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What Percent Is The Best Down Payment?

Deciding what down payment to put on a home is one the first decisions to decide when choosing a home loan. This determines the amount of money the borrower will have to part with, how much house a borrower can afford, and it also determines whether the borrower will have to pay monthly mortgage insurance, or upfront mortgage insurance.

Of course, your financial situation will be a big determining factor for which scenario you can choose.

A 3.5% down payment is the most common, especially among first time home buyers. It’s the smallest amount a borrower has to part with. However, when doing a 3.5% down payment with a FHA loan, the borrower will have added costs consisting of upfront mortgage insurance, which is added to the loan balance, as well as monthly mortgage insurance. This ultimately increases the monthly mortgage payment.

The other option is to go the conventional home loan route and parting with a minimum of 5% down. In order for this scenario, credit scores must be good and the home loan has to be under $417,000 according to Fannie Mae and Freddie Mac guidelines. Monthly mortgage insurance is still added to the loan, but it is significantly less than the 3.5% down payment.

A borrower can also put 10%-20% down with a conventional loan in order to avoid mortgage insurance altogether.

Now, keep in mind there is not “wrong” down payment. It is all based on your financial situation, what is available in your savings for a down payment, and how much house you can afford. The main goal is for the borrowers to understand the different loan options available and choosing what works best for their circumstances. Discuss these options with a mortgage broker for more personalized assistance based on your financial situation.

Huge Savings With FHA Streamline Refinance

Own a FHA Loan? This may be the perfect time for you to refinance if you are stuck with a high interest rate. Rates are still at historic lows, and are providing great opportunities for homeowners to refinance and save a great deal of money.

We have many clients in line to benefit from this program. There are borrowers saving anywhere from $100-$600. The savings is amazing, and truly beneficial to homeowners.

There are many benefits to refinancing your FHA loan to the low interest rates. If you are comfortable with your monthly payment then consider refinancing to lower your rate,  but continue making the same payments and pay off your mortgage early!

If you are not comfortable with your payment and want to lower it, then you can do that as well.

If your current loan is a FHA loan, the refinance transaction is one of the most simple and hassle free processes. There is good news to those who owe more on their home than what it is worth– no equity is required. If you have lost equity in your home due to the housing down turn that has taken place, the FHA Streamline is still a possibility to save you money.  With a FHA Streamline Refinance, no appraisal is required. The purpose of the FHA Streamline is to reduce your interest rate.

The process is even simple in regards to  income verification — there is none. With a FHA Streamline Refinance, we actually leave the income section blank on the application because it is not required to refinance your loan.

Even better, this refinance program is no cost. A true FHA Streamline should be no cost to the borrower.

Right now is a great time to refinance. The word needs to spread to borrowers who feel stuck with a high interest rate and a high monthly payment. There are opportunities to refinance, and you should take advantage of them today.

If you are interested in a FHA Streamline you can contact our mortgage office, Stateline Funding Corp., to get started right away.

Buying a Home as a College Graduate

If you have recently graduated and are eager to buy a home, but not sure if you are able to, then this article is for you.

Generally, in order to purchase a home, lenders require a minimum of two years. As a college graduate that is not that case with an FHA home loan.

If you graduated from college, and get a job in a field of work related to your degree, you do not have a waiting period to purchase a home. In this scenario, your college degree would count as previous work so you do not need two years of employment.

Now keep in mind, you must be employed in order to qualify for an FHA loan. Lenders will need your current pay stubs to show your income qualifies for the house payment, as well as making sure your job relates to your degree.

There are many graduates that don’t know about this loan program.

Another great benefit with FHA is the low down payment to buy a home. FHA only requires a 3.5% down payment. For example, if you are purchasing a home of $200,000 you only need to bring in $7,000. Another benefit is your down payment can be a gift from a family member or friend.

An FHA loan is the best way to go for first time home buyers and recent college graduates.

Don’t let a mortgage payment deter you away from purchasing a home. Many college graduates may think they won’t be able to afford a mortgage payment after finishing school. What you don’t realize is that in many cases, rent can actually be more expensive than a mortgage payment.

So if you are a recent college graduate that was just employed, go ahead and look into buying a home with an FHA loan.

Why an Increase in FHA Delinquencies?

There is new discussion about the down turn of FHA loans and their increase in foreclosures. The mortgage market is stabilizing; however, FHA backed loans have been increasingly defaulting. In the quarter ending March 31, the FHA delinquencies that were 90 days or more delinquent increased to 27%.

The main question is why are FHA loans defaulting?

A publication from Inside Mortgage Finance explained that FHA-backed loans made up more than 29% of the market for home purchases in the first quarter of 2012.

FHA home loans are great options for first time homebuyers who do not have a great deal of money saved up to buy conventional. FHA loans make it easier for younger individuals or lower income individuals to purchase a home.

An FHA loan only requires 3.5% down payment to better assist home buyers with less income and assets. The credit scores are a littler more flexible as well. With that criteria in place, FHA loans can be considered a little more risky for lenders at times. Because home prices are declining, homeowners are becoming underwater and owing more on their property.

By no means is an FHA loan a risky loan for a home buyer to receive, but as with any loan, only purchase what you can afford (not what you think you will be able to afford). Buy conservatively to avoid facing any defaults on your mortgage.

One of the main concerns is FHA’s emergency reserves. Because of the losses on their books from delinquent home loans, their reserves are diminishing. According to CNN Money, FHA emergency reserves dropped to .24% where the ratio is supposed to be 2% as mandated by congress.

However, FHA is hopeful in that their books are going to turn around and fewer delinquencies will be recorded. Only time will tell, but let’s hope for the best with fewer  delinquencies.

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