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Pay Off Your Mortgage Early: Easy Tricks Anyone Can Use

December 7th, 2018

There are two ways to own your home. Either you can pay cash upfront or you can pay little by little, year after year. For most us, monthly mortgage payments are really the only feasible option. Nonetheless, there are a few simple strategies you can put into place now and pay off your mortgage early.

Why Pay Off Your Home Mortgage Early?

When you pay off your home loan faster, you end up paying less for your home than if you were to pay the minimum required payment for the term of the loan. Paying off your house early will literally save you thousands, tens of thousands of dollars and possibly more, over time. Consider the following hypothetical example.

Let’s say you get a $300,000 home loan based on a 30-year term and at a fixed rate of 4.46% (current average APR as of 10/1/2019). If you were to pay the minimum, your monthly mortgage payment would be $1,512.93 every month for 30 years. However, by the time you pay your house off, you would not have paid $300,000 for your home but significantly more, in fact, almost double.

Home Loan                   APR                      Term                   Interest Paid             Total Paid

$300,000 4.46% (fixed) 30 years $244,656 $544,656*

* For simplicity of calculations, we did not include insurance, PMI, property taxes, or any closing costs associated with buying a house.

In this example, we can see that the amount paid in interest is nearly equal to the original home loan. But what can you do? Many of us do not have the $300,000 to buy a house outright. Luckily, here are some simple tricks you could use to knock years off your mortgage while saving you a ton of money in the process.

Set up Bi-weekly Mortgage Payments

This strategy could reduce a 30-year mortgage to 25 years and save you tens of thousands of dollars in the process. Essentially, you will take your monthly mortgage payment (including taxes and insurance), divide that in two, and then pay it every two weeks rather than once a month. In effect, this strategy will have you make the equivalent of 13 monthly payments per calendar year instead of 12. The result is significant as you can see below.

If we were to use our $300,000 mortgage example from above and apply a biweekly payment of $765.47 (which is half the mortgage payment) instead of the full monthly payment of $1,512.93, this would be the result:

Home Loan                      APR                      Term                   Interest Paid             Total Paid

$300,000 4.46% (fixed) 25 years $201,820.63 $501,820.63

Not only do you reduce your mortgage by 5 years but also you end up saving $42,835.37 in the process. However, you should check with your lender to see if they accept bi-weekly payments without charging a fee before implementing this strategy. If they do charge a fee, this may not be the best tactic to use to reduce your mortgage and you should possibly look to one of the other strategies below.

Refinance Your Mortgage

This strategy is highly relative to your situation. If you have a high-interest rate but you have been in your home for a few years and have built up some equity, you might want to consider refinancing your mortgage before interest rates go up. Even a 1% decrease in your APR can save you a considerable sum of money. Alternatively, if you feel financially capable to handle a larger mortgage payment, a 15-year mortgage over a 30-year would save you tens of thousands of dollars. Again, using our hypothetical example from above, we get these results:

Home Loan                   APR                      Term                   Interest Paid             Total Paid

$300,000 4.46% (fixed) 15 years $111,993 $411,993

Typically, with a 15-year home loan the APR is lower than a 30-year term; however, even with keeping the APR the same we can still see that the difference in interest is substantial. Not only would you be paying $132,663 less in interest but also you would have effectively eliminated 15 years of paying on a mortgage. However, your monthly mortgage would have also increased to $2,289.

A Little Extra Goes a Long Way

You may think that little amounts don’t count for much in the larger picture of a 30-year home loan; such as the money you spend on your morning cup of coffee. However, what if I tell you that you could shave off years from your home loan by skipping your coffee and putting that money toward your mortgage. Even a hundred extra bucks each month could save you thousands of dollars in interest payments.

Let’s say you didn’t buy your morning cup of coffee, and instead saved that $5 to put toward your mortgage (in this hypothetical situation, we are estimating that a morning cup of coffee is more than just drip coffee and with a tip should equal to about five dollars). At $5 a day, we are looking at an additional $100 month that could be going toward your mortgage. Again, referring back to our hypothetical situation of a $300,000 home loan but adding an additional $100 a month against your mortgage we would get this as our results:

Home Loan                  APR                      Term                   Interest Paid             Total Paid

$300,000 4.46% (fixed) 26yrs 5 months $211,016 $511,016

In this scenario, we have not only effectively knocked off a few years of your mortgage payments, but also reduced what you would be paying in interest by $33,640. Don’t worry, you can keep drinking your coffee, however, the main takeaway is that a little extra towards your home loan can go a long way.

Monetary Windfalls

The main strategy for those wanting to pay off their mortgage early is to focus on reducing the overall principal of their home loan as fast as possible. Monetary windfalls are any form of extra money that comes your way and is unplanned for. This could include things like gifts, bonuses at work, overtime, inheritance, tax refunds, and lottery winnings, among others.

As we saw in the prior example that even paying an extra $100 a month, or $1,200 a year, you can reduce your mortgage payment by years. Just imagine how many years you could reduce your mortgage by if you were to start putting all your extra money against your home loan.

Speak to Your Lender

Make sure you speak with your mortgage lender about your intentions. You don’t want to begin a strategy to pay off your mortgage early only to find out that your lender has penalties for early payments. Also, some lenders may only allow extra payments to be made within a specific timeframe. You should also make it clear that when you are applying an additional payment that it needs to go against the principal of your home loan, and not towards any future mortgage payment.

Take Time to Build Your Strategy

Paying off your mortgage early is all about having the right strategy. Take your time to explore your options and pursue the strategy that best fits your situation.

This article was written by Jeff Anttila at San Diego Redfin, click HERE for more information.

Good News for Buyers as CA Conventional, FHA and VA Loan Limits Increased Effective Immediately!

December 1st, 2018

There is good news for home buyers as Fannie Mae, the VA and FHA just increased their California borrowing loan limits effective as of November 30th 2018. These increases will help more buyers purchase a home with better financing options. For example, a conventional buyer can now purchase a home up to $500,000 with only 3% down and No PMI. A buyer in San Diego can now purchase a home up to $725k with only 5% down and No PMI with a conventional jumbo loan.​ Check out the rest of the new financing options available for buyers below.

Increased Loan Limits for Conventional Home Purchase Programs

Fannie Mae increased their CA conventional loan limit from $453,100 up to $484,350.

This means a buyer can now purchase a home up to $500,000 with only 3% down, which is the minimum conventional down payment requirement.

In higher cost markets like LA, Orange Co and SF etc, the conventional jumbo loan limit was increased from $679,650 up to to a maximum of $726,525. This means a buyer can now purchase a home up to $765,000 with only 5% down, which is the the minimum conventional jumbo down payment requirement.

In San Diego county, the conventional jumbo loan limit was increased from $649,750 up to $690,000. This means a buyer in San Diego can now purchase a home up to $725,000 with only 5% down.

In Riverside and San Bernardino counties, where loan limits always seem to be too low for some buyers, their conventional loan limit was increased from $453,100 up to $484,350. This means a buyer can now purchase a home up to $500,000 with the minimum conventional down payment requirement of only 3%.

Each county in California has their own specific loan limit. You can check your new county loan limit HERE for Conventional and Conventional Jumbo financing.

Overall, this is good news for buyers who require higher loan amounts to finance their home purchase.

Buy a Home up to $500,000 with Only 3% Down Conventional Financing and No Monthly PMI.

With the new higher conventional loan limits, a buyer can now purchase a home up to $500,000 with only 3% down.

Buyers also have the option to eliminate the monthly mortgage insurance “PMI” from their monthly mortgage payment.

All of the down payment can be gifted too, so this is a great option for buyers to purchase right away if they do not have the down payment saved up yet.

Click HERE for more information on how to qualify for the conventional 3% down program with No PMI, there is a Q&A section included too.

Buy a Home up to $765,000 with Only 5% Down Conventional Jumbo Financing with No Monthly PMI.

With conventional jumbo financing, a buyer can now purchase a home up to $765k with only 5% down.

Buyers also have the option to eliminate the monthly mortgage insurance “PMI” from their monthly mortgage payment.

Buyers in San Diego County can purchase a home up to $725,000 with only 5% down and No PMI.

Buyers in LA County, Orange County and SF County can purchase a home up to $765,000 with only 5% down and No PMI.

All of the down payment can be gifted too, so this is a great option for buyers to purchase right away if they do not have the down payment saved up yet.

Click HERE for more information on how to qualify for the conventional Jumbo 5% down program with No PMI, there is a Q&A section included too.

VA Loan Limits Increased Effective Immediately

The VA also increased their loan limits effective immediately too.

VA buyers qualify for zero down financing up to their county loan limit.

For example, a VA buyer can get zero down financing in San Diego up to $684,350.

VA buyers in LA county and Orange County can get zero down financing up to $726,525.

VA buyers in Riverside and San Bernardino counties can get zero down financing up to $484,350.

You can check your county loan limit HERE.

If a buyer needs to purchase a home price higher than the VA zero down county loan limit, the VA uses a formula for calculating the maximum loan amount financed. For example, on a $750k purchase in San Diego, the down payment due is only $15,000.

We can also give a VA buyer a 3% lender credit to cover ALL their closing costs. This means a VA buyer can purchase a home with No down payment due or closing costs either, and this also includes a credit for the appraisal fee.

FHA Loan Limits Increased Effective Immediately

The FHA also increased their loan limits effective immediately.

The FHA offers financing based on county loan limits. The FHA increased their CA conforming loan limit from $453,100 to $484,350.

This means a buyer can purchase a home up to $500,000 with the minimum FHA down payment requirement of only 3.5%.

In higher cost markets like LA, Orange Co and SF etc, the FHA jumbo loan limit was increased up to a maximum of $726,525, up from $679,650.  This means a FHA buyer can now purchase a home up to $750,000 with the minimum FHA jumbo down payment requirement of only 3.5%.

In San Diego county, the FHA jumbo loan limit was increased from $649,750 up to $690,000. This means a buyer in San Diego can now purchase a home up to $715,000 with only 3.5% down.

In Riverside and San Bernardino counties, the FHA loan limit was increased from $453,100 up to $484,350. This means a buyer can now purchase a home up to $500,000 with the minimum FHA down payment requirement of only 3.5%.

You can check your county loan limit HERE.

Down Payment and Closing Cost Assistance For Buyers 

If you know of a buyer that does not have the minimum down payment to qualify for any of these loan programs above, we have a terrific program available for buyers that combines either a Conventional and CalHFA loan or a FHA and CalHFA loan.

Buyers can purchase a home up to $700k in certain counties with No down payment and No closing costs.

CalHFA (California Housing Finance Agency) offers down payment and closing cost assistance loan programs to help first time buyers purchase a home. A first time buyer is defined as someone who has not owned a home in 3 years.

This program is available with both conventional and FHA financing. CalHFA gives buyers a small 2nd mortgage up to 3.5% to help cover the minimum down payment due with conventional and FHA financing.

If buyers don’t have enough funds for their closing costs, CalHFA will give buyers an additional small 3rd mortgage of up to 4% to help cover ALL their closing costs.  Many buyers using this program only have to pay the upfront appraisal fee out of pocket.

Payments on the CalHFA 2nd or 3rd mortgage loans are deferred for the life of the first mortgage. The terms are the same as the first mortgage. There are no payments due unless you sell or refinance.

Click HERE for more information on this program and examples of how you can purchase a $450k or $550k home with zero down and no closing costs.

If you have questions about any loan program or you would like to get approved for one of these options above, please call me at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on important industry news or any new loan programs that come out, please join my Facebook page .

Buy a Home With Zero Down and No Closing Costs With a Conventional CalHFA Loan!

October 18th, 2018

The #1 reason buyers state for not being able to buy a home is lack of funds for the down payment. We have a terrific program available to help buyers purchase a home with a 3% down Conventional loan combined with a CalHFA loan, which covers the down payment and ALL the closing costs. This program is available up to a purchase price of $705,000 in some counties. Check out how to qualify.

Down Payment and Closing Cost Assistance For First Time Buyers 

Not enough buyers know there are programs available to help them with the down payment and closing costs.

CalHFA (California Housing Finance Agency) offers a down payment and closing cost assistance loan program to help first time buyers purchase a home. A first time buyer is defined as someone who has not owned a home in 3 years.

This program is available with both conventional and FHA financing. CalHFA gives buyers a small 2nd mortgage up to 3.5% to help cover the minimum down payment due with conventional and FHA financing.

If buyers don’t have enough funds for their closing costs, CalHFA will give buyers an additional small 3rd mortgage of either 3% or 4% to help cover all their closing costs.  Many buyers using this program only have to pay the upfront appraisal fee out of pocket.

Payments on the CalHFA 2nd or 3rd mortgage loans are deferred for the life of the first mortgage. The terms are the same as the first mortgage. There are no payments due unless you sell or refinance.

How to Purchase a $450k Home With Zero Down and No Closing Costs 

Check out this example of a $450,000 purchase we helped fund recently for a client. The buyer qualified for a 3% down conventional loan. They received a 3% CalHFA 2nd mortgage to cover the 3% down payment.

They received an additional CalHFA 3rd mortgage of 3% to help cover all their closing costs.

The buyers were able to purchase a home they loved, and the only fee due out of pocket was the upfront appraisal fee.

Here is a summary of the loan terms.

  • Purchase price $450k.
  • 3% minimum down payment required ($13,500).
  • Buyer qualified for a 3% 2nd mortgage CalHFA loan to cover the 3% down payment.
  • Buyer qualified for a 3% CalHFA 3rd mortgage to cover all the closing costs.
  • hey got a rate of 5.75% on a conventional 30 year fixed, the monthly principal and interest payment is $2,534.
  • Property taxes and homeowner’s insurance were $533.
  • The monthly mortgage insurance is $94.
  • Their total monthly mortgage payment is $3,161.
  • The appraisal fee was the only cost out of pocket to buy the home.

How to Purchase a $550k Home With Zero Down and No Closing Costs

Here is another example of a purchase we recently funded for a client. With a purchase of $550k, this meant the loan amount borrowed was >$453,100, so this required a jumbo loan. The minimum down payment for a FHA jumbo loan is 3.5%.

The buyers received a 3.5% CalHFA 2nd mortgage to help cover the 3.5% down payment.

They received an additional 3% CalHFA 3rd mortgage to help cover all their closing costs.

Here is a summary of the loan terms.

  • Purchase price $550k.
  • 3.5% minimum down payment required ($19,250).
  • Buyer qualified for a 3.5% 2nd mortgage CalHFA loan to help cover the 3.5% down payment.
  • Buyer qualified for a 3% CalHFA 3rd mortgage to cover all the closing costs.
  • They got a rate of 5.5% on a FHA 30 year fixed, the monthly principal and interest payment is $3,066.
  • Property taxes and homeowner’s insurance are $645.
  • The monthly mortgage insurance was $375.
  • Their total monthly mortgage payment was $4,086.
  • The appraisal fee was the only cost out of pocket to buy the home.

Frequently Asked Questions on This Program

Here are the most frequently asked questions that buyers and real estate agents have in regards to this program.

1.What is the maximum loan amount I can borrow?

You can borrow up to your county loan limit with this program. In San Diego, a buyer can finance a conventional or FHA jumbo loan up to $649,650, and $679,650 in Orange County and LA.

2.What can I borrow up to with conventional financing?

If you need to finance up to $453,100 with conventional financing, the minumum down payment is 3%. You can get a maximum CalHFA 2nd mortgage loan for 3% to cover all of the 3% down payment.

If you need to finance >$453,100 with conventional, the minimum down payment is 5% for a conventional jumbo loan. You can get a maximum CalHFA 2nd mortgage loan for a maximum of 3.5% which will be applied towards the 5% down payment, so now you just need to cover the remaining 1.5% down payment.

3.What can I borrow up to with FHA financing?

The minimum down payment with FHA is only 3.5% and this includes FHA jumbo financing. As you can borrow a 2nd mortgage loan from CalHFA for 3.5%, this will cover ALL of the down 3.5% down payment requirement with FHA.

4.What credit score is required to qualify for this program?

We only require a 640 credit score to qualify. Please note, the higher the credit score the lower the monthly mortgage insurance will be on the first mortgage loan loan.

5.Is this program for first time buyers only?

This program is for first time buyers only. A first time buyer is defined as someone who has not owned a home in 3 years.

6.Are there any payments due on the CalHFA 2nd or 3rd mortgage loans?

No, the payments are deferred for the life of the first mortgage. There are no payments due unless you sell or refinance.  The terms mirrors that of the 1st mortgage.

7.If I can cover my own closing costs, do I get a lower rate on my mortgage?

Yes, if you only need a CalHFA 2nd mortgage loan to cover the down payment, but you can cover all your own closing costs, you can get a lower rate of 5.125% on the conventional 30 year fixed rate mortgage. Compare this to a rate of 5.75% if you need an additional 3% CalHFA 3rd mortgage loan to cover your closing costs.

8.Are co-signers allowed on this program?

Yes co-signers are allowed on this program.

9. Are there income limits for this program?

Yes there are income limits, but they are pretty high.  For example, the San Diego income limit is $157,000, Riverside and LA is $128,700, Orange county is $174,200. Each county has it’s own county income limit. Contact me for more details if you need to know your county income limit.

10.Are there purchase price limits for this program?

The maximum purchase price for this program is $705k.

11.Can I use this program on 2nd homes or Investment Properties?

No, this program is for Primary Residences only.

12.Do condos also qualify for this program?

Yes, this program is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes.

A Great Opportunity For Buyers

This program presents a great opportunity for buyers who want to purchase a home but don’t have the full down payment saved up yet.  There are also buyers who assume because they don’t have funds for closing costs, they cannot buy a home.

This program will help take care of both of these issues and allow buyers to fulfill their dream of owning a home.  Spread the word to your family and friends that this program is available to them too.

Feel free to contact me directly at 858-442-2686 if you have any questions about this program or getting approved for financing.

I look forward to chatting soon.

Mortgage Rates Spike to 5%: Why Rates Will Continue To Increase Higher

October 7th, 2018

Mortgage Rates have spiked up “.3%” in the past 3 weeks and now sit at 5% on a conventional 30-year fixed with most lenders. It is important that buyers and homeowners looking to refinance understand that rates are going to continue moving higher due to rising inflation concerns in the economy. If rates continue to increase another .5% higher from where they are today, a buyer who can afford to purchase $600,000 today, will only be able to afford $567,500 using the same monthly payment, which is a loss of 5% in purchasing power. If rates continue to increase 1% from today, a buyer who can afford to purchase $600,000 today, will only be able to afford $535,000 using the same monthly payment. Here is why rates will continue to increase.

Why Interest Rates Will Continue to Increase

It has been a rough month for rates. As you can see below, the 10-Year Treasury has spiked from 2.85% around the 10th of September to 3.22% as of this week, an increase of “.37%”.

The 30-year mortgage rate follows the direction of the 10-Year Treasury. Mortgage rates have increased roughly “.3%” during this period.

Here is why rates are going to continue to increase.

Due to the recent slew of very strong economic data, the bond market is going through a correction phase right now, that can be summed up as “phew, The Federal Reserve has inflation covered” to “The Federal Reserve better wake up and get it under control before it’s too late”.

Simply put: these past 2 months of very strong economic data finally put us in a situation where market participants are within their rights to wonder if the Federal Reserve is behind the curve and did not raise rates fast enough and if the economy actually could grow/inflate faster than expected, so the bond market is repricing rates accordingly and fast.

Check out the chart below. The 30-Year Treasury is now breaking out of it’s multi decade lows at 3.34%. This is a significant trading level that dates back to 1987.

Once these trading levels are broken, rates will usually continue increasing higher until they find a new level of support. We just don’t know where that next level of support is, it could be “.25% – .5%” or even higher from current levels. .

If you know of any buyers who have been putting off a home purchase, or any homeowners who have been putting off their refinance, let them know their interest rate is probably going to increase as each month goes by.

If you have the opportunity to lock in a rate for a home purchase or a refinance, you should LOCK in the rate immediately.

The Impact of Higher Rates on Buyer Purchasing Power

A question that many buyers ask is, “If rates rise how will this affect my affordability?”

Here is a chart that all homebuyers should review, that shows the “impact of rising rates on a buyers purchasing power or affordability”.

As you can see, when rates increase by 1%, a buyer will lose 10.75% in purchasing power.

This means, if a buyer can afford to purchase $600k today, but rates increase by 1%, they will only be able to afford $535,500 using the same monthly payment.

If a buyer can afford to purchase $800k today, but rates increase by 1%, they will only be able to afford $714,000 using the same monthly payment.

If a buyer can afford to purchase $1,000,000 today, but rates increase by 1%, they will only be able to afford $892,500 using the same monthly payment.

The Cost of Borrowing Money is Still Good Historically

When compared to rates historically, current rates are still good. This chart below puts current mortgage rates in perspective.

Did you know the average 30 year fixed mortgage rate over the past 40 years is roughly 8.7%, and 6.29% over the past decade!

Compare this to current rates around 5%. As rates are going to continue to increase, current rates are still attractive to anyone looking to borrow money to finance a home.

Close your Transaction Faster

As we approach the winter months, there are going to be lots of sellers who will be very motivated to sell their homes. Closing a transaction faster is a way to entice the seller to accept your offer and negotiate a lower price.

We had a buyer get an offer accepted last week who was also able to negotiate a price reduction, as we told the seller we can close escrow in 10 days. They accepted a lower purchase price because they were going to get their seller proceeds faster. If the sellers are not receiving any other offers, give this strategy a shot.

My company Citywide Financial Corp is closing Purchase Transactions in 15 days or less. We can close in 10-12 days if you need a special rushed closing.

We are also giving clients a lender credit to cover their appraisal fee at closing. Contact me for more details.

Tips for Homebuyers

It is still a good time to buy a home. I tell my clients not to focus on the volatility in rates or home prices, but to find a home that you love and that you can afford for your family.

We are entering the winter months soon, and many of the sellers will be motivated to sell their homes. There are already price reductions happening all over local markets, as sellers are starting to reprice their homes to match the reality of the current market we are in.

It is a good time to get out there an put offers in on homes. If you find a very motivated seller, you may be able to pick up a good deal on a home.

If you have any questions about getting approved for financing, feel free to contact me directly at 858-442-2686. I look forward to chatting soon!

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

 

Freddie Mac Introduces New Conventional 3% Down HomeOne Program With No Monthly PMI

August 24th, 2018

Freddie Mac just introduced a NEW Conventional 3% Down Program for First-Time Buyers called HomeOne. This new program is especially aimed at helping more Millennial buyers qualify for home-ownership. With it’s low down payment requirement, No income level restrictions, and the ability to remove the monthly mortgage insurance “PMI” from the mortgage payment, this program will help more buyers qualify to purchase a home. Check out how to qualify.

The Benefits of a 3% Down Mortgage With No PMI

The conventional 3% down mortgage is helping many buyers obtain home ownership, who may have not been able to otherwise.

I hear all the time from buyers who tell me they assumed they needed to save up 20% to buy a home without monthly mortgage insurance. They are excited when I tell them they only need 3% down to remove the monthly PMI.

Being able to remove the monthly PMI is helping buyers obtain a lower monthly payment, and is helping alleviate the fears of having to take a loan with monthly mortgage insurance.

This program also allows ALL of the down payment and closing costs to be gifted, so buyers can reach out for a gift instead of having to wait and save up the full 3% down payment.

This conventional program is a great option for buyers in complexes that are NON FHA approved, so now you have more inventory to choose from and agents have more homes to show them.

This conventional program will help some buyers afford to purchase a single family home instead of a FHA condo, as it frees up having to pay FHA monthly mortgage insurance and HOA dues, which can both amount to roughly $600-$700 a month on a typical condo. This will open up more inventory to review.

If you know someone who is postponing a purchase to save more money, let them know about this program.

Compare The Savings on a $465k Home Purchase with No Monthly PMI, vs a Mortgage With Monthly PMI.

Let’s compare the conventional 3% down mortgage with No PMI to other low down payment options, which require monthly mortgage insurance to purchase a home.

To calculate property taxes, we will also use 1.2% of the purchase price, so $465 a month, and $60 a month for a homeowner’s insurance policy, so we can calculate what the total monthly PITI (principal and interest, taxes and insurance) payment is for each scenario.

Option #1. The figures on the first column is a conventional 3% down loan with No PMI. The approximate rate on a conventional 30 year fixed with No PMI is 4.875%. The total monthly PITI payment is $2,911.

Option #2. The figures on the second column, is a conventional 3% down loan with PMI. The rate on a conventional 30 year fixed with monthly mortgage insurance is lower at 4.625%, but there is also monthly mortgage insurance of $263 that is included in the monthly mortgage payment. The total monthly PITI payment is $3,107.

Option #3. The figures on the third column, is a FHA 3.5% down loan with monthly mortgage insurance. The rate on a FHA 30 year fixed is 4.375%, but there is also monthly FHA mortgage insurance of $315. There is also a FHA funding fee of 1.75% due on all FHA loans, this fee of $7,852 was added to the loan amount in this example. The total FHA monthly PITI payment is $3,120.

As you can below, option #1 with the conventional loan and No PMI will help you obtain the lowest monthly payment and save you the most money.

It will save you $195 a month over the conventional loan with PMI, and saves $208 over the FHA loan.

Over the next 15 years the conventional loan with no PMI will save $15,604 over the conventional loan with PMI, and $27,693 over the FHA loan.

In Summary. Instead of taking the conventional or FHA loan option and paying the mortgage insurance each month, the conventional loan with No PMI will give the buyer the lowest monthly payment.

Important to remember with FHA, if you put down less than 10% with FHA, you have to pay the monthly mortgage insurance for the life of the loan. Click HERE for a summary of the current FHA mortgage insurance rules.

Frequently Asked Questions for the 3% Mortgage

Here are the most frequently asked questions that buyers and real estate agents have in regards to the conventional 3% down No PMI loan option.

1. What is the maximum loan amount I can borrow with 3% down?

The maximum loan with 3% down is $453,100, which is the conventional loan limit.

If you need to finance over $453,100, the minimum down payment is only 5%. For example, in San Diego a buyer can finance a 5% down conventional jumbo loan up to $649,650 with No PMI. In Orange County and Los Angeles County a buyer can finance a 5% down conventional jumbo loan up to $679,650 with No PMI. Click HERE for more information.

2. Can I receive the 3% down payment as a gift?

Yes, all of the 3% down payment can be gifted. Closing costs and reserves can also be gifted if needed.

3. What credit score is required to qualify for this program?

We only require a 620 credit score to qualify for conventional financing. You need a score 700 to remove the PMI. Please note, the lower the credit scores the higher the interest rate will be.

4. How do you eliminate the monthly mortgage insurance “PMI’ option on this program?

All you have to do is take a slightly higher interest rate than normal, say from 4.625% to 4.875%, and we use a lender credit with the higher interest rate to eliminate the PMI from the mortgage payment. This is also known as lender paid mortgage insurance.

5.  Can I get 3% down with No PMI on 2nd homes or Investment Properties?

No, the 3% down is for Primary Residences only. On 2nd homes, you only have to put down 10% to obtain the No PMI payment option.

6. Are co signers allowed on this program?

Yes co-signers are allowed on this program, the co-signer does NOT have to reside in the home.

7. Is this program for first time buyers only?

If there is one buyer they have to be a first time buyer. If there are 2 buyers, only one of them has to be a first time buyer.

8. Are there income limits for this program?

No, there are NO income restrictions with this program, so any buyer can qualify for this program regardless of income.

9. Do condos qualify for this program?

Yes, you can also purchase a condo using this program with only 3% down and get the No PMI option.

10. Can I use an adjustable-rate mortgage with the 3% down mortgage?

No, the 3% down mortgage requires a 30-year fixed rate mortgage only.

11. What is the maximum number of units for a home with the 3% down payment mortgage?

The 3 percent down mortgage is for single-unit homes only. This includes single-family detached homes and single-family attached homes such as condominiums and town homes. 2-unit homes, 3-unit homes, and 4-unit homes cannot be financed with the conventional 3% down mortgage.

12. What if i put down 5% or 10%, will I get a lower rate?

Yes, if you put down 5% or 10% for the down payment, you will get a lower interest rate. The larger the down payment, the lower the interest rate you will get with conventional financing.

Refinance Tip For homeowners – Refinance up to 97% of Your Property Value with No Monthly PMI

This 3% down conventional program with No PMI also works the same for refinances, as homeowners with limited equity can now refinance up to 97% of their home without having to pay any monthly mortgage insurance.

For example, many homeowners who bought a home over the past 12-24 months using a FHA loan and a minimum down payment of 3.5%, have probably gained at least 8%-10% equity due to appreciation.

This 3% down conventional loan program is a great option to help them refinance out of their current loan with mortgage insurance, and into this conventional loan option with No PMI, so they can save some extra money and get a lower monthly payment.

We have helped many of our clients who bought over the past few years with a FHA loan refinance into conventional loan with No monthly PMI, and save them on average $200-$300 a month.

If you would like to get approved for this program, or you have any questions about any of this information above, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. Please join my Facebook page if you would like to be updated faster on any new loan program changes or industry news.

Fannie Mae Makes it Easier to Buy a Condo Investment Property – No More 50% Owner Occupied Ratios Required

July 1st, 2018

Fannie Mae has finally eased up their qualifying rules for buyers looking to purchase an investment property condo with conventional financing. Prior to June 23rd, if a complex had <50% owner occupied ratios, and a buyer was trying to purchase a condo as an investment property with conventional financing, the loan was automatically declined. Now as long as a buyer puts down 25% to purchase an investment property, 50% owner occupied ratios are no longer required to qualify for conventional financing. This is going to open up a lot more opportunities for investors to purchase condos in complexes that exist all around California that do not have 50% owner occupied ratios.

Tips How to Qualify to Purchase a Condo in a Complex with Less than 50% Owner Occupied Ratios

1. To qualify to purchase a condo in a complex that has <50% owner occupied ratios, the buyer needs to put down a minimum of 25%.

2. If a buyer does NOT put down 25%, Fannie Mae’s underwriting system will require a Full Review of the complex and the owner occupied ratios will be required.

3. Make sure the buyers loan application with the property address is ran through Fannie Mae’s conventional underwriting system (DU) and receives a “Limited Review Approval”. Then the owner occupied ratios are not required.

4. Important. Make sure you work with a lender that follows this new rule. There will be some lenders that will still require the owner occupied ratios regardless of down payment and even if Fannie Mae’s underwriting system does not require it. This is called a Lender Overlay.

5. Realtors, you probably already know lots of complexes in your market that don’t have 50% owner occupied ratios, which meant your buyers could not purchase investment properties there with conventional financing. A good idea is to reach out to these buyers now and let them know.

Fannie Mae made 2 additional changes that will help more investors and buyers purchase condos

1. Single-Entity Ownership has increased from 10% to 20% for projects with 21 units and more, which means a single investor can own up to 4 units in a 20 unit complex.

2. Project review requirements for 2-4 unit projects are now waived, so no more owner occupied ratio or budge requirements etc for a 3-4 unit property.

Buying an Investment Property is a Great Investment

Buying an investment property is one of the best financial investments you can make.

With annual rents continuing to increase on average 3% – 4% in many parts of California, and rental vacancy rates at 30-year lows in most parts of California, buying an investment property is a great source of additional income for the future.

As you can see below, just a 4% increase in annual rent can increase monthly rent of $1,500 up to $1,974 in just 8 years, an increase of $474. 

This is a 32% profit in rental income for an investment property owner in only 8 years.

Interest rates are not far of multi decade lows, so you can still get a low long term fixed rate on an investment property.

4 Loan Programs to Help you Purchase an Investment Property

Here are the best 4 mortgage programs that buyers can use to finance and purchase an investment property.

1. Tips for Buying an Investment Property with Conventional Financing

The majority of buyers and investors will use conventional financing to purchase an investment property.

Conventional financing allows you to obtain the lowest long term fixed rates, so their monthly return on rental income is highest.

The larger the down payment, the lower the rate with conventional financing.

The minimum down payment with conventional financing to purchase a single family residence or condo is 15%. You can finance up to a loan amount of $649,650 in San Diego.

The minimum down payment to purchase a 2 unit property is 20%, and 25% for a 4 unit.

A buyer is allowed to finance up to the following loan amounts for a 2-4 unit property.

  • You can finance up to a loan amount of $870,225 on a 2 unit property.
  • You can finance up to a loan amount of $1,051,875 on a 3 unit property.
  • You can finance up to a loan amount of $1,307,175 on a 4 unit property.

Please note, as listed above, when purchasing an investment property condo and putting down less than 25%, conventional financing will require 50% of the units to be owner occupied.  *When purchasing a condo in a complex as a primary residence, there are NO owner occupied ratio requirements.

Another rule to be careful with when using Conventional financing, gift funds are not allowed on investment properties.

2. FHA Buyers Can Buy a 3-4 Unit With Only 3.5% Down FHA Financing

Did you know the FHA allows you to purchase a 2-4 unit home with FHA financing and you only have to put down 3.5% to qualify?

FHA financing is for owner occupied financing, so you would live in one unit and rent out the other 1-3 units.

You can also use the rental income from the other 1-3 units to qualify for a loan.

This is a great way for homebuyers to start out as a real estate investor.

The FHA allows you to finance up to the following loan amounts for a 2-4 unit property.

  • You can finance up to a loan amount of $870,225 on a 2 unit property.
  • You can finance up to a loan amount of $1,051,875 on a 3 unit property.
  • You can finance up to a loan amount of $1,307,175 on a 4 unit property.

3. VA Buyers Can Buy a 3-4 unit with Zero Down VA Financing

Did you know the VA allows their military buyers to purchase a 2-4 unit home with zero down VA financing?

VA financing is for owner occupied financing, so the VA borrower would live in one unit and rent out the other 1-3 units.

You can also use the rental income from the other 1-3 units to qualify for a loan.

This is also a great way for VA homebuyers to start out as a real estate investor.

A VA homebuyer is allowed to finance up to the following loan amounts for a 2-4 unit property.

  • You can finance up to a loan amount of $870,225 on a 2 unit property.
  • You can finance up to a loan amount of $1,051,875  on a 3 unit property.
  • You can finance up to a loan amount of $1,307,175 on a 4 unit property.

4. New Bank Statement and Stated Financing  Programs Available for buyers

There are lots of new financing options available for buyers who cannot qualify for the 3 traditional financing options above.

We have different bank statement and stated programs for self employed and W2 buyers who cannot verify their income on their tax returns.

For example, if you need financing to purchase an investment property and rehab it, we can help you with the financing.

I also have access to several private money sources that will allow you to finance up to 90% of the purchase price, and then also give you the additional cash to rehab the property. The r are also some of the lowest in the industry.

Tips for Investment Property Buyers

It is a great time to purchase an investment property. With rates still near mutli decade lows, the cost of borrowing money to finance a home is still historically very low.

With rising rents and low rental vacancy rates, buying an investment property is a great long term investment.

Buying an investment property is also a great source of additional income for the future.

There are the tax benefits too of course, as the interest on the mortgage is tax deductible, and the property taxes and any repairs are also tax deductible.

If you have any questions about any of this information above, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon!

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

Bi-Weekly Mortgage Payments Will Payoff a 30-Year Mortgage in Only 24 Years

June 8th, 2018

The Bi-Weekly Mortgage Payment Plan is a convenient mortgage budgeting plan that can help you save thousands of dollars in interest and pay off your 30-Year Mortgage in only 24 Years. This also lowers the overall effective interest rate paid on the mortgage, so if your rate is around 5%, your effective payback interest rate will be around 4% when using the Bi-Weekly mortgage plan. The Bi-Weekly mortgage payment plan is easy to set up, as there are 3 different ways to make payments that will accomplish the same result.

Typical Mortgage = 12 Payments Per Year

The typical mortgage asks for one payment per month, which equals 12 payments per year. With a 30-year fixed rate mortgage, therefore, 360 payments are required to pay the loan in full.

Each mortgage payment is split into two parts — a principal portion and an interest portion. The principal portion is applied to the amount that you owe the bank.

This diminishes your remaining loan balance. The interest portion is your cost for borrowing from the bank.

As your loan moves toward maturity, the balance between your mortgage payments’ principal-and-interest shifts. In the early years, a significant portion of your payment is comprised of interest and just a small part goes to paying down your balance.

It’s not until later in your loan’s life cycle does the principal portion of the payment start to grow.

Bi-Weekly Mortgage Payments = 13 Payments Per Year

A bi-weekly mortgage payment program is meant to short-circuit your loan’s amortization schedule. Check out th example above.

Instead of taking 12 payments per year, the bi-weekly payment plan asks for one payment every two weeks, which adds up to 13 payments per year.

Except that you can’t make 13 payments per year on your mortgage — that’s not how a mortgage works.

With a mortgage, you pay a certain amount of interest on an annual basis and that amount is covered in your first twelve payments.

The 13th payment has to go somewhere, though, so it gets applied to your principal balance; the amount that you still owe to the bank.

And, this is how a bi-weekly payment plan works. With each “13th payment”, your loan balance is reduced by the entire amount of the paymentYou reach your loan’s payoff date sooner.

At today’s mortgage rates, bi-weekly payments shorten your loan term by at least 6 years. Here is an example above of a Bi-weekly payment plan on a $200k mortgage.

In this example the homeowner will save over 6 years off their mortgage and a total of $68,284 in interest using this payment plan, compared to making regular payments over a 30 year term.

This also lowers the over all effective interest rate paid on the mortgage. If the rate on your mortgage is 5%, your effective payback interest rate will be around 4% using the bi-weekly mortgage plan.

2 Other Ways to Make Bi-Weekly Payments

Bi-weekly payments plans work; there’s no doubt about that. It’s just basic math. There are two other ways you can self-manage your bi-weekly payment plan, so you accomplish the same goal of paying off your mortgage faster.

Here’s how to self-manage:

1. Rather than sending payments to the bank every other week, you can achieve the same result by making your regular mortgage payment once monthly, by adding 1/12 of your regular mortgage payment to your check each month.

For every $1,200 in your mortgage payment, in other words, add $100 to your monthly payment. By sending $1,300 to your lender monthly, you will “overpay” your mortgage by $1,200 annually, which is a 13th payment.

2. The 3rd and final way to accomplish the bi-weekly program, is to just send in one extra monthly payment a year. Some people do this after they get their tax refund.

Or if you earn bonuses and commissions at work, just send the bank one extra payment a year, and you can save 6 years off your mortgage.

Is it Better to Self-Manage Your Mortgage Payments?

One reason to skip the bi-weekly mortgage program is that bi-weekly payments are a contract and once that contracts starts, as a homeowner, you’re obligated to make those 13 payments per year no matter what.

By contrast, with a self-managed payment plan, you never have that obligation. You can choose to skip a month during the holidays, for example, then double-up on payments later on, or not at all. It’s all in your control — not the bank’s.

And, lastly, if you find your bank is charging for it’s bi-weekly mortgage payment program, I would probably say no to that, you can save that money by self managing your payments.

I hope you found these tips helpful. If you have any questions about how to set up a Bi-Weekly payment plan, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon!

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

Own vs Rent: Buy a $650k Home With a $3400 Payment vs Rent for $3400

May 28th, 2018

Many people ask the question, “is it better to own or rent“? A good answer to that question is, “you are paying for housing whether you own or rent, so you should take advantage of the financial benefits of owning a home“. Instead of renting for $3,400 a month, a buyer can purchase a $650,000 home with 20% down for the same monthly payment. Check out the “Own vs Rent 10 year Home Purchase Plan” I shared with a client this week that shows all the financial benefits that come with owning a home, vs renting for $3,400 a month.

Financial Reasons to Buy a Home versus Rent

Here are some of the financial reasons to buy a home instead of rent.

Homeowners get to take advantage of tax benefits and paying down the principal on their loan, whereas renters help pay the landlords loan so he can take advantage of tax benefits and principal payments.

When you own a home it is also a hedge against inflation.  You will get a low fixed rate mortgage and your principal and interest payment will never change. Whereas rent will continue to go up over time with inflation.

Homeowners get to take advantage of the magic of appreciation. Over time the value of a home will increase. If you bought a home anytime over the past 8 years, you have probably made some good appreciation on your home. Compare this to paying rent over the past 8 years.

Compare Owning vs Renting for $3,400 a month

Here is a “Own vs Rent 10 year Home Purchase Plan” I shared with a client this week, that shows the benefits of owning a home with a payment of $3,400 a month, versus renting for the same payment.

You can also review this Own vs Rent report online at https://mcedge.tv/1cb5pl

With a $3,400 payment, the buyers can purchase a $650,000 home with 20% down.

On the left column is the $3,400 in monthly rent.

On the right column, is the $650,000 home purchase with a down payment of 20% with conventional jumbo financing, with an interest rate of 4.625%. The total PITI payment is $3,398 a month, which includes principal and interest, property taxes and homeowners insurance.

As you can see above, the owner will get tax benefits of $923 a month, and pay down principal of $669 on the loan, versus no financial benefits from writing a check for $3,400 in rent every month.

Compare Principal Paid vs Rent Paid over 10 years

In this section of the report, it compares how much rent versus principal is paid over the next 10 years.

The owner will have paid down the principal on the loan by $101,881 over the next 10 years.

Compare this to paying $467,726 in rent over the next 10 years to the landlord.

Compare Net Worth in 10 years

In this section of the report, it compares the net worth after 10 years of owning a home versus renting.

The owner will accumulate a net worth of $455,427 over the next 10 years, by paying down the principal on the loan, tax benefits, and accumulated equity gains due to appreciation on the property.  In this example I used a conservative 3% annual appreciation rate.

There are no financial benefits to paying rent over the next 10 years.

The Impact of Rising Rates on Buyer Purchasing Power

As interest rates have continued to rise recently, a question that many renters and buyers are asking is, “If rates rise how will this affect my affordability?”

Here is a chart that shows the “impact of rising rates on a buyers purchasing power or affordability”.

As you can see below on the chart, if rates just increase by 1%, from current levels of 4.5% to 5.5%, a buyer will lose 10.75% in purchasing power.

This means, if a buyer can afford to purchase $600k today, but rates increase by 1%, they will only be able to afford $535,500 using the same monthly payment.

If a buyer can afford to purchase $800k today, but rates increase by 1%, they will only be able to afford $714,000 using the same monthly payment.

If a buyer can afford to purchase $1,000,000 today, but rates increase by 1%, they will only be able to afford $892,500 using the same monthly payment.

It is still a good time to buy a home

It’s still a good time to purchase a home, especially as the cost of borrowing money with today’s interest rates is still very low historically. The average 30-year fixed rate over the past decade was 6.7% and 8.9% over the past 30 years.

When you crunch the numbers and weigh up all the financial benefits that come with home ownership, and compare it to what you are paying in rent, buying a home is a better financial decision.

It is important that buyers are given all the information they need so they can make an informed decision about buying a home. Buyers love these “Own vs Rent Reports”above, because it shows them all the financial benefits and different figures they need to see when making the decision to purchase a home.

If you would like to review one of these “Rent vs Own Reports” like this example above, please contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

The Extra Cost of Waiting to Buy a Home as Rates and Home Prices Increase

May 11th, 2018

The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if home prices and interest rates were to continue to increase. So far in 2018, both interest rates and home prices have continued to increase. If rates continue to increase 1% higher from where they are today, a buyer who can afford to purchase $800,000 today, will only be able to afford $714,000 using the same monthly payment, which is a loss of 10.75% in purchasing power.

Why Interest Rates Will Continue to Increase

It looks like rates are going to continue to move higher again over the next few months, as the technical trading signals are growing louder and more dangerous.

With every moment that the 10-Year Treasury remains above the 2.95% technical level (see chart below), it is looking likely that rates have turned 2018’s previous ceiling into a floor.

This means the 10-Year Treasury is probably going to increase to the next technical trading level of around 3.35%, which will increase the 30-year mortgage rate another “.30” from current levels. The 30-year mortgage rate follows the direction of the 10-Year Treasury.

This means we are looking at 5% interest rates soon. If you know of any buyers who have been putting off a home purchase, let them know their interest rate is probably going to increase as each month goes by.

The Impact of Higher Rates on Buyer Purchasing Power

A question that many buyers ask is, “If rates rise how will this affect my affordability?”

Here is a good chart that all buyers should review, that shows the “impact of rising rates on a buyers purchasing power or affordability”.

As you can see, if rates just increase by 1%, from current levels of 4.5% to 5.5%, a buyer will lose 10.75% in purchasing power.

This means, if a buyer can afford to purchase $600k today, but rates increase by 1%, they will only be able to afford $535,500 using the same monthly payment.

If a buyer can afford to purchase $800k today, but rates increase by 1%, they will only be able to afford $714,000 using the same monthly payment.

If a buyer can afford to purchase $1,000,000 today, but rates increase by 1%, they will only be able to afford $892,500 using the same monthly payment.

The Cost of Waiting to Buy a $750k Home

Here is an example below of the potential extra cost for waiting to buy a $750k home, if both rates and home prices continue to increase.

As of today, if a buyer pays a point they will be able to buy down the rate to 4.02%.

But if rates increase to 4.80% and the home price increases by 5% over the next 12 months, the monthly payment will increase from $3,589 to $4,127, which is an increase of $538 a month.

This amounts to an extra $6,456 annually, and $193,680 over the life of the loan. Therefore the cost of waiting to buy this home could cost an extra $193,680.

The Cost of Waiting to Buy a $250k Home

Here is another example below of the potential extra cost for waiting to buy a $250k home, if both rates and home prices continue to increase.

As of today, if a buyer pays a point they will be able to buy down the rate to 4.3%.

But if rates increase to 5.1% and the home price increases by another 4% over the next 12 months, the monthly payment will increase from $1,237 to $1,415, which is an increase of $178 a month.

This amounts to an extra $2,136 annually, and $164,080 over the life of the loan. Therefore the cost of waiting to buy this home could cost an extra $64,080.

The Cost of Borrowing Money is Still Cheap Historically

When compared to rates historically, current rates are still very cheap. This chart below puts current mortgage rates in perspective.

Did you know the average 30 year fixed mortgage rate over the past 40 years is roughly 8.7%, and 6.29% over the past decade.

Compare this to current rates around 4.5%. As rates are going to continue to increase, current rates are still a gift to anyone looking to borrow money to finance a home.

Tips for homebuyers

It is still a good time to buy a home, as the cost of borrowing money to finance a home is still historically very low.

It is a great time to get out there and shop for homes. We are entering the summer months soon, which means there will be more inventory available.

I tell my buyers not to focus on rising rates or home prices. Find a home that you love and that you can afford for your family.

If you have any questions about any of this information above, please feel free to contact me directly at 858-442-2686. I look forward to chatting soon!

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.

2018 Mortgage Waiting Periods for Buyers With Prior Short Sale, Foreclosure or BK

April 21st, 2018

It is hard to believe that it has been a decade since the housing crash in 2008. It is another year that has passed for buyers to recover from a prior foreclosure, short sale or BK. We have been seeing lots of buyers who suffered a financial hardship in the past get back into the market recently to purchase a home again. Here are the current 2018 mortgage waiting periods and loopholes available for buyers who had a prior Foreclosure, Short Sale or Bankruptcy.

Buying a Home Again After a Financial Hardship

More than 9 out of 10 mortgages are either funded by Fannie Mae/Freddie Mac, the FHA or VA!

Therefore if a buyer is looking to purchase a home and needs financing, it is more than likely they will be using one of these 3 financing options.

If a buyer does not fit these guidelines, there are a lot of new financing products that are available in the market again to help fit a buyers needs. We have options where a buyer can finance a home with less than one month out of a BK, foreclosure or short sale.

Here are the current 2018 mortgage waiting periods when a buyer is looking to repurchase a home after either a short sale, foreclosure or bankruptcy.

1. When Can I Repurchase Again After a Foreclosure?

Here are the current waiting periods when a buyer can repurchase again after a Foreclosure and they are trying to obtain either Conventional, FHA or VA financing.

Conventional. It is 7 years before a buyer can repurchase again using conventional financing.

Loophole. There is a loophole that not many are aware of, see below. If you included the foreclosure in a bankruptcy, you can qualify after 4 years instead of 7 years. Contact me for more details on how to qualify under this new rule.

“For conventional financing, the bankruptcy guidelines have been updated to indicate that if a mortgage debt has been discharged through bankruptcy, even if a foreclosure action is subsequently completed to reclaim the property in satisfaction of the debt, the borrower is held to the bankruptcy waiting periods and not the foreclosure waiting period.

This means a buyer can now qualify for conventional financing after 4 years from the bankruptcy date, instead of the foreclosure date of 7 years”.

FHA. It is 3 years before a buyer can repurchase again using FHA financing. Or, see below for how a FHA buyer can qualify again after just 1 year if they experienced an economic event.

VA. It is only 2 years before a buyer can repurchase again using VA financing.

2. When Can I Repurchase Again After a Short sale?

Here are the current waiting periods when a buyer can repurchase again after a Short Sale and they are trying to obtain either Conventional, FHA or VA financing.

Conventional. It is 4 years before a buyer can repurchase again using Conventional financing.

Loophole. If you included a short sale in a bankruptcy chapter 13, you can qualify after 2 years instead of 4 years. We have been helping buyers recently qualify under this rule. Contact me for more details on how to qualify under this new rule.“For conventional financing, the bankruptcy guidelines have been updated to indicate that if a mortgage debt has been discharged through bankruptcy, even if a short sale action is subsequently completed on the property, the borrower is held to the bankruptcy waiting periods and not the short sale waiting period. This means a buyer can now qualify for conventional financing after 2 years from the bankruptcy date, instead of the short sale date of 4 years”.

FHA. It is 3 years before a buyer can repurchase again using FHA financing. But here are 2 different ways to qualify less than 3 years.

*Tip #1: The FHA has a loophole that not many people know about, if the FHA buyer did not have any late payments before their short sale, they are allowed to automatically qualify again for FHA financing.

Tip #2. The FHA reduced the time line that buyers must wait after a bankruptcy, foreclosure or short sale before qualifying for an FHA-backed mortgage, if a buyer experienced an “economic event” whereby their household income fell by 20% or more for a period of at least six months.

The period had previously been two years following a bankruptcy, and three years following a foreclosure or short sale. The FHA reduced the waiting period to ONE YEAR. 

For additional information on how to qualify under this rule, I wrote an article on this subject for the San Diego Union Tribune newspaper, see HERE

VA. It is only 2 years before a buyer can repurchase again using VA financing.

3. When Can I Repurchase Again After Bankruptcy?

Here are the current waiting periods when a buyer can repurchase again after a Bankruptcy and they are trying to obtain either Conventional, FHA or VA financing.

Conventional. For a chapter 7 Bankruptcy it is 4 years and 2 years for a chapter 13 bankruptcy, before a buyer can repurchase again using Conventional financing.

FHA. For a chapter 7 Bankruptcy it is 2 years and 1 year for a chapter 13, before a buyer can repurchase again using FHA financing. Or, see above for how a buyer can qualify again after just 1 year if they experienced an economic event.

VA. For a chapter 7 Bankruptcy it is 2 years, and 1 year for a chapter 13 bankruptcy, before a buyer can repurchase again using VA financing.

4. What if a buyer does not fit the waiting periods above? New Financing programs available

There are new mortgage options available for buyers who do not fit the more traditional mortgage options above.

Portfolio lenders are stepping in to provide mortgage options for buyers who cannot qualify for conventional, FHA and VA financing, and with terms much better than private financing.

We have lenders who will now provide financing for buyers less than 1 month out of a foreclosure, short sale or BK for example. A larger down payment will be required, and rates will be higher than traditional loans.

We also have several different stated programs for self employed and W2 buyers who cannot verify their income.

We also have bank statement programs available for borrowers, whereby we can use their monthly deposits to qualify. This is a great option for self employer borrowers who do not show all their income on their taxes.

Contact me with any scenarios you have, we typically can find a solution to most borrower situations.

Helping Buyers Rebuild Their Credit

It is also very important that buyers start to re-establish their credit again since their hardship.

For example, even though the required waiting period of say 2 or 3 years may have passed, it is also important that buyers have the required credit scores to qualify again for financing. For example, the FHA and VA only require a 580 credit score to repurchase a home again. 

The first step is for a buyer to get a copy of their credit report to verify if their financial hardship or discharge is reporting correctly and to also see what their scores are.

Then the next step is for buyers to start rebuilding credit scores. I have a section on my website  which is devoted to helping buyers and consumers  rebuild and improve their scores, see HERE, so they are able to score the best rates and financing terms.

Tips for Buyers Looking to Purchase Again

There are many buyers who suffered a financial hardship in the recent past who are already back in the market again to purchase a home.

As the VA only requires 2 years from a short sale or a foreclosure, and the FHA only 1 year in some cases, there are a lot more buyers who are eligible to repurchase again but probably just don’t know they can.

A lot of buyers I talk to who suffered a financial hardship in the past, are genuinely surprised when they realize that the FHA or VA for example allows them to purchase again after just 2-3 years!

Tip for real estate agents: A good idea is to check the dates with any clients, friends or family you helped short sale in the past, or anyone you know who had a foreclosure, and verify how much time has elapsed since their hardship. Now you can let them know when they can repurchase again using these waiting periods above.

Also let them know too how important it is that they rebuild their credit, and that they should contact you if they need credit tips on how to rebuild their credit.

If you have any questions about any of these mortgage waiting periods, or you would like to get approved for financing, please call me at 858-442-2686, or you can also email me at mdeery@citywidefinancialcorp.com .

P.S. If you would like to be updated faster on important industry news or any new loan programs that come out, please join my Facebook page .