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Wisconsin Mortgage

How Much Down Payment is Enough?

DB_Thought_Bubble

As we explore many topics about buying a home in our First Time Buyer Education Series, many have been wondering how much they need to save for their new home? It may not be as much as you think.

ZERO DOWN
The VA and the USDA both offer a zero down loan program for individuals and/or properties that meet their criteria. Sometimes, loans require little or no cash out of pocket. Some HUD properties are available with as little as $100 down.

3% DOWN
Some Fannie Mae Community and HomePath® programs allow just 3% down. You may even be able to fund your down payment through gifts, grants, employers, government agencies, unsecured loans from family or even with loans against CDs or retirement accounts.

3.5% DOWN
The FHA loan program allows as little as 3.5% down, and it is more lenient than most other programs on minimum credit scores.

5% DOWN
Fannie Mae / Freddie Mac conventional loans are available with down payments as low as 5%. The minimum changes based on property type, credit score, occupancy, etc.

Are you surprised at how low you may be able to go? While many believe a 20% down payment is required, you can see now that it’s far from the only option.

Whether you’ve saved a little or a lot, reach out to my team today, and we’ll work on finding a loan that works for you.

 

HUD Announced an Increase in FHA Fees

Image Increased costs FHA home loans oconomowoc wisconsin wiOn 3/6/2012 HUD’s Official Announcement came out (click here to read it). The revisions/updates below are in red.

As part of HUD’s ongoing efforts to increase their financial health – and to get the FHA back into a place where they meet their capital requirements – on Monday, HUD announced the anticipated increases in the premiums they charge borrowers for FHA loans.

In its simplest form: The cost of borrowing is going to rise.

As you might know, the standard FHA loans are less risk-sensitive with their underwriting guidelines relative to conventional loans (that means lower credit score requirements, less money down, higher debt-to-income ratios, etc.). FHA is not a lender. Instead, they are a federally-backed insurance company that insures lenders against default on loans that are in compliance with their published guidelines.  A PMI company would be a private equivalent of the FHA. It is because of this insurance that lenders approve and close loans with more liberal guidelines; without it, the loans could not be closed.

As a federally-backed insurer, the government charges two types of premiums on the FHA mortgages:

  • Monthly Mortgage Insurance Premium (UFMIP) This, too, will increase. It will go up 10 basis points (0.1% per year) on April 1, 2012 for all cases assigned on or after April 9, 2012 to cover the requirements of the payroll tax extension approved in December of 2011. You might recall that this was already tacked on to conventional loans from a post I wrote a while back. This is a direct increase of 10 basis points (0.1%) in the borrower’s mortgage payment. For those in very high cost areas, FHA loans over $625,000 will be bumped 35 basis points from today’s levels effective June 1, 2012 for all cases assigned on or after June 11, 2012.
  • Up Front Mortgage Insurance Premium (UFMIP) This fee will, effective April 1, 2012 for all FHA cases assigned on or after April 9, 2012, go from its current 1% to 1.75% of the loan amount. One huge advantage to this UFMIP is that it is customarily built into the loan and does not require additional cash from a buyer at closing. That increase, however, certainly does impact monthly payment and cash flow.

Bottom Line:

  • If you are selling a home, get it priced correctly and under contract this month.
  • If you are buying a home, it’s quite possible that right now is the time where the cheapest possible mortgage is available – ever.  It’s time to make that to get yourself into a home!

To find out how this impacts you directly, please contact me directly for a completely free consultation.