inspections Archives - Page 3 of 39

Apache is functioning normally

April 3, 2024 by Brett Tams

New American Funding (NAF) has snagged top Chicago loan officer Larry Steinway as it looks to grow its presence in the Chicagoland area.

Steinway, who closed more than $1.5 billion of loan volume in his nearly 30-year career, started at NAF on April 1 as its vice president and producing area sales manager tasked with expanding the lender’s footprint in the Chicagoland area.

Larry Steinway

He joins NAF from Revolution Mortgage, where he served as branch production sales manager and SVP of mortgage lending for a little over a year. Steinway was also one of the first four loan officers to be hired at Guaranteed Rate, where he earned the firm’s Chairman’s Club title for hitting $100 million in yearly production multiple times.

“The goal is to help them develop this territory and use this platform to attract talent – established loan officers, up and coming loan officers,” Steinway said in an interview with HousingWire.

“One of the several things that differentiate New American Funding from other lenders is that they service 98% of their loans, which as a loan officer is wonderful for us because I can retain them as a lifelong customer.”

Steinway also expects NAF’s “expansive” product mix, such as NAF Cash, will help him achieve more production volume in a highly competitive market.

Through NAF Cash, the lender purchases the buyer’s chosen home upfront with cash while the buyer can rent the new home while working on selling the old home or securing financing on the new one. When the buyer is ready to move in with permanent financing, NAF sells it back to the buyer for the original price with a convenience fee that can be added to the purchase price.

“Chicago, I think, is suffering more than most markets in the United States. People are still buying homes, but we are still seeing multiple offers like crazy, seeing a lot of people waive contingencies such as inspections. There are a lot more as-is offers being made out there than I would ever see before. Because of the lack of inventory and multiple offers, the NAF Cash product will give an advantage for my clients over other buyers that cannot make a cash offer,” said Steinway.

NAF, the 31st largest mortgage lender in America in 2023, according to Inside Mortgage Finance, has been in growth mode. HousingWire reported that the company was entering the joint ventures arena in April, offering multiple JV models in a margin-compressed and highly regulated industry.

Most recently, NAF acquired $2 billion Chicago-based retail shop Draper & Kramer Mortgage Corp. (DKMC) to enhance its presence in the Midwest and along the East Coast.

“We’re extremely excited about the recent purchase of Draper & Kramer in the Chicago market and adding Larry as a Producing Area sales manager to help us continue our growth,” Pat Bolan, chief production officer and head of retail sales at NAF, said in an emailed response.

Founded in 2003 by Rick Arvielo and his wife, Patty Arvielo, NAF offers a variety of conventional, government, adjustable-rate and non-qualified mortgages. The lender originated $9.6 billion in mortgages in 2023, according to estimates from Inside Mortgage Finance.

NAF, licensed in 50 states and Washington, D.C., has 256 active branch locations across the country with 2,098 sponsored mortgage loan originators as of March 29, according to the National Multistate Licensing System.

Source: housingwire.com

Apache is functioning normally

March 28, 2024 by Brett Tams

In the intricate dance of buying or selling a home, few steps are as crucial—or as anxiety-inducing—as the home inspection. It’s the moment when the house gets put under a magnifying glass, revealing its flaws and imperfections. But are home inspections truly deal killers, or are they just an essential part of the process? Let’s delve into this often-debated topic.

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The Power of the Home Inspection

A home inspection is like a thorough health check-up for a property. A licensed inspector examines the home’s major systems, structure, and components, looking for issues that could pose safety concerns or costly repairs down the line. From the foundation to the roof, no stone is left unturned.

Deal Breaker or Deal Maker?

The Case for Deal Breakers:

Unforeseen Issues: Home inspections sometimes uncover problems that neither the buyer nor the seller were aware of, such as hidden water damage, faulty wiring, or structural issues. These discoveries can spook buyers, leading them to renegotiate the price or even walk away from the deal.
Negotiation Leverage: Armed with the inspection report, buyers may demand repairs or concessions from the seller. If the seller refuses to address significant issues, the deal could fall apart.
Financing Hurdles: Lenders may require certain repairs to be completed before approving a mortgage. If the seller is unwilling or unable to make these repairs, the buyer’s financing could be in jeopardy.

The Case for Deal Makers:

Transparency and Trust: A thorough inspection report provides transparency about the condition of the property, giving both parties a clear understanding of what they’re getting into. This transparency can build trust and facilitate smoother negotiations.
Opportunity for Renegotiation: While inspection issues can be daunting, they also present an opportunity for renegotiation. Buyers and sellers can work together to find solutions that satisfy both parties, such as adjusting the purchase price or splitting repair costs.
Peace of Mind: For buyers, a clean inspection report offers peace of mind, confirming that the home is in good condition and worth the investment. For sellers, it validates the value of their property and reduces the risk of last-minute surprises derailing the sale.

The Bottom Line

So, are home inspections real estate deal killers? The answer is: it depends. While inspection issues can certainly derail a deal, they can also pave the way for a successful transaction if approached with transparency, flexibility, and open communication.

For buyers, a thorough inspection is essential for protecting their investment and ensuring they’re not buying a lemon. For sellers, addressing potential issues upfront can help streamline the selling process and minimize surprises.

In the end, a home inspection is not about killing deals—it’s about empowering buyers and sellers to make informed decisions and navigate the complex world of real estate with confidence. So, embrace the process, and remember that with the right mindset and approach, even the most challenging inspection issues can be resolved.

Are you looking to buy or sell this spring? Give us a call today! Our experienced real estate agents are here to help you find the perfect home!

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Source: zoocasa.com

Apache is functioning normally

March 26, 2024 by Brett Tams

Generally, it helps to save up to 20-25% of a house’s sales price. However, factors like geographical location, economic climate, real estate interest rates, and global events will influence how much money you’ll need to buy a house.

Key Takeaways:

An ideal down payment is 20% to 25% of a home’s value.
USDA and VA home loans traditionally don’t require down payments.
If you make a down payment below 20%, you may be required to get private mortgage insurance.

How much money do you need to buy a house? That cost depends on numerous factors like inflation and real estate trends. According to the Census, homes sold for a median price of $420,700 in January 2024.

Thankfully, you don’t need to pay off that amount all at once. A down payment that’s 20% to 25% of a home’s value can help you secure a property. Even if you don’t have the funds to make a sizeable down payment, low and no-down-payment mortgage options are available.

Below, we’ll share our expertise to help you learn all about loans and mortgage options. We’ll also answer several common questions and share helpful tools, like Credit.com’s mortgage calculator.

All Costs Associated with Buying a House

Spend enough time shopping around for houses, and you’ll learn very quickly that a property’s sales price isn’t the only expense you’ll have to pay. Below, we’ll cover down payments, earnest money deposits, and other factors that determine the real cost of a home.

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Down Payments for Different Mortgage Options

According to the United States Census Bureau, 661,000 new homes were sold in January 2023. Most homebuyers don’t pay off their properties in full from the get-go. Instead, they cover a portion of the home’s cost with a down payment, then gradually pay off the remaining value via monthly mortgage payments.

“How do home mortgage rates work?” and “What types of mortgages am I eligible for?” are common questions for first-time homebuyers.

Below, we’ll discuss four mortgage options and break down how each of them works.

1. Conventional Mortgage

A conventional loan is a mortgage option that’s offered by a private lender instead of the government. Mortgage companies, credit unions, and banks offer conventional loans, though they might require a down payment between 20% and 25% of a property’s sales price.

Lenders might request that you purchase private mortgage insurance (PMI) if your down payment is less than 20%. PMI reimburses lenders if you don’t make your mortgage payments, and borrowers will have to pay for coverage annually.

2. USDA Mortgage

The United States Department of Agriculture (USDA) offers this unique mortgage to borrowers who live in rural areas. A USDA mortgage has no down payment requirement, and its interest rate is very competitive.

To qualify for a USDA loan, you need to:

Buy an eligible property. Your potential home has to be in an eligible rural area.
Meet income guidelines. To qualify for a USDA loan, your income can’t exceed a state-specific amount.
Use the home as your primary dwelling. You have to live on the property permanently.
Be a U.S. citizen, a U.S. national, or a qualifying resident alien. Foreign nationals not authorized to remain in the United States can’t get USDA loans.

You’ll also need to meet the lender’s credit requirements. On average, a credit score of 620 or more will qualify you for a government-backed USDA loan.

3. FHA Mortgage

The Federal Housing Administration (FHA) offers this distinct government-backed mortgage. Borrowers can secure an FHA mortgage with a down payment as low as 3.5%.

Borrowers with very low credit scores might be eligible for an FHA loan, at the expense of having more strict loan limits and higher up-front costs.

To get an FHA loan, you need to meet the following requirements:

Primary residence. The house associated with your loan must be your primary residence. You can’t rent it out to others for profit.
FHA maximum limit. FHA loans can only apply to properties within a set price range. In 2024, the maximum FHA loan amount is $498,257 for single-family homes.
Debt-to-income ratio. To qualify for an FHA loan, you must spend a maximum of 43% of your income on housing costs and housing-related debt.

4. VA Home Loans

Veterans Affairs (VA) loans offer low credit requirements and come with no down payment restrictions.

Certain people qualify for VA loans, including:

Service members who’ve served for at least 90 days consecutively.
Veterans who’ve served at least 181 continuous days, depending on their deployment date.
National Guard members with six years of Active Reserve status or 90 consecutive days of active duty service.
Surviving spouses of veterans, including veterans who are missing in action or being held as a prisoner of war (POW).

Earnest Money Deposit

An earnest money deposit is a payment that buyers can place to demonstrate how serious they are about obtaining a property. Earnest money deposits are normally between 1% and 3% of a property’s sales price. This deposit is not the same as a down payment.

When you make an earnest money deposit, those funds are put into an escrow account. If the seller of a property closes on a deal with you, your earnest money deposit is then added to your down payment. If the seller doesn’t close on the deal with you, it’s possible to regain your earnest money deposit if contingencies are set in place.

Several common contingencies include:

Home inspection contingency: Buyers request to have an inspection conducted on a property. If problems are discovered, buyers can back out of a deal.
Home sale contingency: Buyers who might need to sell their current home can ask for extra time.
Insurance contingency: This is for buyers who may need time to obtain home insurance for a property.

Closing Costs

Closing costs include taxes, appraisals, home inspection costs, title costs, and attorney fees. They’re generally between 3% and 6% of your mortgage principal. Your mortgage principal is the amount you borrow—so the bigger your down payment, the less you’ll pay in closing costs.

Let’s use the $200,000 home above as an example. Consider these three 4% closing cost scenarios:

Your down payment is 10%, or $20,000, leaving a mortgage principal of $180,000. Your closing costs will roughly amount to $7,200.
You offer 20%, or $40,000, as your down payment. Your mortgage principal is $160,000, and you’ll pay $6,400 in closing costs.
You apply for a mortgage with no down payment, so your mortgage principal is $200,000. Ultimately, you’ll pay $8,000 in closing costs.

Home-Buying Examples

Next, we’ll show you how to determine your down payment on a home with the previous loans as examples. Let’s imagine your dream home is on the market for $200,000.

Down payments for conventional mortgages are usually $10,000 – $40,000.
USDA mortgages normally don’t require down payments.
An FHA mortgage can cost as little as $7,000.
A VA home loan also doesn’t require a down payment.

USDA and VA home loan mortgage options have the lowest up-front costs for eligible borrowers. An FHA mortgage is less costly than a conventional loan, but interest rates will affect your total payments in the long term.

Financial Resource Ideas

Making a down payment can be challenging because you need a paper trail of your purchases. In most cases, you can’t use borrowed money for a down payment.

Conversely, we know several creative ways to come up with a down payment:

Profits earned from stock or bond sales
Filing for an IRA or 401(k) withdrawal
Paying with money from your checking or savings account
Cash earned from a money market account
Using funds from your retirement account
Monetary gifts

You can roll other funds, like your tax return or a security deposit refund, into your down payment, too.

How Much Money Should I Save Before Buying a House?

It’s important to look at the big picture when buying a house. You’ll need to pull together a down payment and closing costs, but you’ll also need to budget for removal costs, inspections, and repair fees.

A tool like a monthly budget template can put your common expenses into perspective and help you better understand how much house you can afford with your current income.

When Should I Seek Mortgage Relief?

“What happens if I miss a mortgage payment?” is another concern for new and long-time homeowners. First, know that your home won’t immediately be foreclosed on if you miss a payment. Foreclosure usually isn’t imminent unless you’ve missed two or three payments.

If your mortgage payments aren’t within reach, you can contact your lender and explain your specific situation. Seeking forbearance, which is a temporary pause on your payments, can also help you regain your bearings.

Prepare to Buy a Home with Credit.com

Knowing your credit score and understanding the elements that affect it can help you know what you need to do to prepare for loan opportunities.

Sign up for Credit.com’s ExtraCredit® subscription to check out 28 of your FICO® scores. Afterward, visit our mortgage rates page to get additional information.

Source: credit.com

Apache is functioning normally

March 25, 2024 by Brett Tams

It’s entirely possible to sell a house with a mortgage. In fact, it’s common to sell a property that still has a mortgage, because most people don’t stay in a home long enough to pay off the home loan.

With the help of your lender and real estate agent, you can move ahead and sell a house with a mortgage. Yes, there’s a bit of paperwork involved, but settling your mortgage at the closing table shouldn’t prove too challenging.

Here’s everything you need to know about selling a home with a mortgage.

What Happens to Your Mortgage When You Sell Your Home?

When you sell your home, the amount you contracted with the buyer is put toward your mortgage and settlement costs before any excess funds are wired to you. Here’s how it works for different transaction types.

A Typical Sale

In a typical sale, homeowners will put their current home on the market before buying another one. Assuming the homeowners have more value in their home than what is owed on their mortgage, they can take the proceeds from the sale of the home and apply that money to the purchase of a new home.

A Short Sale

A short sale is one when you cannot sell the home for what you owe on the mortgage and need to ask the lender to cover the difference (or short).

In a short sale transaction, the mortgage lender and servicer must accept the buyer’s offer before an escrow account can be opened for the sale of the property. This type of mortgage relief transaction can be lengthy (up to 120 days) and involves a lot of paperwork. It’s not common in areas where values are falling or at times when the real estate market is dropping.

When You Buy Another House

There are several roads you can take when you buy another house before selling your own. You may have the option of:

• Holding two mortgages. If your lender approves you for a new mortgage without selling your current home, you may be able to use this option when shopping for a mortgage. However, you won’t be able to use funds from the sale of your current home for the purchase of your next home.

• Including a home sale contingency in your real estate contract. The home sale contingency states that the purchase of the new home depends upon the sale of the old home. In other words, the contract is not binding unless you find a buyer to purchase the old home. The two transactions are often tied together. When the sale of the old home closes, it can immediately fund the down payment and closing costs of the new home (depending on how much there is, of course). Keep in mind that a home sale contingency can make your offer less competitive in a hot real estate market where sellers are not willing to wait around for a buyer’s home to sell.

• Getting a bridge loan. A bridge loan is a short-term loan used to fund the costs of obtaining a new home before selling the old home. The interest rates are usually pretty high, but most homebuyers don’t plan to hold the loan for long.

💡 Quick Tip: You deserve a more zen mortgage. Look for a mortgage lender who’s dedicated to closing your loan on time.

Selling a House With a Mortgage: Step by Step

Here are the steps to take to sell a home that still has a mortgage.

Get a Payoff Quote

To determine exactly how much of the mortgage you still owe, you’ll need a payoff quote from your mortgage servicer. This is not the same thing as the balance shown on your last mortgage statement. The payoff amount will include any interest still owed until the day your loan is paid off, as well as any fees you may owe.

The payoff quote will have an expiration date. If the outstanding mortgage balance is paid off before that date, the amount on the payoff quote is valid. If it is paid after, sellers will need to obtain a new payoff quote.

Determine Your Home Equity

Equity is the difference between what your property is worth and what you owe on your mortgage (your payoff quote is most accurate). If your home is worth $400,000 and your payoff amount on the existing mortgage is $250,000, your equity is $150,000.

When you sell your home, you gain access to this equity. Your mortgage, any second mortgage like a home equity loan, and closing costs are settled, and then you are wired the excess amount to use how you like. Many homeowners opt to use part or all of the money as a down payment on their next home.

Secure a Real Estate Agent

A real estate agent can walk you through the process of selling a home with a mortgage and clear up questions on other mortgage basics. Your agent will be particularly valuable if you need to buy a new home before selling your current home.

Set a Price

With your agent, you will look at factors that affect property value, such as comparable sales in your area, to help you set a price. There are different price strategies you can review with your agent to bring in more buyers to bid on your home.

Accept a Bid and Open Escrow

After an open house and showings, you may have an offer (or a handful). Consider what you value in accepting an offer. Do you want a fast close? The highest price? A buyer who is flexible with your moving date? A buyer with mortgage preapproval?

You may also choose to continue negotiating with prospective buyers. Once you’ve selected a buyer and have signed the contract, it’s time to go into escrow.

Review Your Settlement Statement

You’ll be in escrow until the day your transaction closes. An escrow or title agent is the intermediary between you and the buyer until the deal is done. While the loan is being processed, title reports are prepared, inspections are held, and other details to close the deal are being worked out.

Three days before, you’ll see a closing disclosure (if you’re buying a house at the same time) and a settlement statement. The settlement statement outlines fees and charges of the real estate transaction and pinpoints how much money you’ll net by selling your home.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

Selling a House With a Negative Equity

Negative equity means that the value of an asset (such as a home) is less than the balance due on the loan against it. Say you purchased a property for $400,000 with a $380,000 loan, but then the real estate market took a nosedive. Your property is now worth $350,000, less than the amount of the mortgage.

If you have negative equity in the home and need to sell it, it is possible to sell if you come up with the difference yourself.

In this scenario (an alternative to a short sale), you pay the difference between the amount left on your mortgage note and the purchase offer at closing. So in the example above, if you sold the house for $350,000, at the closing, you would need to pay the loan holder an additional $30,000 to clear the debt.

The Takeaway

Selling a house with a mortgage is common. The buyer pays the sales price, and that money is used to pay off your remaining mortgage, your closing costs, and any second mortgage. The rest is your profit.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

Who is responsible for the mortgage on the house during the sale?

The homeowner is responsible for continuing to pay the mortgage until paperwork is signed on closing day.

What happens if you sell a house with a HELOC?

When you sell a home that has a home equity line of credit with a balance, a home equity loan, or any other kind of lien against the house, that will need to be paid off before the remaining equity is paid out to you.

What happens to escrow money when you sell your house?

Your mortgage escrow account will be closed, and any money left will be refunded to you.

Can I make a profit on a house I still owe on?

Yes. You can make a profit if the amount you sell your house for is greater than the amount you owe on it, less closing and settlement costs.

Can I have two mortgages at once?

Yes, you can have two mortgages at once if the lender approves it.

Photo credit: iStock/Beton studio

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOHL0124030

Source: sofi.com

Apache is functioning normally

March 18, 2024 by Brett Tams

Hedging, Multi-Family Servicing, CU Appraisal, Imaging, POS Tools; Conventional Conforming News

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Hedging, Multi-Family Servicing, CU Appraisal, Imaging, POS Tools; Conventional Conforming News

By:
Rob Chrisman

Thu, Mar 14 2024, 11:37 AM

Fun with numbers: Did you know that, at age 22, Billie Eilish has won twice as many Oscars (2) than 80-year-old Martin Scorsese (1)? (And yes, Samuel L. Jackson, Tom Cruise, and Johnny Depp have won a cumulative total of 0.) Lenders and vendors didn’t have a lot of fun with numbers in 2023, with overall production dropping from $4.4 trillion in 2021 to $1.6 trillion last year, a drop of 63 percent in dollar volume, even more in units since average loan amounts have gone up. Yes, this is an over-simplification, but have you cut your staffing and expenses by 63 percent? (The MBA is predicting $2 trillion this year.) Lenders and vendors who want to stay in business aren’t sitting on their hands, and many are out there adding related businesses (title, insurance), avoiding overly competitive markets or low margin products, monitoring branches or LOs taking advantage of pricing concessions, engaging in aggressive cost-cutting and renegotiating contracts and compensation packages, and tweaking their business models and channels. All easier said than done. (Found here, this week’s podcast is sponsored by Lender Toolkit. With Lender Toolkit’s AI-powered AI Underwriter and Prism borrower income automation tools, you’ll be able to get loans approved in under two minutes. Hear an interview with money manager Vijay Marolia on the affordable housing shortage.)

Lender and Broker Services, Products, and Software

Revolution Mortgage, a nationwide lender, partners with OptiFunder for end-to-end warehouse automation. “We’ve been using OptiFunder to help us manage our warehouse allocations for years. The optimization savings, easy platform, and customer service made us instant fans of OptiFunder,” said Revolution CEO and Founder Tony Grothouse. “We have recently expanded our use of the system to automate our entire funding process. Our team leverages technologies every day to boost efficiencies in the loan process.” Founded in 2019 to bring optimization and automation to the mortgage industry, OptiFunder has automated over a half million processes for originators, including funding, wire data checks, collateral shipping, purchase advice reconciliation and writeback to the LOS, paydown requests and more. With connections to over 150 warehouse lenders and investors, OptiFunder offers the most comprehensive automation from funding through loan sale. Schedule a demo or meet with us at ICE Experience 24 to learn more about our robust automation.

Mortgage capital markets tech leader Polly launches Lender Intelligence platform, leveraging robust data and analytics to drive margin expansion and cost reduction. Lender Intelligence provides a holistic view of a lender’s business and the wider competitive landscape via granular data visualizations that illustrate enterprise, market, and competitor benchmarking data and indices. “Polly has already established an unmatched reputation by reinventing the PPE to prioritize flexibility, granularity, and scalability. In 2024 and beyond, we will only continue to advance this innovation-focused approach and its application to mortgage data and analytics,” noted Founder and CEO Adam Carmel. Learn more about Polly and Lender Intelligence next week, March 18-20, at ICE Experience 2024. Schedule a meeting here, or visit Polly in #X24 booth 221.

This week, Floify launched Lender Edition, a newly badged version of the popular point-of-sale configured to give IMBs, credit unions and banks best-in-class tools at an accessible price point. While some vendors are squeezing lenders on pricing during market hardship, Floify is committed to being a supportive partner by offering flexible per-loan pricing without compromising access to product features or quality. Floify is popular for its intuitive interface for borrowers and lenders, and efficiency-driving features, such as automated document management workflows, free native eSign, verification of income and employment waterfall functionality, and loan progress transparency. The Floify team will be out in force at ICE Experience. Click here to schedule a meeting or visit booth 418.

“We know that not all property data is equal, and it certainly shouldn’t be viewed as a commodity. With data playing such a critical role in virtually every aspect of a mortgage (underwriting decisions, risk management, property, and asset valuation), it makes sense that you would get your data from a trusted provider. That’s why we wanted to highlight First American Data & Analytics and their industry-leading repository of recorded property document images. It’s true: more than 8 billion and growing! As a nationwide single-source solution, they are proud to provide property document images that are current, complete, and accessible. Feel confident in your ability to know where and how to locate the data, documents, and reports you need. Sound good? Learn more and get a sample of their data.”

“Hey credit union mortgage lenders, we have a webinar specifically tailored for you! As you know, unique challenges can arise when valuing new construction for your members. To help you navigate these complex projects, Class Valuation has assembled an expert panel with deep background knowledge of credit union lending, new construction, valuations, and the intersection of all three. Join our veteran panelists for insights on selecting appropriate comparable sales, selecting qualified appraisers, valuing the site, understanding ANSI standards, managing inspections, timing, and more. Titled “Successfully Navigating the Challenges of New Construction Valuation,” this webinar will equip you to do just that. This webinar is a valuable opportunity for credit union mortgage lenders to gain essential knowledge and strategies for navigating the complexities of new construction valuation. Don’t miss out – register today!”

Correspondent and Servicing-Released Options

Discover unparalleled expertise in multifamily servicing with Planet Management Group and Planet Loan Servicing at the IMN Texas Middle-Market Multifamily Forum in Dallas. As industry leaders, we’re ready to showcase our innovative solutions and expert advisory that empower investors to optimize their portfolio value. Join us for a convergence of trailblazers and gain insights that will shape the future of multifamily living in Texas. To secure your spot now with Samantha Manfer and Caitlin Moynihan, reach out or call (585) 512-1030. Elevate your investment strategy with us at the forefront of multifamily evolution.

If you read this column regularly, you know AmeriHome is the 2nd largest correspondent investor in the country and backed by the strength of Western Alliance Bank. There’s no better time than now to speak to an AmeriHome sales representative about everything from AmeriHome’s industry leading correspondent acquisition platform for Delegated and Non-Delegated lenders to Western Alliance’s specialty services such as Warehouse financing for lenders of all sizes, MSR financing, specialized Treasury Management Services, and corporate credit cards! AmeriHome continues to evolve its product offerings, having recently removed cash-out restrictions on VA loans and announcing that they will now purchase HomeReady and Home Possible loans with the $2500 grant for Very Low Income (VLIP) borrowers. Don’t miss them this month at the MCT Exchange in San Diego or the Houston MBA Golf Classic! Check Upcoming Events for details, find your sales representative, or email them to learn more about connecting with AmeriHome.

Agency News and Updates

Fannie Mae spread the word that lenders now will be able to validate assets, income, and employment with a single 12-month asset report in Desktop Underwriter®. That same asset report will also identify the borrower’s positive rent payment history and cash flow history. This could be a boon for both lenders and homebuyers – think faster cycle times, less paperwork, and enhanced access to credit, not to mention the ability for lenders to get Day 1 Certainty®, which can help improve loan quality and reduce the risk of repurchase. The enhancement goes into effect in DU on March 29. Reach out to your Fannie Mae representative for help getting started.

So yes, on March 29, Fannie Mae will update Desktop Underwriter® (DU®) validation service to allow for the digital verification of income and employment for casefiles submitted to DU which reference an eligible third-party asset verification report. Refer to the following resources to learn how DU validation service can help simplify your processes. Validation Using a Single Data Source. Read Release Notes. View the integration impact memo.

Freddie Mac Single-Family Seller/Servicer Guide Bulletin 2024-3 announces updates pertaining to: Uniform Loan Delivery Dataset (ULDD). Implementation notes that provide updates to existing ULDD data points, New ULDD Phase 4a valid values related to automated collateral evaluation (ACE), ACE+ PDR (property data report) and ACE+ PDR upgrade to hybrid, ULDD Phase 5 requirements for specific property data, mortgage products and data points, Manufactured homes closing protection letters.

Fannie Mae remains committed to expanding opportunities for those who are ready to purchase a home and maintain a mortgage. Recent innovations include: an enhanced pre-qualification experience through the DU early assessment to help lenders determine homebuyer preparedness and mortgage options earlier without the impact of a hard credit check on the consumer. An income calculator to help mortgage lenders automate the calculation of self-employment income streams during the underwriting process for homebuyers who don’t have traditional sources of income. A down payment assistance tool to help homebuyers find the down payment and closing cost assistance they need. Fannie Mae’s award-winning HomeView® and HomeView en Español, providing consumers and first-time homebuyers with educational tools and information about financial literacy and homeownership.

In March, the Fannie Mae Selling Guide has been updated to expand the DU validation service to allow income and employment validation using an asset verification report. Details can be found in Fannie Mae SEL-2024-02.

Fannie Mae is committed to promoting servicer awareness of fair servicing best practices. In 2023, Fannie conducted outreach with servicers and consumer advocacy groups to capture their efforts to ensure fair servicing. Refer to this resource as you develop and/or enhance your best practices.

Fannie Mae issued the following reminder: Use of the Uniform Property Dataset (UPD) will be required for value acceptance + property data offers as of April 1, 2024, when Fannie Mae’s proprietary Property Data Standards V6 will be retired. Explore the UPD page for more information including the current list of UPD service providers.

Pennymac updated Conventional LLPAs, effective for all Best-Efforts Commitments taken on or after Tuesday, March 05, 2024. View Announcement 24-19 for details.

Pennymac confirmed FHA’s non-borrowing spouse requirement and updated its guidelines accordingly. Refer to Pennymac Announcement 24-40 for examples.

As part of its commitment to maintain the highest quality and security of client data, Pennymac has finalized implementation of Multi-Factor Authentication (MFA) Technology in the P3 client portal with enforcement effective Friday, March 8, 2024.

“CMG is aligning with Fannie Mae and Freddie Mac regarding F&F’s announcement of a temporary enhancement to their HomeReady and HomePossible products. This enhancement includes a $2,500 credit for very low-income borrowers (VLIP) that can be used for down payment and closing costs. The loan must meet all of the guidelines and requirements defined by Fannie Mae and Freddie Mac in order for the loan to be eligible for purchase. This grant will be effective immediately for all new applications submitted. This is a temporary credit and CMG Corporate Credit will advise clients on the closing date for applications next year. If incorporating a HomeReady or HomePossible Very Low-Income Purchase (VLIP) within your Bulk Commitment, please contact our CMG Secondary [email protected] to let us know how you are labeling your VLIP loans.”

Arch MI announced a new second-lien product for its first-lien customers. Arch MI Equity Secure℠ provides mortgage insurance (MI) coverage on eligible home equity loans through Arch Mortgage Assurance Company (AMAC).

PHH Mortgage has made several modifications to the Seller Guide to adhere to agency guidelines and incorporate advancements.

Capital Markets

Interested in learning more about moving from best efforts to mandatory loan sales? Maybe you’ve already moved to mandatory and are looking for even more pickup and ways to mitigate risk? Join MCT’s Moving to Mandatory Loan Sales webinar on April 4th at 11am PT to learn how mandatory loan sales is helping lenders improve profitability while reducing risk. In this webinar, MCT’s Scott Holtz, Vice President of South Regional Sales, will discuss how to leverage mandatory loan sales to improve profitability, manage risk with pipeline hedging, and operational changes needed for the transition. Register for the webinar or join MCT’s newsletter to receive the latest educational content.

As far as the bond market is concerned, investors yesterday continued to digest the February CPI data, in which consumer prices rose more than analysts anticipated. And despite excellent demand as the U.S. Treasury reopened $22 billion in 30-year bonds, selling was the “trade of the day.” That selling added to post-CPI losses ahead of today’s release of PPI (expected 0.3 percent month-over-month) and Retail Sales (expected 0.7 percent month-over-month) for February.

Today’s busy economic calendar is already under way with retail sales (+.6 percent, somewhat less than expected, ex-auto +.3 percent), PPI (+.6 percent, twice what was expected, core +.4 percent), and weekly jobless claims (209k, little changed from 210k; 1.811 million continuing claims). Later this morning brings January business inventories, a series of Treasury auctions that include 20-year bonds and 10-year TIPS, and Freddie Mac’s Primary Mortgage Market Survey. We begin Thursday with Agency MBS prices worse about .125 from Wednesday evening, the 10-year yielding 4.22 after closing yesterday at 4.19 percent, and the 2-year yielding 4.66 after the reminder that inflation is not going down and the labor market continues to be strong.

Jobs

A mid-sized, Mid-West lender is looking for a Wholesale Underwriting Manager to join its leadership team. As a key player in a growing organization, you’ll be responsible for overseeing and elevating the wholesale underwriting process. If you’re looking for a role with a seat at the table and the ability to make a difference, this position may be for you! Remote applicants will be considered. Interested parties should contact Chrisman LLC’s Anjelica Nixt to forward your resume.

Don’t forget that anyone displaced from their position can post their resume for free on www.lendernews.com and potential employers can view resumes for several months for the nominal charge of $75.

Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

March 15, 2024 by Brett Tams

Are you eligible for the zero-down USDA home loan?

What if you could secure a USDA home loan that allows you to buy a house with no down payment, competitive mortgage rates, and reduced mortgage insurance costs?

It might sound like a dream, but it’s entirely possible with the USDA mortgage program. Designed to assist low- and moderate-income Americans in becoming homeowners, USDA loans provide incredibly affordable financing options for eligible buyers.

Essentially, USDA mortgages empower individuals to transition from renting to owning, even when they thought homeownership was out of reach.

Verify your USDA loan eligibility. Start here

In this article (Skip to…)

>Related: How to buy a house with $0 down: First-time home buyer

What is a USDA loan?

USDA loans are mortgages backed by the U.S. Department of Agriculture as part of its Rural Development Guaranteed Housing Loan program. The USDA offers financing with no down payment, reduced mortgage insurance, and below-market mortgage rates.

Verify your USDA loan eligibility. Start here

The USDA mortgage program is intended for home buyers with low-to-average household incomes. In order to qualify, you must also purchase a home in a “rural area” as the USDA defines it. Those who are eligible can use a USDA mortgage to buy a home or refinance one they already own.

USDA loans offer nearly unbeatable benefits for qualified borrowers. So if this program sounds like a good fit for you, it’s worth getting in touch with a participating lender to find out if you’re eligible.

How do USDA loans work?

The U.S. Department of Agriculture insures USDA loans. Thanks to government guarantees and subsidies, lenders can offer 100% financing and below-market interest rates without taking on too much risk.

Verify your USDA loan eligibility. Start here

Although the USDA backs this program, it typically isn’t the one lending money. Instead, private lenders are authorized to offer USDA loans. That means you can get a USDA mortgage from many mainstream banks, mortgage lenders, and credit unions.

The application process for a USDA mortgage works just like any other home loan. You’ll compare rates and choose a lender, complete an application (often online), provide financial documents, wait for the lender’s approval, and then set a closing day.

The only exception is for very low-income borrowers, who may qualify for a USDA Direct home loan. In this case, you’d go straight to the Department of Agriculture to apply rather than to a private lender.

Types of USDA loans

For eligible individuals and families looking to buy, build, or renovate a home in a rural area, the USDA offers three main mortgage loan types. The loan programs are as follows:.

Verify your USDA loan eligibility. Start here

USDA Guaranteed Loans

Approved private lenders, such as banks and mortgage companies, provide USDA loan guarantees to qualified borrowers. A USDA guaranteed loan is one in which the government backs a portion of the loan, lowering the lender’s risk and allowing them to offer more favorable terms to the borrower. These loans frequently have low interest rates, no down payment, and more lenient credit requirements. The property must be in an eligible rural area as the USDA defines it, and borrowers must meet household income requirements that vary depending on location and household size.

USDA Direct Loans

The USDA also offers the Single Family Housing Direct loan through the Section 502 Direct Loan Program. These loans are meant to help low-income families buy, build, or fix up small homes in rural areas. The USDA, rather than private lenders, provides funding for direct loans as opposed to guaranteed loans. These loans have favorable terms, such as low interest rates (as low as 1% with payment assistance) and long repayment periods (up to 38 years for eligible applicants). Income, creditworthiness, and the property’s location in an eligible rural area determine eligibility for direct loans.

USDA Home Improvement Loan

The USDA’s Single Family Housing Repair Loans and Grants program, also known as the Section 504 program, provides financing for home improvements. This program provides low-interest, fixed-rate loans and grants to low-income rural homeowners for necessary home repairs, improvements, and modifications that make their homes safer, more energy-efficient, and more accessible. However, if you’re looking for one, you might have a difficult time finding this type of USDA home loan. They are not widely available from lenders.

USDA loan eligibility requirements

To be eligible for a USDA home loan, you’ll need to meet a number of requirements that vary depending on whether you are applying for a USDA loan guarantee or a USDA direct loan.

Verify your USDA loan eligibility. Start here

Some general requirements, however, apply to all USDA loans, specifically those based on both buyer and property eligibility.

USDA loan property requirements

Eligible rural area

The USDA defines an eligible area in rural America as having a population of 20,000 or fewer. To check if the property you’re considering falls within these designated areas, the USDA’s eligibility site provides all the necessary information. We also provide a USDA eligibility map below.

Single-family primary residence

USDA loans are exclusively available for primary residences. Neither investment properties nor second homes are eligible for this program.

Meet safety standards

The property must adhere to the USDA’s minimum property requirements, which focus on safety, structural integrity, and adequate access to utilities and services.

USDA loan borrower requirements

Income limits

You must meet USDA monthly income limits, meaning your household income can’t exceed 115% of the area median income. Conforming to USDA income eligibility requirements ensures the program is accessible to those it’s intended to serve.

Stable income

Applicants are required to demonstrate a stable and dependable income, typically for at least 24 months, before applying. This helps ensure borrowers can maintain their loan payments.

Creditworthiness

Although USDA loans are known for their flexible credit requirements, creditworthiness is still important. Lenders usually seek a minimum credit score of 640 for guaranteed loans, with USDA Direct Loans potentially having more lenient criteria.

Debt-to-income ratio

Your monthly debt, including future mortgage payments, generally should not exceed 41% of your gross monthly income. However, lenders may make exceptions based on credit score and available cash reserves.

Citizenship status

Applicants need to be U.S. citizens, U.S. non-citizen nationals, or qualified aliens with a valid Social Security number to qualify for a USDA loan.

USDA loan eligibility map

The USDA eligibility map is a valuable online resource for potential borrowers. It helps them identify if a property is situated in an area of rural America that qualifies for USDA home loans.

Verify your USDA loan eligibility. Start here

Users can enter a specific address or explore areas of the map to see if they qualify for USDA guaranteed loans or direct loans by using this interactive map.

¹ Source: USDAloans.com, based on Housing Assistance Council data

USDA loan rates

Compared to other home loan programs, USDA mortgage interest rates are some of the lowest available.

Check your USDA loan rates. Start here

The VA loan, specifically tailored for veterans and service members, stands alongside the USDA loan as one of the few government-backed loan programs offering competitively low rates. Due in large part to the security that government subsidies and guarantees provide, both the USDA and VA programs are able to offer interest rates below the market average.

Other mortgage programs, like the FHA loan and conventional loan, can have rates around 0.5%–0.75% higher than USDA rates on average. That said, mortgage rates are personal. Getting a USDA loan doesn’t necessarily mean your rate will be “below-market” or match the USDA loan rates advertised.

How to get the best USDA mortgage rates

Strengthening your financial standing is essential for obtaining the best USDA loan rates. Here are some helpful techniques for improving your personal finances:

Boost your credit score. Improving your credit score is an important step toward getting the best USDA loan rates. Taking steps to improve your credit score before applying for a USDA loan often proves beneficial.
Consider a down payment. While a down payment is not required for USDA loans, it can demonstrate to the lender your commitment to repaying the loan. This could also help lenders find your application more appealing.
Minimize existing debt. Lowering your debt-to-income ratio (DTI) by paying off existing high-interest debts can make you more appealing to lenders. It demonstrates that you are capable of handling your loan and making payments on time.
Shop around for lenders. Exploring loan options with multiple participating lenders is a smart move that can save you thousands of dollars over the life of the loan. Comparing their interest rates, fees, closing costs, and loan terms can help you identify the most appealing offer. It’s possible that first-time home buyers will find better options than what USDA loans can offer.

USDA loan costs

When it comes to financing a home purchase with a USDA loan, it’s not just the mortgage rate that you need to consider. You’ll be responsible for various fees and costs, which can add up over time. Understanding these costs upfront can help you make a more informed decision and plan your budget accordingly.

Here’s a breakdown of the expenses you can expect:.

USDA mortgage insurance

The USDA guarantees its mortgage loans, meaning it offers protection to approved mortgage lenders in case borrowers default. But the program is partially self-funded. To keep this loan program running, the USDA charges homeowner-paid mortgage insurance premiums.

Verify your USDA loan eligibility. Start here

Upfront guarantee fee

One of the first costs you’ll encounter is the upfront guarantee fee. This fee is a percentage of the loan amount and is required by the USDA to secure the loan. It’s usually around 1% but can vary. You can either pay this fee upfront or roll it into the loan balance.

Annual guarantee fee

Unlike conventional loans that may not require mortgage insurance, USDA loans come with a monthly mortgage insurance premium. You can expect to pay a 0.35% annual guarantee fee based on the remaining principal balance each year.

The annual fee is broken into 12 installments and included in your regular mortgage payment.

As a real-life example, a home buyer with a $100,000 loan size would have a $1,000 upfront mortgage insurance cost plus a monthly payment of $29.17 for the annual mortgage insurance. USDA upfront mortgage insurance is not paid in cash. It’s added to your loan balance, so you pay it over time.

Inspection fees

Before the loan is approved, the property will need to be inspected to ensure it meets USDA property eligibility requirements. This inspection can cost anywhere from $300 to $500, depending on the location and size of the home.

Closing Costs

Closing costs are a mix of fees that include loan origination fees, appraisal fees, title search fees, and more. These costs can range from 2% to 5% of the home’s purchase price. Some of these costs can be rolled into the loan amount, but it’s best to be prepared to pay some of them out-of-pocket.

How to apply for a USDA home loan

Qualifying for a USDA home loan can be a great way to finance a home, especially if you’re looking to buy in a rural area. These loans offer attractive benefits like zero down payments and competitive interest rates.

However, the USDA loan approval process involves several steps and specific eligibility criteria. Here’s a guide on how to apply for a USDA home loan.

Check your USDA loan eligibility. Start here

Step 1: Check your eligibility

Before diving into the application process, it’s important to determine if you meet the USDA’s eligibility requirements. These typically include:

A minimum credit score of 640
A debt-to-income (DTI) ratio of up to 41%
Income limitations, which vary by location and household size
The property must be located in a USDA-eligible area

Step 2: Gather necessary documentation

You’ll need to provide various documents to prove your eligibility, including:

Proof of income eligibility (e.g., pay stubs, tax returns)
Employment verification
Credit history report
Personal identification (e.g., driver’s license, passport)

Step 3: Pre-Qualification

Contact a USDA-approved lender to get pre-qualified for a loan. During this qualifying process, the participating lender will review your financial situation to give you an estimate of how much you can borrow.

Check if you’re eligible for a USDA loan. Start here

Both pre-approval and pre-qualification can give you a better idea of your budget and show sellers that you are a serious buyer.

Step 4: Property search

Once pre-qualified, you can start looking for a property that meets USDA guidelines. Keep in mind that the home must be your primary residence and be located in an eligible rural area.

Working with a real estate agent who has experience with USDA loans can be a big advantage.

Step 5: USDA home loan application

After finding the right property, you’ll need to fill out the USDA loan application. Your lender will guide you through this process, which will include a more thorough review of your financial situation and the submission of additional documents.

Step 6: Property appraisal and inspection

The lender will arrange for an appraisal to ensure the property meets USDA standards. An inspection may also be required to identify any potential issues with the home.

Step 7: Loan approval and closing

Once the appraisal and inspection are complete and all documentation is verified, you’ll move on to the loan approval stage. If approved, you’ll proceed to closing, where you’ll sign all necessary paperwork and officially secure your USDA home loan.

With the loan secured and the keys in hand, you’re now ready to move into your new home!

By following these steps and working closely with a USDA-approved lender, you can navigate the USDA home loan process with confidence. Always remember to consult with your lender for the most accurate and personalized advice.

How do USDA loans compare to conventional loans?

USDA loans and conventional loans both have fixed terms and interest rates, but they’re different when it comes to down payments and fees.

Down payment

USDA loans don’t ask for a down payment, unlike conventional mortgages, which usually require a 3% down payment. FHA loans require a 3.5% down payment. VA loans, like USDA loans, also don’t require a down payment.

Home appraisal

Both USDA loans and conventional loans need an appraisal from an independent third party before the loan is approved.

The home appraisal for a conventional loan determines whether the loan amount and the home’s value match. If the loan amount doesn’t measure up to the market value of the home, the lender can’t get back their money just by selling the house. If you want to know more about the home’s condition, like the roof or appliances, you need to get a home inspector.

For a USDA loan, the appraisal does two things:

Just like with a conventional loan, it makes sure the home’s value is right for the loan amount.
It checks if the home meets USDA standards. This means the home should be ready to live in. For example, the roof and heating should work properly. The appraisal also looks at whether the well and septic systems follow USDA rules.

If you’re looking for a detailed report on the house, hiring a home inspector is still a good idea.

Fees

While conventional loans charge private mortgage insurance (PMI) when you make less than a 20% down payment, this isn’t the case with USDA loans. You don’t need PMI for USDA direct or guaranteed loans.

However, USDA guaranteed loans have a guarantee fee of 1% at closing and then an annual fee of 0.35% of the loan, added to your monthly payment. You can roll the initial fee into your loan amount.

Loan terms

The term for a USDA guaranteed loan is 30 years with a fixed rate. If you get a USDA direct loan, you can have up to 33 years to pay it back. If you’re a very low-income borrower, you might get up to 38 years to make it more affordable.

FAQ: USDA loans

Verify your USDA loan eligibility. Start here

What is the USDA Rural Housing Mortgage and who is eligible for it?

The USDA Rural Housing Mortgage, officially known as the Single Family Housing Guaranteed Loan Program, is a rural development loan aimed at helping single-family home buyers. It’s often referred to as a “Section 502” loan, based on the Housing Act of 1949 that created this program. Designed to stimulate growth in less-populated and low-income areas, this rural development loan is ideal for those looking to buy in eligible rural areas with the possibility of a zero-down payment.

What is the income limit for USDA home loans?

The income limit for USDA home loans is based on your area’s median income. To be eligible for a USDA loan, you can’t exceed the median income by more than 15 percent. For example, if the median salary in your city is $65,000 per year, you could qualify for a USDA loan with a salary of $74,750 or less.

Do USDA loans take longer to close?

USDA lenders have to send each loan file to the Department of Agriculture for approval before underwriting. This can add around two to three weeks to your loan processing time.

Can I do a cash-out refinance with the USDA program?

No, cash-out refinancing is not allowed in the USDA Rural Housing Program. Its loans are for home buying and rate-and-term refinances only.

What’s the maximum USDA mortgage loan size?

The USDA does not set loan limits, but your household income and debt-to-income ratio have a limit on the amount you can borrow. The USDA typically caps debt-to-income ratios at 41 percent. However, the program may be more lenient for borrowers with a credit score over 660 and stable employment or who show a demonstrated ability to save.

Where can I find a USDA loan lender, and what loan terms are available?

You can find a USDA loan lender by visiting the U.S. Department of Agriculture’s website, which maintains a list of approved lenders for the Rural Housing Program. The USDA Rural Housing loan offers a 30-year fixed-rate mortgage only, with no 15-year fixed option or adjustable-rate mortgage (ARM) program available.

Can I receive a gift or have the seller pay for my closing costs with a USDA loan?

Yes, USDA rural development loans allow both gifts from family members and non-family members for closing costs. Inform your loan officer as soon as possible if you’ll be using gifted funds, as it requires extra documentation and verification from the lender. Additionally, the USDA Rural Housing Program permits sellers to pay closing costs for buyers through seller concessions. These concessions may cover all or part of a purchase’s state and local government fees, lender costs, title charges, and various home and pest inspections.

Can I use the USDA loan for a vacation home, investment property, or working farm?

No, the USDA loan program is designed specifically for primary residences and cannot be used for vacation homes, investment properties, or working farms. The Rural Housing Program focuses on residential property financing.

Am I eligible for the USDA if I recently returned to work or am self-employed?

If you are a W-2 employee, you are eligible for USDA financing immediately, as there’s no job history requirement. However, if you have less than two years in a job, you may not be able to use your bonus income for qualification purposes. Self-employed individuals can also use the USDA Rural Housing Program. To verify your self-employment income, you will need to provide two years of federal tax returns, similar to the requirements for FHA and conventional financing.

Can I use the USDA loan program for home repairs, improvements, accessibility, and energy-efficiency upgrades?

Yes, the USDA loan program can be used for various purposes, including making eligible repairs and improvements to a home (such as replacing windows or appliances, preparing a site with trees, walks, and driveways, drawing fixed broadband service, and connecting utilities), permanently installing equipment to assist household members with physical disabilities, and purchasing and installing materials to improve a home’s energy efficiency (including windows, roofing, and solar panels).

Can a non-citizen qualify for a USDA loan?

Yes, along with U.S. citizens, legal permanent residents of the United States can also apply for a USDA loan.

Today’s USDA mortgage rates

USDA mortgage interest rates consistently rank among the lowest in the market, next to VA loans.

USDA loans can be particularly attractive to borrowers seeking optimal financial terms, especially in an environment with elevated interest rates. Prospective homebuyers who meet the criteria for a USDA loan may be able to secure a great deal right now.

To find out whether you qualify for one and what your rate is, consult with a trusted lender below.

Time to make a move? Let us find the right mortgage for you

¹ Source: USDAloans.com, based on Housing Assistance Council data

Source: themortgagereports.com

Apache is functioning normally

March 10, 2024 by Brett Tams

After you apply for a mortgage, keep your eye out for the Loan Estimate, an official document from the lender.

Reading and comparing Loan Estimates from different lenders will help you understand the terms and costs of getting a home loan.

What is a Loan Estimate?

A Loan Estimate is a three-page government-mandated document that spells out the terms of a mortgage offer. To get a Loan Estimate you must provide a lender your name, income amount and Social Security number as well as the address of the property you want to buy, an estimated value of the property and the requested loan amount. Once you’ve applied with this information, the lender has three business days to provide a Loan Estimate.

Although you don’t have to give more information about your finances at this stage, the Loan Estimate will be more accurate with the more details you provide, such as the amount of debt you carry and the type of mortgage you’re interested in.

Reading a Loan Estimate

A Loan Estimate details the terms of your loan, including:

Expenses, with clear “yes” or “no” answers to important questions, such as whether each amount can increase after closing, whether your loan includes a prepayment penalty or a balloon payment and which expenses are included in your escrow account.
The projected monthly mortgage payment, including taxes, insurance and other assessments.
Information on services you can, and cannot, shop for — such as pest inspections, survey fees and the home appraisal.

The lender must give a new Loan Estimate if key information changes. For example, the loan offer may change and require a new Loan Estimate if the property appraisal comes in lower than expected. Or a new Loan Estimate might be necessary if your credit standing changes and you no longer qualify for the terms of the original loan offer.

Comparing Loan Estimates

The Loan Estimate also offers data that can help you compare loan offers from multiple lenders. The information to compare includes the total costs of third-party services, the annual percentage rate — your interest rate including fees — and the amount of interest you’ll pay over the loan term, expressed as a percentage of your total loan amount.

One important section to look for is at the top of Page 2, on the left-hand side of the page. That’s where you’ll see “Loan Costs” and “A. Origination Charges.” You’ll find two types of charges here:

Lender fees can have several different names, including “application fee” or “underwriting fee,” as shown. You’ll want to compare these origination fees among the lenders you are shopping.
Discount points are prepaid interest that you have the option of paying to reduce your interest rate. In the example below, an annotated screenshot from the Consumer Financial Protection Bureau’s website, it’s shown as “.25% of Loan Amount (Points).” For more detail, go to the CFPB website and click through all three pages of the sample Loan Estimate.

Page 2 of a sample Loan Estimate on the Consumer Financial Protection Bureau’s website

It’s a good idea to apply with a few lenders and compare Loan Estimates line by line to see which is the best deal.

See the final terms in the Closing Disclosure

After choosing a lender, you’ll go through the full mortgage underwriting process. The lender will order an appraisal of the property and may request more documentation of your finances. After final loan approval, you’ll get the Closing Disclosure. This document gives the final terms and costs of your loan, including the specific amount you’ll need to pay at closing.

You’ll receive the Closing Disclosure at least three business days before your scheduled loan closing. Use this time to review the document for any changes, comparing your Closing Disclosure with the previously received Loan Estimate side by side. Call the lender if you have any questions.

Source: nerdwallet.com

Apache is functioning normally

March 7, 2024 by Brett Tams

Over the life of a $350,000 mortgage with a 7% interest rate, borrowers could expect to pay from $216,229 to $488,233 in total interest, depending on whether they opt for a 15-year or 30-year loan term. But the actual cost of a mortgage depends on several factors, including the interest rate, and whether you have to pay private mortgage insurance.

Besides interest, homebuyers need to account for a down payment, closing costs, and the long-term costs of taxes and insurances that are included in a $350,000 mortgage payment.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Cost of a $350,000 Mortgage

When you finance a home purchase, you have to pay back more than the borrowed amount, known as the loan principal. The total cost of taking out a $350,000 mortgage is $838,281 with a 30-year term at a 7% interest rate. This comes out to $488,233 worth of interest, assuming there aren’t any late monthly mortgage payments or pre-payments.

When you buy a home, there are usually some upfront costs you’ll have to pay, too. Mortgages often require a down payment, calculated as a percentage of home purchase price, that’s paid out of pocket to secure financing from a lender. The required amount varies by loan type and lender, but average down payments range from 3% – 20%.

Closing costs, including home inspections, appraisals, and attorney fees, represent another upfront cost for real estate transactions. They typically sum up to 3% to 6% of the loan principal, or $10,500 to $21,000 on a $350,000 mortgage.

The total down payment on $350,000 mortgages also impacts the total cost of taking out a home loan. Unless buyers put 20% or more down on a home purchase, they’ll have to pay private mortgage insurance (PMI) with their monthly mortgage payment. The annual cost of PMI is generally between 0.5% – 1.5% of the loan principal. Borrowers can get out of paying PMI with a mortgage refinance or when they reach 20% equity in their home. If this is your first time in the housing market, consider reading up on tips to qualify for a mortgage.
💡 Quick Tip: When house hunting, don’t forget to lock in your home mortgage loan rate so there are no surprises if your offer is accepted.

Monthly Payments for a $350,000 Mortgage

The monthly payment on a $350K mortgage won’t always be the same amount. You’ll need to factor in your down payment, interest rate, and loan term to estimate your $350,000 mortgage monthly payment.

With a 30-year loan term and 7% interest rate, borrowers can expect to pay around $2,328 a month. Whereas a 15-year term at the same rate would have a monthly payment of approximately $3,146. However, these estimates only account for the loan principal and interest. Monthly mortgage payments also include taxes and insurances, but these costs can differ considerably by location and based on a home’s assessed value.

There are also different types of mortgages to consider. Whether you opt for a fixed vs adjustable-rate mortgage, for instance, will affect your monthly payment.

To get a clearer idea of what your monthly payment might be with different down payments and loan terms, try using a mortgage calculator.

Recommended: Best Affordable Places to Live in the U.S.

Where to Get a $350,000 Mortgage

Homebuyers have many options in terms of lenders, including banks, credit unions, mortgage brokers, and online lenders.

The homebuying process can be stressful, so it may be tempting to go with the first mortgage offer you receive. However, shopping around and getting loan estimates from multiple lenders lets you choose the one that’s the most competitive and cost-effective.

Even a fraction of a percentage point difference on an interest rate can add up to thousands in savings over the life of a mortgage. Besides the interest rate, assess the fees, terms, and closing costs when comparing mortgage offers.

Recommended: Home Loan Help Center

What to Consider Before Applying for a $350,000 Mortgage

When taking out a mortgage, it’s important to consider the total cost of the loan. You’ll need cash on hand for a down payment and closing costs, plus sufficient income and funds to cover the monthly payment and other homeownership costs.

Before applying for a $350,000 mortgage, crunching the numbers in a housing affordability calculator can give a better understanding of how these costs will work with your finances.

It’s also helpful to see how $350,000 mortgage monthly payments are applied to the loan interest and principal over the life of the loan. The majority of the monthly mortgage payment goes toward interest rather than paying off the loan principal, as demonstrated by the amortization schedules below.

Here’s the mortgage amortization schedule for a 30-year $350,000 mortgage with a 7% interest rate — which would amount to $488,233 in interest. For comparison, we’ve also included the mortgage amortization schedule for a 15-year $350,000 mortgage with a 7% interest rate. A $350,000 mortgage payment, 15 years’ out, would add up to $216,229 in interest. When weighing a 30-year vs 15-year loan term, the shorter loan term carries a higher monthly payment but less than half the total interest over the life of the loan.

Amortization Schedule, 30-year Mortgage at 7%

Year	Beginning Balance	Total Interest Paid	Total Principal Paid	Remaining Balance
1	$350,000	$24,386	$3,555	$346,425
2	$346,425	$24,129	$3,812	$342,613
3	$342,613	$23,853	$4,088	$338,525
4	$338,525	$23,558	$4,383	$334,142
5	$334,142	$23,241	$4,700	$329,442
6	$329,442	$22,901	$5,040	$324,402
7	$324,402	$22,537	$5,404	$318,998
8	$318,998	$22,146	$5,795	$313,203
9	$313,203	$21,717	$6,214	$306,989
10	$306,989	$21,278	$6,663	$300,326
11	$300,326	$20,796	$7,145	$293,182
12	$293,182	$20,280	$7,661	$285,520
13	$285,520	$19,726	$8,215	$277,306
14	$277,306	$19,132	$8,809	$268,497
15	$268,497	$18,496	$9,446	$259,051
16	$259,051	$17,813	$10,128	$248,923
17	$248,923	$17,081	$10,861	$238,062
18	$238,062	$16,295	$11,646	$226,417
19	$226,417	$15,454	$12,488	$213,929
20	$213,929	$14,551	$13,390	$200,539
21	$200,539	$13,583	$14,358	$186,181
22	$186,181	$12,545	$15,396	$170,784
23	$170,784	$11,432	$16,509	$154,275
24	$154,275	$10,238	$17,703	$136,573
25	$136,573	$8,959	$18,982	$117,590
26	$117,590	$7,586	$20,355	$97,236
27	$97,236	$6,115	$21,826	$75,409
28	$75,409	$4,537	$23,404	$52,006
29	$52,006	$2,845	$25,096	$26,910
30	$26,910	$1,031	$26,910	$0

Amortization Schedule, 15-year Mortgage at 7%

Year	Beginning Balance	Total Interest Paid	Total Principal Paid	Remaining Balance
1	$350,000	$24,065	$13,684	$336,296
2	$336,296	$23,076	$14,673	$321,624
3	$321,624	$22,015	$15,733	$305,890
4	$305,890	$20,878	$16,871	$289,020
5	$289,020	$19,658	$18,090	$270,929
6	$270,929	$18,351	$19,398	$251,531
7	$251,531	$16,948	$20,800	$230,731
8	$230,731	$15,445	$22,304	$208,427
9	$208,427	$13,832	$23,916	$184,510
10	$184,510	$12,103	$25,645	$158,865
11	$158,865	$10,249	$27,499	$131,366
12	$131,366	$8,261	$29,487	$101,879/td>
13	$101,879	$6,130	$31,619	$70,260
14	$70,260	$3,844	$33,904	$36,355
15	$36,355	$1,393	$36,355	$0

Recommended: The Cost of Living By State

How to Get a $350,000 Mortgage

To qualify for a $350,000 mortgage, borrowers will need to meet the income, credit, and down payment requirements. It’s also important to have an adequate budget for long-term housing costs and other financial goals and obligations like savings and debt.

Using the 28/36 rule, a monthly mortgage payment shouldn’t be more than 28% of your monthly gross income and 36% of your total debt to be considered affordable. With a $2,328 monthly mortgage payment, you’d need a minimum gross monthly income of at least $8,300, or annual income of $96,600, to follow the 28% rule. Similarly, your total debt could not exceed $660 to keep housing and debt costs from surpassing 36%.

Home mortgage loans, with the exception of certain government-backed loans, require a minimum credit score of 620 to qualify. However, a higher credit score can help secure more competitive rates. If you qualify as a first-time homebuyer, you could get a FHA loan with a credit score of 500 or higher, though borrowers with a credit score below 580 will have to make a 10% down payment.

As mentioned above, it’s a good idea to compare lenders and loan types to find the most favorable rate and loan terms. From there, getting preapproved for a home loan is a logical next step to determine the loan amount and interest rate you qualify for. It also puts you in a better position to demonstrate you’re a serious buyer when making an offer on a property.

After putting in an offer, completing the mortgage application requires many of the same forms used for preapproval, plus an earnest money deposit.
💡 Quick Tip: Generally, the lower your debt-to-income ratio, the better loan terms you’ll be offered. One way to improve your ratio is to increase your income (hello, side hustle!). Another way is to consolidate your debt and lower your monthly debt payments.

The Takeaway

Buying a home is the largest purchase many Americans make in their lifetime. How much you’ll end up paying for a $350,000 mortgage depends on the interest rate and loan term. On a $350,000 mortgage, the monthly payment can range from $2,328 to $3,146 based on these factors.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

How much is a $350K mortgage a month?

The cost of a $350,000 monthly mortgage payment is influenced by the loan term and interest rate. On a $350K mortgage with 7% interest, the monthly payment ranges from $2,328 to $3,146 depending on the loan term.

How much income is required for $350,000 mortgage?

Income requirements can vary by lender. But using the 28/36 rule, a borrower who isn’t burdened by lots of other debts should make $99,600 a year to afford the monthly payment on a $350,000 mortgage.

How much is a down payment on a $350,000 mortgage?

The down payment amount depends on the loan type and lender terms. FHA loans require down payments of 3.5% or 10%, while buyers could qualify for a conventional loan with as little as 3% down.

Can I afford a $350K house with a $70K salary?

It may be possible to afford a $350,000 house with a $70,000 salary, but only if you are able to make a sizable down payment to lessen the amount of money you need to borrow. Having a good credit score and minimal debt would also better your chances.

Photo credit: iStock/sturti

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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Source: sofi.com

Apache is functioning normally

February 27, 2024 by Brett Tams

The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Learn how to utilize a tax advantaged 529 plan to help your or a friend’s children save for future education expenses.

This Week in Your Money: What are the risks of purchasing a home without an inspection? How can you plan for major expenses when healthcare providers can’t tell you how much their services will cost? Hosts Sean Pyles and Sara Rathner share their hot takes on unexpected financial challenges, with tips and tricks on handling surprise expenses, understanding the importance of home inspections, and dealing with healthcare industry inefficiencies.

Today’s Money Question: What are the benefits of a 529 college savings plan? Can you contribute to a friend’s 529 plan to support their child’s future? NerdWallet writer Elizabeth Ayoola joins Sean and Sara to discuss the essentials of 529 college savings plans. They discuss the types of educational expenses covered, the tax benefits associated with 529 plans, and the flexibility of choosing different state plans. They also answer a listener’s question about how to approach the sensitive topic of financial gifts for education with parents, sharing methods for contributing to a loved one’s 529 plan without overstepping boundaries. Then, they discuss the implications of the Secure Act 2.0 on 529 plans, methods for estimating necessary savings for a child’s education, and tactful ways to discuss educational contributions with parents.

Check out this episode on your favorite podcast platform, including:

NerdWallet stories related to this episode:

Episode transcript

This transcript was generated from podcast audio by an AI tool.

Sara Rathner:

Hey Sean, has money ever made you mad?

Sean Pyles:

Yeah, it has, especially when I get a bill that I don’t expect to pay but have to anyway. So yeah, why?

Sara Rathner:

Yeah. Yeah, those surprise major expenses are a huge pain. I just had to replace my washing machine because the fun never stops in my house.

In this episode, we are going to let off a little steam about what makes us mad in the world of money.

Sean Pyles:

Welcome to NerdWallet’s Smart Money Podcast. Our job today is to help you be smarter with your money, one money question at a time. I’m Sean Pyles.

Sara Rathner:

And I’m Sara Rathner.

So listener, this show is all about you and your money questions. So, whatever financial decision you’re pondering, whatever’s making you mad about your money, let us know.

Sean Pyles:

Leave a voicemail or text the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or you can email your questions to podcast@nerdwallet com.

Sara Rathner:

In this episode, Sean and I answer a listener’s question about contributing to 529 accounts for your loved ones. But first, we’re going to yell into the void in our semi-regular Money Hot Takes segment.

Sean Pyles:

So here’s how this works. Sara and I just rail against whatever we feel like in the world of money. And let’s put, say, 100 seconds on the clock. That’s what? A second for every penny in a dollar. I don’t know, it’s just an arbitrary number really.

Sara Rathner:

That works for me. It’s a nice round number.

Sean Pyles:

All right, Sara, are you ready?

Sara Rathner:

Sean Pyles:

I’m starting my timer. Go.

Sara Rathner:

All right. I hate the trend where home buyers feel pressure to completely waive getting a home inspection before buying a property. That’s different from the type of waiver where you’ll still do the inspection, but then you’re assuming the cost of anything you find. It’s when you just do without the inspection entirely.

I live in a block of houses that are like 107 years old, and two houses on my block sold with waived inspections where the buyers had to put tens of thousands of dollars unexpectedly into problems in their house that they didn’t know about. I just had a neighbor text me asking for a roofer because the first time it rained since she moved in her house, it started raining on the inside of her house, which means that the seller just lived with that for however long before selling the house and passing the problem onto somebody else.

So especially if you’re a first-time home buyer, if you are going to drain your savings to buy your house, and then you’re not going to have much money left for repairs, be really careful about this. And as a society, can we just make inspections mandatory? That’s more consumer-friendly, honestly. People need to know what they’re getting into, and frankly, people should feel pressure to keep their houses well maintained before sale. There I said it.

Sean Pyles:

You’ve got 40 more seconds if you want to keep on railing.

Sara Rathner:

Oh man, I do? Well, if you haven’t bought a home yet, what’s nice about getting an inspector involved is they’ll look at all the major systems of the house, the appliances, the roof, all sorts of stuff, the electrical, the plumbing, and they will tell you the lifespan of some of those major things like a furnace or a boiler, your roof, your HVAC system. And even if something is going to go in the next year or two, at least you have this laundry list of things and when they’ll probably need to be replaced, and you can begin to budget for those replacements.

Sean Pyles:

Okay, that’s 100 seconds.

Sara Rathner:

Boom. All right, Sean, you got any reaction?

Sean Pyles:

Well, I totally feel that, because buying a house without knowing what’s wrong with it is very risky financially. Buying a house can be financially risky in and of itself, depending on how expensive the home is. But imagine getting into the house, it’s your first day, you’re super happy to be a homeowner, and then you realize, oh, it’s raining inside the house, or the crawl space is infested with termites. You don’t know what you’re getting into if you don’t have an inspection. And even if it may make you a more competitive buyer, it isn’t worth it, in my opinion, to get yourself into something like that because you just don’t understand the risks you could be taking on. And I’m all about mitigating risks as much as possible.

Sara Rathner:

All right, Sean, I have had my turn, and now it is your turn. I have set my timer for 100 seconds. And go.

Sean Pyles:

Okay. Today I am mad about industries that are designed to extract money from us while making our lives miserable or at least really frustrating. And I have one, maybe two, examples depending on how far 100 seconds takes me.

First step is healthcare. Americans spend far more on healthcare than other wealthy nations. Nearly 18% of our GDP in 2021 went to healthcare. And what are we getting for it? An incompetent extractive industry that exploits nearly everyone that engages with it. Among wealthy nations, the US has the highest rates of infant and maternal mortality and excess deaths, not to mention the daily indignities that come with trying to access healthcare.

I have a recent example that is a microcosm of these larger issues. I recently got a bill in the mail for some regular lab work, and the thing is, I have these labs done every few months, and they’re always covered by my insurance. But this time I got a surprise bill for nearly $200, and I’d already had an expensive month with some car repairs, and I was not excited about the prospect of an additional $200 to cover. So I called my doctor, and they said, “Oh yeah, the company that does the lab work just messed up. Oops, just disregard the bill.”

So if I hadn’t called my doctor, I would have been on the hook for this bill. This was a relatively small bill as far as medical bills go, and it was fairly easy for me to clear up. I’m obviously very fortunate in this case, but for so many people, especially those with chronic illnesses or complex medical conditions, the onslaught of navigating insurance, verifying that you’re being billed correctly and then somehow coming up with the money to cover bill after bill is just totally exhausting and can make achieving financial goals nearly impossible.

So why am I going on and on about things that we already know too much about?

Sara Rathner:

Just so you know, you’re over time.

Sean Pyles:

Oh, God. I’m going to keep going. I’m almost done.

Sara Rathner:

Keep going, Sean. Let’s do this.

Sean Pyles:

All right. I am going on and on about this because I think it’s important to remind people that it does not have to be this way. We are in an election year, people, so I don’t know, let’s try to do something about it.

Okay, Sara, how many seconds was that?

Sara Rathner:

Oh, well I stopped timing it the second it hit the clock, so that might’ve been just an extra 10 seconds, honestly.

Sean Pyles:

Okay. It’s hard to fit so much into such a small amount of time.

Sara Rathner:

You know what? Your rage is such that it cannot be fit into a tiny container and that is valid. It’s okay to let the rage out and give it some more space.

I agree with you. What’s annoying is, for example, this past year I had a baby, and that is expensive to the tune for me of $7,000 out of pocket after insurance. Hi. $7,000 is a lot of money, people.

And what was annoying about that, and this is something for anybody who maybe is facing a planned medical procedure like a surgery or childbirth or anything like that, or who takes medication for chronic illnesses, I tried to call the billing department at the hospital to talk to my insurance company to say, “Can you at least give me an idea of how much money I will be out?” I knew going into it that I would be having a C-section. So I could say, “I’m having a C-section, that means I have to work with an anesthesiologist, which is an extra expense. Can you tell me ballpark, even if you’re off by a grand, how much should I budget for this?” And everyone’s like, “We don’t know.” Shrug emoji.

Then the bills just fly in for months and you think you’re done. So you’re like, “Okay, we’re done paying for the hospital bill. Now we can put our money into other stuff.” And then you get another bill for like, $1,100.

Sean Pyles:

And you have to question, was this billed correctly? Was it coded correctly? You don’t know. And it just flies in the face of all the things that we try to talk about in the personal finance space, which is around anticipating big expenses, budgeting for it, saving up for it if you can. It’s impossible when you don’t know what you’re going to be paying.

Sara Rathner:

Right, and if you’re facing surgery, what, are you just going to not have anesthesia to save money? Do not recommend.

Sean Pyles:

That is not a money-saving tip that we would recommend. No.

Sara Rathner:

No, that’s a place where you should spend good money, get good and numb.

But really it is an extra expense. And that’s so, so frustrating because you are not only out a lot of money, but you’re feeling kind of vulnerable because you’ve just gone through some medical stuff, even if it’s just blood work or something, and you want to take good care of your health, and it’s sometimes financially impossible to do that.

Sean Pyles:

Yeah. Not to mention completely demoralizing.

Sara Rathner:

Yeah, and some people just don’t go to the doctor because of the cost, or the dentist. And then years later, they’re faced with really serious health issues because they’ve been neglecting their health because of the cost.

Sean Pyles:

Yeah. I don’t know, it’s really tough in this space to talk about medical expenses because at NerdWallet and in the personal finance realm, we try to give actionable advice, and a lot of the time the advice is reactive. If you get a medical bill, you do have to ensure that it’s coded correctly. Maybe try to work out a payment plan with your medical office if you can’t cover the bill in one go. But it’s so hard to be proactive like you were just describing and understand what you’re going to have to pay if you want a routine procedure like blood work or something more significant like having a baby, makes me want to yell into the void all day every day.

Sara Rathner:

Yeah. Well, we took more than 100 seconds about this. If you have a body, then this is something that affects you, and it is really hard to deal with those extra unexpected costs.

Sean Pyles:

All right, so that is what we are mad about this week, listener. I know there’s a lot to be mad about in the world of money, so do not keep it in. Let us hear what you’re mad about, and we might just share it on a future episode.

You can text your Money Hot Take to us or leave a voicemail on the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or you can email it to podcast@nerdwallet com.

Sara Rathner:

All right, I don’t know about you, but my heart rate is starting to come down from all of that. Ooh, deep breaths, everyone. This episode’s money question is up next. So calm down too and stay with us.

Sean Pyles:

This episode’s money question comes from Lauren, who wrote us an email. Here it is.

“Hi nerdy Nerds. I’m not a parent. I’m never going to be a parent. Because of that, I have made it part of my financial plan to contribute to the 529 plans of kids around me. Because I don’t have nieces and nephews, I’m contributing toward the savings of my friend’s three-year-old. How much needs to go into a 529 starting at age two or three to cover a four-year private college?”

“I got the details on this kid’s 529 plan from his dad and started contributing about $100 a month. We didn’t talk about it. I intend to keep chipping in until the kid is done getting formal education 20 to 25 years from now. How do I talk to the parents? I want to understand if I’m helping enough without becoming privy to their private financial details. I also don’t want to make it seem like I have any vote whatsoever in how the kid charts an educational path. How do I broach this with the parents?”

Sara Rathner:

To help us answer this listener’s question, on this episode of the podcast, we are joined by NerdWallet writer Elizabeth Ayoola. Welcome.

Elizabeth Ayoola:

Hello, and hi.

Sean Pyles:

Elizabeth, so good to have you on.

So let’s start by setting some groundwork. Can you please describe what a 529 college savings plan is, how they work, and why they’re such a big deal?

Elizabeth Ayoola:

A 529 plan is a huge deal indeed to me anyway. I wish I had one when I went to college because I was left with a huge bill. But anyways.

529s are tax advantaged college savings plans, and they allow people to save and invest money for education expenses. So, with that said, the money gets to grow, and it gets to compound, which can mean beneficiaries have a nice education pot to pull from when they need the money. And for those who don’t know what compounding is, it’s essentially when your interest earns interest.

Sara Rathner:

It’s the eighth wonder of the world.

Elizabeth Ayoola:

Sara Rathner:

So you mentioned education expenses and that’s what the purpose of this account is, but what kinds of education expenses can you use a 529 to fund?

Elizabeth Ayoola:

Funds in a 529 account can be used to cover a vast range of qualified expenses, and that can range from tuition to computers and education related equipment. The expenses can also be used to pay for education needs of your beneficiaries. And the good thing that I like is that the beneficiaries can be in anywhere from kindergarten through grade 12. So that said, it’s not only for college students.

Sean Pyles:

Right, that is a really good point because people hear about 529 accounts, and they think they may be specifically for people going through a traditional four-year education, but people can also use the funds in the 529 college savings plan to cover things like trade schools too. So it really isn’t only for that traditional four-year higher education route.

Sara Rathner:

So earlier you mentioned that 529s are tax advantaged accounts. Can you talk a little bit about the tax treatment of them, and what should people know when they’re considering opening a 529?

Elizabeth Ayoola:

Well, one thing that I personally like about these accounts that some people don’t know also is that some states offer a tax deduction if you contribute to their plan. And when I say their plan, I mean the state that you live in. But there is no federal tax deduction for a 529 contribution. So it’s only at a state level. The tax deduction is usually capped. So no, you can’t just deduct your entire contribution. The deduction amount varies from state to state. So it’s best that you check in your state what the amount may be, if they offer it.

And a little bit off-topic, but I also like that the IRS doesn’t set a cap on your contributions to a 529 account, although some states do set a limit.

Sean Pyles:

And I’ll call out two other tax benefits of 529 college savings plans. The first is that investment growth in this account is tax-free, and second, distribution for qualified expenses like tuition or books are also tax-free.

Elizabeth, another important thing to know about 529 college savings plans is that each state has their own, and you don’t have to choose the 529 plan from the state that you live in. And this can all get a little bit confusing because there are so many states to choose from. So, at a high level, can you outline the main differences between a 529 from one state to the next, and how would someone go about choosing which state’s 529 plan to use?

Elizabeth Ayoola:

One of the major differences that people should know and a reason that people may cheat on their state’s 529 plan is lower fees. I personally have a 529 from a different state than my current home state for that very reason. So people should consider shopping around and comparing fees before opening an account. Ultimately, the goal should be to do some math and see whether the deductions and the credits that you’re going to get in the state that you live in are worth more than the lower fees that you could get in another state in the long term.

Also, note that you can open multiple 529 accounts. I have multiple 529 accounts. I recently opened a second one in my home state, Florida, because my son was awarded a grant and it could be transferred to a 529 account, but the catch was it had to be a Florida 529 plan.

Sara Rathner:

So 529s have some flexibility, which we talked about before, not just for four-year educations, but also for trade schools and for K to 12 expenses as well. And interestingly enough, 529s were just made even more flexible. Can you talk about recent changes around the ability to roll 529 funds into a Roth IRA, and what that means for folks who maybe aren’t considering going to college?

Elizabeth Ayoola:

The Secure Act 2.0 was recently passed, and if I can be honest, that’s what motivated me to open up my first 529 account, and I just opened it last year. I was always on the fence and only saved money in a brokerage account because I was afraid of what would happen if my son decided not to go to college in 15 years. He’s six, by the way.

I decided to get off the fence when the Secure Act 2.0 made it possible for people to roll at least a portion of the unused funds into a Roth account. However, you do have to wait until 15 years after you’ve opened the 529 account before you can roll those funds over. And you can also only roll up to a certain limit starting in 2024. It may be ideal to read the IRS’s rules, they have a lot of fine print around the conversion or speak to a finance professional about it.

I think Roths are also awesome because they aren’t subject to required minimum distributions and withdrawals. They’re also tax-free when you meet certain requirements like waiting until 59-1/2, amongst other rules.

Sara Rathner:

All right, well thank you for that great summary of the tax rules surrounding this new change. We just want to let you all know that we are not investing or tax professionals, and if you have any specific questions to your own situation, definitely consult a professional who can give you guidance.

Now let’s turn to the fun stuff. The math, Sean. I know that you are in the midst of your certified financial planner coursework. I have slogged through that myself. It is a lot. It is a lot of math.

Sean Pyles:

Sara Rathner:

And now that you know how to do it, I’m sure you’re eager to show off your chops. So are there any insights you can share that will help our listener figure out how much they need to save every month or every year to help their friends reach their savings goals?

Sean Pyles:

As a matter of fact, yes. And you’re right, I have been waiting for an opportunity to show off what I’ve been learning about because often I’m just doing calculations in silence and this is a time for me to be loud and proud about hitting buttons on a calculator. So let’s do it.

I’ll spare you and our listeners the specifics of the calculation, but I plugged the listener’s situation into a time value of money calculation and got a rough estimate for how much they will need to save.

Sara Rathner:

All right, drum roll. What’s the number?

Sean Pyles:

For our listener to meet the savings goal that they outlined in their question, remember, they want to save for four years of education at a private college starting now-ish and saving until the kid finishes school. They would need to save around $8,000 per year. Obviously, that’s a lot of money to contribute to a 529 account, no less for a kid who isn’t your own. And this is why 529s are often just part of the picture when it comes to paying for college, which usually includes some combination of scholarships, grants and loans and generous gifts from family friends.

Sara Rathner:

That is definitely more than a hundy a month.

Sean Pyles:

Yeah, that’s for sure.

All right, so all of that math out of the way, I want to talk about the other part of our listener’s question. They seem to be concerned about how much they should contribute and also how to talk about this with their friends. I am not a parent, so I would love to hear from both of you who are parents, how you would approach the situation if you had such a generous friend. Would you welcome the money, or say get out of my business? Or if you are going to accept this money, if you want to have this conversation with your friend, how would you want them to communicate that with you?

Elizabeth Ayoola:

Honestly, I would welcome the money, especially because I’m a single mama. So as a matter of fact, my friends always contribute to my son’s savings account in London for his birthdays or holidays and I really, really appreciate it. It can be a better gift to me than toys that stab me in the foot within a few days.

Sean Pyles:

Elizabeth Ayoola:

I would also appreciate a friend asking me what my savings goals are, so they know how to support that goal. However, I do think, for the sake of boundaries, I would like my friend to ask me my comfort level with the topic before they dive in and start trying to give advice.

I think it’s also important to note that not everyone is comfortable discussing money or financial goals. But with that said, here’s an example of maybe how somebody could say it. So you may say, “Hey, I want to help you reach John’s college savings goal. Are you comfortable discussing that target number you have in mind, and can you tell me how I can support that?” Or another option could be you saying, “Hey, would you like to do the math yourself and then let me know how I can support that goal?” So those are just a couple of options.

Sara Rathner:

Yeah, I mean, I’m not going to look a gift horse in the mouth. College is expensive now, and it’s only going to become even more expensive in the future. Even in-state tuition, where I live in Virginia, is often over $20,000 a year. That used to be the economical way to get a four-year degree, and now it’s also very, very expensive. So what’s it going to be like by the time my kid’s in college? I don’t know. A lot.

Sean Pyles:

I think we can confidently say more money.

Sara Rathner:

Confidently, we can say a whole lot more money.

I would want my friends to decide for themselves what they feel comfortable giving, because I don’t feel comfortable telling another person how they should allot their money because they have other competing financial goals and obligations. And I never want to tell another person what they can do with their money unless they specifically ask me to tell them what to do with their money, which nobody ever asks me.

Sean Pyles:

And you also don’t want to give the impression that your friends can’t look after their own family’s finances, right? That’s a bit of the awkwardness underlying the question, is you want to help someone that you care about and this child that you’re seeing grow up in the world, but you don’t want to impose your will upon them. It seems like our listener is being very thoughtful about that. And you don’t want to make it seem like you think they aren’t doing enough.

Sara Rathner:

Right, or you think their kids should go to a four-year private university because that’s what you value, but maybe the parents have other values that they want to impart upon their child as the kid grows up, and then the kid will go off and do their own thing as a young adult.

In my case, we have a 529 for our son. We have family members who’ve contributed money. They’ve just written checks to us, and then we deposit it into our account that is tied to our 529 and then deposit the money into the 529.

Ultimately, when you contribute, you do go through the account owners, and that’s oftentimes parent or guardians. You are going to have to communicate with them because they’re ultimately the gatekeeper of that account. They are the owners, and then the child is the beneficiary.

Sean Pyles:

That actually brings up something that I wanted to talk about, which is who would own this account? The listener could in theory open up a 529 account on their own for this kid. But long-term, it’s probably going to be easier if the parents are the owners of the account, because that way when the kid is eventually ready to go to college or trade school or what have you, the parent can be the one managing those distributions.

Personally, I know as a friend, as much as I love my friends and my friends’ kids, I don’t want to have to manage that down the road. So that’s something else that they should think about when they’re talking about this with their friends.

Sara Rathner:

I definitely agree with talking to the parents and ultimately contributing to an account that the parents or guardians are in charge of.

Sean Pyles:

Well, Elizabeth, do you have any final thoughts around 529s and helping your friend’s kids afford college?

Elizabeth Ayoola:

I think we have given some very juicy tips here and only two more things come to mind, which is one, while it’s noble to contribute to your friend’s kids or loved one’s kids’ 529 account, please take advantage of any state income tax deductions that you might be eligible for. The rules around this can be muddy. And I know the original listener who asked this question lives in a different state than where he’s contributing, but sometimes you’re able to get a deduction depending on the state that you live in. So if you can get money back, I mean, why not?

My second thing that I’ll say is that if your loved one doesn’t have a number in mind, guide them to a college savings calculator or run the numbers together over coffee if they’re open to doing that.

Sean Pyles:

Great. Well, thank you so much for coming on and talking with us.

Elizabeth Ayoola:

I loved it. Thank you for having me.

Sean Pyles:

And that is all we have for this episode. If you have a money question of your own, turn to the Nerds and call or text us your question at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected].

Visit nerdwallet.com/podcast for more info on this episode. And remember to follow, rate, and review us wherever you’re getting this podcast.

Sara Rathner:

This episode was produced by Sean Pyles and myself. Kevin Berry and Tess Vigeland helped with editing. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all of their help.

And here’s our brief disclaimer:

We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.

Sean Pyles:

And with that said, until next time, turn to the Nerds.

Source: nerdwallet.com

Apache is functioning normally

February 26, 2024 by Brett Tams

Key takeaways

Construction loans are short-term loans that you can use to build a new home.
Some construction loans can be converted to mortgages after your home is finished.
Construction loans typically have tougher criteria than conventional mortgages for existing homes.

If you can’t find the right home to buy, you might be thinking about building a house instead. Financing this type of project is somewhat different than getting a mortgage to move into an existing property. Instead of a mortgage, you take on a construction loan (also known as a construction mortgage). Here’s what to know about construction loans.

What are construction loans?

Construction loans are loans that fund the building of a residential home (aka a stick-built house), from the land purchase to the finished structure. Common types are a standalone construction loan — a short-term loan (generally with a year-long term) — which only finances the building phase, and a construction-to-permanent loan, which converts into a mortgage once the construction is done. Borrowers who take out a standalone construction loan often get a separate mortgage to pay it off when the principal falls due.

You can use a construction loan to cover such costs as:

The land
Contractor labor
Building materials
Permits

How do construction loans work?

The initial term on a construction loan generally lasts a year or less, during which time you must finish the project. Because construction loans work on such a short timetable and are dependent on the project’s progress, you (or your general contractor) must provide the lender with a construction timeline, detailed plans and a realistic budget. Based on that, the lender will release funds at various phases of the project, usually directly to the contractor.

Construction loan statistics

Construction loans typically require 20 percent down, at minimum.
As of the second quarter of 2023, commercial and non-commercial construction loan volume totaled $488.54 billion, according to S&P Global Market Intelligence.
Currently, the top five construction loan lenders, in terms of number of loans, are (in order): Wells Fargo, JP Morgan Chase, Bank of America, U.S. Bank and Bank OZK, reports S&P.

Construction loans vs. traditional mortgages

Beyond the cost and repayment timeline, construction loans and mortgages have a few main differences:

The funds distribution: Unlike mortgages and personal loans that provide funds in a lump-sum payment, the lender pays out the money for a construction loan in stages as work on the new home progresses. These draws tend to happen when major milestones are completed — for example, when the foundation is laid, or the framing of the house begins.
The repayments: With a mortgage, you start paying back the principal and interest right away. With construction loans, your lender will typically expect you to make interest payments only during the construction stage. Additionally, borrowers are typically only obligated to repay interest on any funds drawn to date until construction is completed.
Inspection/appraiser involvement: While the home is being built, the lender has an appraiser or inspector check the house during the various construction stages. As the work is approved, the lender makes additional payments to the contractor, known as draws. Expect to have between four and six inspections to monitor the progress.
Requirements: Construction loan requirements include being financially stable and having the ability to make a down payment. Lenders also want to see a construction plan, which you can read more about below.
Interest rates: Construction loan interest rates are typically higher than traditional mortgage rates. This is often because you’re not providing collateral to back the loan, which means the lender is taking on more risk.

Types of construction loans

There are different types of construction loans available to borrowers, which are designed to suit various financial needs.

Construction-to-permanent loan

With a construction-to-permanent loan, you borrow money to pay for the cost of building your home. Once the house is complete and you move in, the loan is converted to a permanent mortgage.

In essence, the loan becomes a traditional mortgage, typically with a loan term of 15 to 30 years. You can opt for a fixed-rate or an adjustable-rate mortgage.

Then, you start making payments that cover interest and the principal. (During the construction loan phase, your lender disburses the funds based upon the percentage of the project completed, and you’re only responsible for interest payments on the money drawn). While many construction loans are conventional loans — entirely privately originated and financed — there are government versions as well. Your other options include an FHA construction-to-permanent loan — with less-stringent approval standards that can be especially helpful for some borrowers — or a VA construction loan if you’re an eligible veteran.

Whatever the type, the big benefit of the construction-to-permanent approach is that you have only one set of closing costs to pay, reducing your overall expenses. “There’s a one-time closing so you don’t pay duplicate settlement fees,” says Janet Bossi, senior vice president at OceanFirst Bank in New Jersey.

Construction-only loan

A construction-only loan provides the funds necessary to build the home, but the borrower is responsible for repaying the loan in full at maturity (typically one year or less). You can settle the debt either in cash or by obtaining a mortgage to pay it off.

Construction-only loans can ultimately be costlier than their construction-to-permanent cousins, especially if you have to finance the repayment. That’s because you complete two separate loan transactions and pay two sets of fees. Closing costs tend to equal thousands of dollars, so it helps to avoid another set. And, of course, you have to invest time and energy shopping for a mortgage.

Another consideration: Your financial situation might worsen during the construction process. If you lose your job or face some other hardship, you might not be able to qualify for a mortgage later on — and might not be able to move into your new house.

Renovation loan

If you want to upgrade an existing home rather than build one, you can compare home renovation loan options. These come in a variety of forms depending on the amount of money you’re spending on the project.

“If a homeowner is looking to spend less than $20,000, they could consider getting a personal loan or using a credit card to finance the renovation,” says Steve Kaminski, head of U.S. Residential Lending at TD Bank. “For renovations starting at $25,000 or so, a home equity loan or line of credit may be appropriate, if the homeowner has built up equity in their home.”

Another viable option in a low mortgage rate environment is a cash-out refinance, whereby a homeowner would take out a new mortgage in a higher amount than their current loan and receive the extra as a lump sum. As rates tick up, though, cash-out refis become less appealing.

With any of these options, the lender generally does not require disclosure of how the homeowner will use the funds. The homeowner manages the budget, the plan and the payments. With other forms of financing, the lender will evaluate the builder, review the budget and oversee the draw schedule.

Owner-builder construction loan

Owner-builder loans are construction-to-permanent or construction-only loans in which the borrower also acts in the capacity of the home builder.

Most lenders won’t allow the borrower to act as their own builder because of the complexity of constructing a home and the experience required to comply with building codes. Lenders typically only allow it if the borrower is a licensed builder by trade.

End loan

An end loan simply refers to the homeowner’s mortgage once the property is built, says Kaminski. You use a construction loan during the building phase and repay it once the construction is completed. You’ll then have a regular mortgage to pay off, also known as the end loan.

“Not all lenders offer a construction-to-permanent loan, which involves a single loan closing,” says Kaminski. “Some require a second closing to move into the permanent mortgage, or an end loan.”

Construction loan rates

Unlike traditional mortgages, which carry fixed rates, construction loans usually have variable rates that fluctuate with the prime rate. That means your monthly payment can also change, moving upward or downward based on rate changes.

Construction loan rates are also typically higher than traditional mortgage rates. That’s partially because they’re unsecured (backed by an asset). With a traditional mortgage, your home acts as collateral — if you default on your payments, the lender can seize your home. With a home construction loan, the lender doesn’t have that option, so they tend to view these loans as bigger risks.

On average, you can expect interest rates for construction loans to be about 1 percentage point higher than those of traditional mortgage rates.

Construction loan requirements

The companies that offer construction loans usually require borrowers to:

Be financially stable. To get a construction loan, you’ll need a low debt-to-income ratio and proof of sufficient income to repay the loan. You also generally need a credit score of at least 680.
Make a down payment. You need to make a down payment when you apply for the loan, just as you do with most mortgages. The amount will depend on the lender you choose and the amount you’re trying to borrow to pay for construction, but construction loans usually require at least 20 percent down.
Have a construction plan. Lenders will want you to work with a reputable construction company and architect to come up with a detailed plan and schedule.
Get a home appraisal. Whether you’re getting a construction-only loan or a construction-to-permanent loan, lenders want to be certain that the home is (or will be) worth the money they’re lending you. The appraiser will assess the blueprints, the value of the lot and other details to arrive at an accurate figure. For construction-to-permanent loans, the home will serve as collateral for the mortgage once construction is complete.

How to get a construction loan

Getting approval for a construction loan might seem similar to the process of obtaining a mortgage, but getting approved to break ground on a brand-new home is a bit more complicated. Generally, you should follow these four steps:

Find a licensed builder: Lenders will want to know that your chosen builder has the expertise to complete the home. If you have friends who have built their own homes, ask for recommendations. You can also turn to the NAHB’s directory of local home builders’ associations to find contractors in your area. Just as you would compare multiple existing homes before buying one, it’s wise to compare different builders to find the combination of price and expertise that fits your needs.
Find a construction loan lender: Check with several experienced construction loan lenders to obtain details about their specific programs and procedures. If you have trouble finding a lender willing to work with you, check out smaller regional banks or credit unions. Compare construction loan rates, terms and down payment requirements to ensure you’re getting the best possible deal for your situation.
Get your documents together: A lender will likely ask for a contract with your builder that includes detailed pricing and plans for the project. Be sure to have references for your builder and any necessary proof of their business credentials. You will also likely need to provide many of the same financial documents as you would for a traditional mortgage, like pay stubs and tax statements, that offer proof of income, assets and employment.
Get preapproved: Getting preapproved for a construction loan can provide a helpful understanding of how much you will be able to borrow for the project. This can be an important step to avoid paying for plans from an architect or drawing up blueprints for a home that you will not be able to afford.
Get homeowners insurance: Even though you may not live in the home yet, your lender will likely require a prepaid homeowners insurance policy that includes builder’s risk coverage. This way, if something happens during the construction process — the halfway-built property catches on fire, or someone vandalizes it, for example — you are protected.

Construction loan FAQ

Construction loans cover the costs of building a home. Typically, that means the expenses associated with construction, such as contractor fees, labor and permits. But you can also use the funds to purchase land. However, construction loans do not cover design costs. If you want to hire a professional to design your home, you’ll need to cover that cost on your own.
Ask your lender how money gets disbursed from your loan amount. Some lenders allow for monthly draws, while others will only authorize a draw after a passed inspection. Inquire about any processes or documentation required to pull money from your construction loan so that you can pay the bills in a timely fashion as they come in.

Understanding this process — and ensuring your contractor does, too — can help to avoid delays because of insufficient funds.
There are benefits and drawbacks to construction loans. These types of loans tend to have higher interest rates than those associated with a mortgage, for instance. In addition, the funds provided by a construction loan are only released in stages as work on your home progresses rather than in a lump sum upfront. However, construction loans often only require interest payments while your home is being built, which can be easier on your budget. The loan terms may also be more flexible than those that come with a traditional loan.
Talk to your contractor and discuss the timeline of building the home and what sort of factors could slow down the job. Delays could result in changes to your loan’s interest rate, which can lead to higher payments. Delays can also lead to delays in fund disbursement for construction-only loans.

If your project takes longer than expected, work with your contractor to try to resolve any bottlenecks. You should also keep in touch with your lender to let them know what’s going on. Clear and consistent communication can help avoid major issues with the loan.
In general, it is harder to qualify for a construction loan than for a traditional mortgage. Most lenders require a credit score of at least 680 — which is higher than what you’d need for most conventional, VA and FHA loans. It’s also typical for lenders to ask for a minimum down payment of 20 percent on construction loans, so you may have trouble qualifying if you can’t get that much money together upfront.

Source: bankrate.com

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When You Buy Another House

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FAQ

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Hedging, Multi-Family Servicing, CU Appraisal, Imaging, POS Tools; Conventional Conforming News

Option 1: Copy and send this link

Are you eligible for the zero-down USDA home loan?

What is a USDA loan?

How do USDA loans work?

Types of USDA loans

USDA Guaranteed Loans

USDA Direct Loans

USDA Home Improvement Loan

USDA loan eligibility requirements

USDA loan property requirements

Eligible rural area

Single-family primary residence

Meet safety standards

USDA loan borrower requirements

Income limits

Stable income

Creditworthiness

Debt-to-income ratio

Citizenship status

USDA loan eligibility map

USDA loan rates

How to get the best USDA mortgage rates

USDA loan costs

USDA mortgage insurance

Upfront guarantee fee

Annual guarantee fee

Inspection fees

Closing Costs

How to apply for a USDA home loan

Step 1: Check your eligibility

Step 2: Gather necessary documentation

Step 3: Pre-Qualification

Step 4: Property search

Step 5: USDA home loan application

Step 6: Property appraisal and inspection

Step 7: Loan approval and closing

How do USDA loans compare to conventional loans?

Down payment

Home appraisal

Fees

Loan terms

FAQ: USDA loans

Today’s USDA mortgage rates

What is a Loan Estimate?

Reading a Loan Estimate

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.