Emanuel Stewart - Reliant Home Lending

Use A Fixer-Upper Mortgage To Expand Your Options

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Use A Fixer-Upper Mortgage To Expand Your Options

Many people purchasing a home for the first time are running into the same problem. There simply are not enough starter or entry-level houses available in the current market that are ready for people to move into. One solution some home buyers are exploring is to buy a fixer-upper home. With a home renovation mortgage, prospective homebuyers can qualify for a home loan that combines the cost of home improvements with the purchase price of the house.

A Lack Of Affordable Homes

Regardless of whether they are brand new or resale homes, there simply are not enough affordable homes for first-time homebuyers. A significant number of new houses are built for people who are looking to purchase their second or third home. Furthermore, because there is a lot of demand for affordable entry-level houses, their prices have gone up. This makes it very difficult for first-time homebuyers to qualify for a mortgage for an entry-level home. 

Consider Fixing Up An Existing Home

With a lack of affordable homes, it only makes sense for first-time homebuyers to consider buying and repairing entry-level homes that might be in need of repair. Because a lot of people do not want to purchase a house that requires repairs, first-time homebuyers might be able to save money by going this route. 

There are two separate home renovation loans available. The first is the FHA 203k loan, which is insured by the Federal Housing Administration. The other option is guaranteed by Fannie Mae, and it is called the HomeStyle loan. These loans can cover the cost of most home improvements, regardless of how large or small they might be. Both of these loans can be used to cover cosmetic and structural renovations. With access to this loan, it is possible for first-time homebuyers to begin work immediately after the closing process is done. 

Consider Taking Out A Home Renovation Loan

The FHA 203k is for primary residences only. The Fannie Mae HomeStyle loan can be used for either a primary residence or an investment property. They require a minimum credit score of 620 and a down payment of at least three percent. These loans could make it easier for first-time homebuyers to afford a house. 

 

What’s Ahead For Mortgage Rates This Week – May 16, 2022

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What's Ahead For Mortgage Rates This Week - May 16, 2022Last week’s economic reporting included readings and forecasts on inflation and the University of Michigan’s preliminary consumer sentiment survey. Weekly readings on mortgage rates and jobless claims were also released.

Inflation Reports: Mixed Results for April

Commerce Department readings on consumer inflation showed mixed results in April; the Consumer Price Index dropped to 0.30 percent growth from the March reading of 1.20 percent inflation. Analysts expected 0.30 percent growth from March to April. The Core Consumer Price Index, which excludes volatile food and fuel sectors, rose by 0.60 percent in April as compared to the March reading of 0.30 percent growth. Analysts expected April’s reading for the Core Consumer Price Index to rise by 0.40 percent.

Year-over-year inflation dipped to 8.30 percent in April as compared to the March reading of 8.50 percent. This was the first decline in eight months and was caused by lower fuel prices. Analysts expected a year-over-year inflation rate of 8.10 percent for April. The year-over-year reading for the Core CPI, which excludes food and fuel sectors, showed  6.20 percent growth as compared to the March reading of 6.40 percent. The University of Michigan forecasted an inflation rate of 3.00 percent in the next five years.

Mortgage Rates, Jobless Claims Mixed

Freddie Mac reported higher average mortgage rates last week as the rate for 30-year fixed-rate mortgages rose by three basis points to 5.30 percent; the average rate for 15-year fixed-rate mortgages fell by four basis points to 4.48 percent. The average rate for 5/1 adjustable-rate mortgages rose by two basis points to 3.98 percent. Discount points averaged 0.90  percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable-rate mortgages.

First-time jobless claims rose to 203,000 new claims filed last week as compared to 202,000 initial claims filed in the prior week. Continuing jobless claims were lower last week with 1.34 million ongoing claims filed; 1.39 million claims were filed during the prior week.

The University of Michigan released the preliminary edition of its Consumer Sentiment Index for May; consumer sentiment dropped to an index reading of 59.10 percent for May as compared to April’s reading of 65.20 percent. The war in Ukraine and high fuel prices continued to contribute to consumer skepticism about current economic conditions.

What’s Ahead

This week’s scheduled economic reports include homebuilder readings on housing market conditions, Commerce Department reports on building permits issued and housing starts are also scheduled. The National Association of Realtors® will release data on sales of previously-owned single-family homes. Weekly readings on mortgage rates and jobless claims will also be released.

Wondering How Much Mortgage You Can Afford? Here’s How to Calculate It

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Wondering How Much Mortgage You Can Afford? Here's How to Calculate ItMany people are aware of the financial commitment that is involved when investing in a home, but what that amounts to is different for every person. From what you can afford to what a lender will allow, there are plenty of details involved in determining the right home for you. If you’re not quite sure what the right price is, here’s how to approach home ownership and determine your debt-to-income.

Calculating Your Debt-To-Income Ratio

You may not know what your DTI ratio is, but it has a lot to with how much home you can afford. In order to calculate this amount, add together all the debts you owe each month and divide them by your monthly pre-tax income. For example, if your credit card is $150 and your rent is $900, your debt amount would be $1050. Divide this amount by your income, say $2500, to get 0.42. This means your DTI ratio is 0.42 or 42%.

What Your DTI Means

While a DTI in the high 20s or low 30s is good, anything that hovers above 43 percent may serve as a red flag to the lender. The lower your DTI ratio is, the more likely it is that a lender will approve your mortgage application since you’ll have the disposable income to deal with financial hurdles. If your dream home has you hovering close to this amount, it may be a sign that it’s a bit out of reach.

How Do You Want To Live?

It’s quite common to be taken over when you find your dream home and decide to commit. However, buying a home is a huge financial commitment, and if you’re buying more than you can afford it may drain your well-being over time. Instead of diving in, determine other expenses that are likely to come up in the next few years, whether it’s travel, a child or a new car. It’s important to have the home you want and budget when buying it, but you’ll still need to financial wiggle room in case something comes up.

There are a lot of factors involved in determining how much house you can afford, but by calculating your DTI ratio and being aware of your spending plans, you’ll be well on your way to an ideal price range. If you’re currently on the market for a home, contact one of our mortgage professionals for more information.

ARM Loans: What To Know

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ARM Loans: What To KnowMany people are wondering what type of home loan is right for them, and one of the options is an ARM loan. This is an adjustable-rate mortgage. Typically, the rate is fixed for a certain amount of time, but it can change after that. Adjustable-rate mortgages will vary depending on the market. Is an ARM a smart loan option?  There are some situations where an ARM loan can be helpful, but people need to be careful with them.

The Risk Of An ARM Loan

First, it is important to understand why ARM loans contributed to the housing crash more than a decade ago. Many people took out ARM loans to buy houses that they could not afford. For example, if an ARM loan is a 5/30 loan, this means that it is a 30-year mortgage that has a fixed interest rate for the first five years. Then, after five years, the interest rate can change. There are typically caps on how much the interest rate can rise, but for many people, a three or four percent increase in the mortgage rate is enough to price them out of their homes.

What Are The Advantages Of An ARM Loan?

There are a few advantages that come from taking out an ARM loan. First, they usually have lower rates than fixed-rate mortgages. They might only be lower than a fixed-rate mortgage by a quarter point, but this adds up over time. Furthermore, they are a great option for real estate investors who are planning on buying and selling properties quickly. If someone is only planning on holding onto the property for a year or two, it might be a smart move to take out an ARM loan because the rate will not have a chance to go up before the property is sold. 

When To Take Out An ARM Loan For A House

Ultimately, people should consider taking out an ARM loan if they do not plan on living in the property for a long time. That way, they can sell the property before the interest rate increases. This could be a way to save money on property purchases and housing expenses, but there are risks involved, so be careful and speak with a mortgage professional to help guide you with the best loan option for you.

 

The Younger Generations Are Interested In Owning A Home

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The Younger Generations Are Interested In Owning A HomeThe real estate market has been red hot this year, with many people looking to purchase a home because of record-low interest rates. This includes younger individuals, as younger generations are interested in owning a house for the first time. The past couple of years have been anything except normal, and the housing market has taken off, with demand far exceeding supply. Why is this taking place?

Record Low-Interest Rates Are Driving People Into the Market

Even though there are many reasons why people are interested in purchasing a home, incredibly low-interest rates are one of the biggest reasons. Many people are interested in taking out a home loan with a 30-year term. Potential homebuyers think that they may never see interest rates this low again. As a result, many are looking to capitalize on this opportunity before it disappears. This is increasing competition for homes on the market, driving up their values.

Interest Is Skyrocketing Among Younger Individuals

Record-low interest rates are appealing to just about everyone, but it is a particularly attractive option for young homebuyers. Many are just beginning their careers and are looking for ways to build wealth. One of the best ways to do so is through homeownership. Many research bureaus have noted that there is a sharp increase in younger individuals looking at houses. 

Many Are Facing An Uphill Battle

Even though there are many young individuals and families looking for houses, there are a number of challenges they will need to overcome. One of the biggest challenges is that there is a historic shortage of inventory. Even though potential homeowners might be able to lock in a low interest rate on a loan, they might not find a house they can purchase. It is difficult for young home buyers to compete against older individuals and families who can make a cash offer. If a bidding war takes place, younger homeowners rarely have the cash to come out on top. 

Asking For Help Is Key

Even though today’s mortgage rates are attractive, it is critical not to overpay for a house. Asking for help from a professional can help potential homeowners make the right decision. 

 

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