with car loans and other lines of credit.

Using OPM is smart financial planning. Other people’s money is a great way to get into the game. Thanks to PMI, the bank’s insurer takes the risk. Twenty percent down on a $400K home is $80,000. Three percent down would be $12,000, which is a $68,000 difference.

PMI can be removed. PMI can be removed when your loan balance is paid down to 78 percent of the purchase price. Or if your lender appraises the home to show an increase in market value great enough to eliminate PMI.

There are other reasons to love PMI. You’ll likely lose more in equity than it would take to save such a large down payment, at today’s sales pace. And it’s tax deductible.

That said, putting less money down is going to work for you only if you can afford the higher monthly payment, or you can choose a less expensive home. At least you’ll be in the game. Please consult your financial advisor before making any home-buying decisions.

Contact Berkshire Hathaway HomeServices today to get help or ask questions regarding your next home loan.

©2017 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Information not verified or guaranteed. If your property is currently listed with a Broker, this is not intended as a solicitation. Equal Housing Opportunity.

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About Jumbo Loans

Each year, the Federal Housing Finance Agency (FHFA) publishes conforming loan limits for all loans eligible for purchase and guarantee by government-sponsored entities Fannie Mae and Freddie Mac. The current limits are $424,100 and $636,150, or higher, depending on housing costs in U.S. counties or territories. Jumbo mortgages are simply loans that exceed conventional limits.

Jumbo mortgage are non-conforming loans designed for the purchase of single-family luxury properties or homes in high-cost areas. They’re only available for owner-occupied homes, not vacation or second homes, or investment properties.

 

Jumbo Loans

Without federal guarantees, lenders require unique qualifying and loan underwriting standards. Borrowers must have credit scores of 700 or above in order to lower their down payments to as little as five percent down. Income-to-debt ratios must fall between 36 percent and 43 percent, and borrowers must show liquid reserves equal to three to 12 months of mortgage payments, depending on the loan amount.

 

Lenders may have other requirements, and the final loan product must meet the Consumer Financial Protection Agency’s standards for a “qualified” mortgage. For example, a borrower who puts five percent down may be limited to a $1 million loan, while another borrower obtains a $2.5 million loan with 10 percent down. With 20 percent down, a $3 million mortgage is possible.

There are many advantages to obtaining a jumbo loan. Interest rates can approximate or equal those of conventional loans for qualified borrowers and can be deducted from federal income taxes on loans up to $1 million. As always, please consult your tax professional before making these decisions.

Contact our local BHHS Hodnett Cooper Real Estate Team to learn more!

©2017 BHHS Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Information not verified or guaranteed. If your property is currently listed with a Broker, this is not intended as a solicitation. Equal Housing Opportunity.

Best Tips for Fixer-upper Buyers

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Best Tips for Fixer-upper Buyers

Home prices have been rising for five years, and spring sales are outpacing last year, according to the National Association of REALTORS.® When it’s harder for buyers to find the perfect home, what’s a great strategy? Buy a fixer upper!Fixer-upper

There are real advantages to buying a home that needs work. Unloved or outdated homes don’t attract as many buyers, allowing you to mine the gold under the dirt. You’re getting the home at a discount compared with the rest of the neighborhood. You’re not paying top dollar for someone else’s improvements and you can make the home your own. You’ll wow your friends and family with the result.

Shop for the best neighborhood you can afford. Look for the worst home in the best neighborhood. Usually that home is older, smaller and not as well maintained as other homes. You’ll build instant equity when you improve the curb appeal, so the home looks like it belongs with its neighbors.

Ignore the cosmetics. Don’t stress over ugly paint, shag carpet or gingerbread trim. Your Berkshire Hathaway Home Services network professional can help you distinguish features that matter and which are easy to change.

Consider the bones. You need to know whether or not you can open a kitchen to the den or add on a bathroom or other square footage. These updates can be costly but they add value to the home. Talk to your lender about loans that pay for remodeling such as FHA’s 203(k) program or Fannie’s HomeStyle Renovation Mortgage.

 

©2017 BHH Affiliates, LLC. Real Estate Brokerage Services are offered through the network member franchisees of BHH Affiliates, LLC. Most franchisees are independently owned and operated. Berkshire Hathaway HomeServices and the Berkshire Hathaway HomeServices symbol are registered service marks of HomeServices of America, Inc.® Information not verified or guaranteed. If your property is currently listed with a Broker, this is not intended as a solicitation. Equal Housing Opportunity.