What is an FHA Loan?

Buying a home is exciting, however, figuring out the right home loan can be stressful. Home loans, called mortgages, come in numerous types. Choosing the right mortgage loan is very important, after all it is a major purchase in your life. To have a better idea of what loan works best for your needs, let’s dive into the FHA loan program.

What is an FHA loan?

The Federal Housing Administration (FHA) mortgage offers down payments as low as 3.5 percent.

The credit score and down payment amounts are just two requirements of FHA loans. You can qualify with a credit score as low as 500 with a 10% down payment unlike many conventional loans. Just keep in mind that the lower the credit score the higher the interest rate the borrowers will receive.

Majority of first-time home buyers don’t realize that the down payment can be obtained from a financial gift.

FHA lets borrower’s spend up to 57 percent of their income on monthly debt obligation, this includes credit cards, student loans, car loans, and mortgages. On the other hand, conventional mortgage guidelines tend to cap debt-to-income ratios at around 43 percent.

FHA offers several other loans programs, including:

• Home Equity Conversion Mortgage
• FHA 203k improvement loan
• FHA’s Energy Efficient Mortgage Program
• Section 245 (a) Loan

What was the purpose of the FHA?

Congress decided to create the Federal Housing Administration in 1934 which was amid the Great Depression. During that time, the housing industry was in crisis. There was an increase of foreclosure, loans were limited to 50% of a property’s market value. The government created these loans to stimulate the housing market and reduce lender risk which made it easier for borrowers to apply for home loans. This has helped the homeownership rate to increase overtime.

While an FHA loan may sound great, you’ll want to make sure this type of mortgage is right for you.

 

If you want a full team of mortgage professionals to help with your decision on what is the best loan options for you, we’re happy to help. To learn more about an FHA loan, please don’t hesitate to reach out to us, we look forward to hearing from you!

Why is Fall a Good Time to Buy a New Home?

The housing market flows just like the seasons. Fall is an amazing season for many different reasons. It’s a chance to fill up on hot pumpkin spice lattes every morning and stay warm and cozy by a fire. Fall may be a great time to buy a house as well.

Believe it or not, November is among the greatest time of the year to find your dream home. Here are three reasons why fall can be a great time to buy.

Fewer Buyers are competing

During the summer, there’s competition everywhere! When a buyer sees a house they like, they start the home process in a blink of an eye. However, it starts to slow down when families are already in their new home by the beginning of the school season. That’s when you’ll likely notice not as many buyers are at the open house.

So, what happened?

Buyer’s demand has finally slowed down this time of year, meaning less competition. Sellers might be willing to negotiate with home buyers.

If you didn’t get the chance to buy your dream home during the busy summer season, right now is a great time to buy a home.

Price Reductions

Sellers tend to put their homes on the market in the Spring season. When homes listed didn’t sell, it’s probably because they were overpriced. Homebuyers might find the house prices falling more towards the actual market value during this season.

The longer a home lingers on the market. The more willing a seller may become on a flexible closing date or making certain repairs. Most importantly, they are willing to negotiate the price.

Holidays motivate Sellers

Holidays are a great time to spend with family, but it’s also a great time to snag a deal on a house. Sellers aren’t as motivated in the home buying process during the holidays months. However, holidays are just around the corner, sellers are eager to close so they can move on to planning their holiday dinner. Lenders, brokers, and realtors are often motivated to get a deal done before the end of the year.

So, don’t miss out the opportunity to search for a home during fall season.

Before you decide to buy a house, find out if you can put your housing costs to work by buying this year! If you have any questions for us, don't hesitate to give us a call at 770-552-1000. We look forward to hearing from you soon!

Homebuyers’ Top Mortgage Fears

The day you decide to purchase a house is the day you feel adrenaline rushing through your body. Having that constant fear in the back of your mind, afraid of not having enough down payment or maybe your credit score is too low. Possibly, your debt is too high. Those fears are what might make you take a step back and ask yourself if it’s worth going through the home process.

But did you know it’s very possible you won’t be turned down for a loan? That’s because there are three types of home loans. A lot of those fears might just simply be misconceptions.

Here’s how you can overcome your mortgage fear:

“I don’t have enough for a down payment”

According to the National Association of Realtors, the average median down payment has been 5% for first time buyers for decades. People don’t realize there are different kinds of mortgage loans that requires less than 20% down. Many borrowers put down less than 2%.

Homebuyers who go with an FHA (Federal Housing Administration) loan type can put down as low as 3.5%. Borrowers who take out a VA (U.S. Department of Veterans Affair) mortgage have the offer of 0% down.

While many believe a 20% payment is a requirement, you can see that there are different loan options available.

“I have too much debt.”

Don’t assume no one will lend you money to buy a house or a condo just because you have debt to pay off.

Lenders typically want to see that you spend less than a certain percentage of your total income on recurring monthly debts. When looking for a home, most lenders look at the borrower’s debt-to-income ratio.

Let’s say you’re paying $300 a month on your student loans, another $400 on credit card debt, $300 on your car loan and expect a mortgage payment, including taxes and insurance, of $800.

The lender will find this ratio by adding your monthly debt payments and then dividing that number by your income. So, with that monthly pre-tax income of $5000, your debt-to-income ratio is right at 36% where it lies for conventional loans.

“My credit score is too low.”

The minimum credit score for conventional loans is 620. FHA loans require a minimum of 500. The VA does not impose a minimum credit score requirement. However, most lenders would want to see you have a minimum credit score between 580-620 before approving a VA loan. This can vary lender by lender.

“I don’t make enough money.”

Most lenders expect borrowers to have monthly housing costs consume less than 28% of gross income. The lenders will measure housing expenses as a percentage of gross income which indicates if a borrower can make the payments on their mortgage loans.

For instance, if a borrower’s salary were $5,000 a month, a lender would want to see the housing expenses were less than $1,400 per month.

Budgeting is key, so don’t lose hope!

 “Getting turned down for a loan.”

When searching for a home, you should consider getting pre-approved. It can get you a very good idea of where you stand, and this will help you boost your confidence when buying your dream home.

The pre-approval process is free and it’s one of the most important steps when getting a mortgage.

Before you decide to buy a house, find out if you can put your housing costs to work by buying this year! If you have any questions for us, don't hesitate to give us a call at 770-552-1000 or send us an email at skatz@vandykmortgage.com. We look forward to hearing from you soon!

How to get a Mortgage

The best part about house hunting is finding “the one”, but it’s important not to rush things and take the time to understand the home buying process. You don’t want to overwhelm yourself. So, before you set foot in your new home, make sure you know the step by step of getting a mortgage.

Here are some simple steps that you can follow to help make the most out of the mortgage process. 

Step 1: Get your credit in check    

Your credit score tells lenders just how much you can be trusted to repay your loan on time. 

Usually, first time home buyers are unsure of what their credit score is. When you look at your credit report, make sure there aren’t any credit errors. Having a credit error removed has the potential to boost your score, but keep in mind it can take up to 30 or more days to get corrected.

If you discover your credit report has errors, do what you can to improve your credit score, so you’ll be ready for the next step of researching and choosing the best mortgage type for you.

Step 2: Get pre-approved for a mortgage

Once you are prepared with your credit score, getting a pre-approval is the next step. A mortgage pre-approval is a letter from a lender that determines the loan amount you could qualify for. This will help you eliminate disappointment! Also, without it, the seller has no guarantee you can afford their home.

Step 3: Choose the right mortgage options

The most important thing is deciding the right type of mortgage for you! There are three main factors to consider when you are comparing loan options: The term, the interest rate type, and the loan type.

• The loan term indicates how long you pay off the loan: The most popular loan terms than homebuyers get would be a 15-year or 30-year mortgage.
• There are two types of interest rates: fixed and adjustable. Fixed rates will stay the same while adjustable rates change over the life of the loan.
• There are three main types of loans: Conventional, FHA and special programs loans.

Once you have a sense of the type of loan you want, you can compare lenders and offers.

Step 4: Be patient

Don’t rush through the process. Buying a home requires a lot of time and effort, so you want to be fully prepared and make the best decisions possible.

Make sure you are ready to purchase a home, emotionally and financially!

If you want a full team of mortgage professionals to help with your decision on what is the best mortgage option for you, we’re happy to help. Please don’t hesitate to reach out to us, we look forward to hearing from you!