Wright Mortgage Services

How much “house” can I afford?

Buying a home offers many advantages, one of the most significant being that it allows you to build equity (ownership) when you pay your mortgage each month. A common myth is that monthly mortgage payments are more expensive than rent. But, in many cases, mortgage payments can be even less than rent. When considering home ownership for the first time, you need to decide whether buying makes financial and practical sense for you right now or if you are better off renting. Consider both the advantages and disadvantages to renting as well as buying, and weigh the pros and cons for your particular situation.

Borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. Borrowers with less than a 580 FICO score will be required to put down at least 10%.

Will allow you to submit TBD to arm borrowers with a real conditional APPROVAL (without a contract).

Far and away, the most significant benefit of a VA loan is the borrower’s ability to purchase with no money down. Apart from the government’s UDSA’s Rural Development home loan and Fannie Mae’s Home Path, it’s all but impossible to find a lending option today that provides borrowers with 100 percent financing.

VA loans also come with less stringent underwriting standards and requirements than conventional loans. In fact, about 80 percent of VA borrowers could not have qualified for a conventional loan. These loans also come with no private mortgage insurance (PMI), a monthly expense that conventional borrowers are required to pay unless they put down at least 20 percent of the loan amount.

Private mortgage insurance (PMI) policies are designed to reimburse a mortgage lender up to a certain amount if you default on your loan. Most lenders require PMI on loans where the borrower makes a down payment of less than 20%. Premiums are usually paid monthly or can be financed. With the exception of some government and older loans, you may be able to drop the mortgage insurance once your equity in the house reaches 20% and you’ve made timely mortgage payments. The Servicing Lender will have the requirements for canceling the mortgage insurance.

Buying a home offers many advantages, one of the most significant being that it allows you to build equity (ownership) when you pay your mortgage each month. A common myth is that monthly mortgage payments are more expensive than rent. But, in many cases, mortgage payments can be even less than rent. When considering home ownership for the first time, you need to decide whether buying makes financial and practical sense for you right now or if you are better off renting. Consider both the advantages and disadvantages to renting as well as buying, and weigh the pros and cons for your particular situation.

How much “house” can I afford?

The first step toward finding the right home is to quickly compute your purchasing power and determine how much you can afford to pay each month. This saves you time by allowing you to focus on homes in your price range.

Some up front costs include:

Down payment: Typically ranges from 3-30% of the cost of the house. The more you can put down, the greater equity you will have in your home and the lower your monthly payment will be. For down payments less than 20% you may also need to pay mortgage insurance.

Closing Costs: Typically range from 2-6% of the loan amount depending on your area.

On-going Costs: Your housing costs can include the following:

• Monthly mortgage payment
• Homeowners insurance
• Mortgage Insurance
• If applicable – Flood Insurance
• If applicable – Property taxes
• Utilities
• Maintenance

What is an FHA 203K Loan?

Basically, it’s an FHA loan to purchase or refinance your home with additional funds for your home improvements. FHA which stands for Federal Housing Administration (FHA) is a mortgage insurance and is part of the Department of Housing and Urban Development (HUD). HUD or FHA do not make direct loans to consumers (homebuyers or homeowners) but FHA does insure loans that are funded by approved FHA lenders. FHA insures different types of home loans which one of them is the 203k that is used to rehab properties. The more popular version though is the FHA 203b which does not include funds for rehabilitation.

The Process of the 203k Loan

Find the home you’ll want to purchase and determine what improvements need to be made to the property. The purchase contract offer is written the same as any other, accept you’ll want to make sure that there is language stating the purchase is contingent upon borrower acquiring an FHA 203k Loan.

In order to complete the financing of the improvements, you will need to meet with a contractor to determine what kind of work you are planning and how much it will cost. The contractor will give you a bid, which you’ll need to pass on to the lender. The lender will order an appraisal to determine what the value of the house will be once all of this work is completed. Keep in mind, you’ll also need to be qualified for the full loan amount which is based on the purchase price plus the additional cost of repairs. Once the loan is approved, you will go to closing like you normally would. The amount that will be needed to do all of these repairs or improvements will be placed into an escrow account held by the lender. As the work is being completed, there will be draws from the account to pay the contractor.

Many buyers are not aware that FHA & HUD have a special $100 down mortgage program, mainly because this is a specialty program. In fact very few lenders and banks specialize in and offer the HUD 100 down program.

The property must be a HUD owned home. Basically a HUD home is a home that was foreclosed on and had a FHA-insured mortgage. HUD pays off the losses of the lender and takes the home back to sell and recoup their losses. It is then offered for sale at market value, based on a recent AS-IS appraisal, meaning, and the market value in its current condition. If you find a HUD home you like, a HUD registered realtor is needed to help set up a showing and to make a bid. Also, the buyer will still need to pay earnest money(deposit) for the home as well.

The benefits of the HUD $100 down home loan.

Wright Mortgage works with numerous FHA lenders that offer these $100 Down HUD REO