Hello and welcome to this week’s edition of Moorings. First let’s take a look at rates and see where the market is at. For a thirty year fixed conventional loan a borrower should expect to obtain an interest rate of approximately 5% or 4.875% for an FHA loan with a 1% discount point. The difference being that an FHA loan can be up to 96.5% LTV as opposed to 95% LTV with a conventional loan. FHA also allows lower credit scores. The one drawback is with FHA there is an up-front fee of 1% as well as an annual mortgage insurance rate of 1.15% which is usually higher than private mortgage insurance needed on a conventional loan of greater than 80% loan-to-value. While both of these programs are popular for different reasons, they both have positive and negative guidelines with which your loan officer will be aware.
Another great option that we see being used more and more is a USDA loan. The United Stated Department of Agriculture will guarantee a loan up to 100% loan-to-value in areas it deems to be rural. Locally that includes most of Brunswick and Pender Counties and a few sections of New Hanover County. The major limitation for these loans other than the home’s location is the limit on income. A one to four person household cannot make more than $74,050 and a five to eight person household cannot make more than $97,750. With a USDA loan you can receive a rate as low as 4.875% with a 1% discount point and there is only a 3.50% onetime up-front mortgage insurance cost which can be financed into the total loan amount or paid by the seller. This means that many clients who choose this option have to bring very little or even no money to the closing. For first time homebuyers or any clients looking in Leland or Hampstead, this is an extraordinary opportunity to own a new home at a payment that is probably less than rent.
Last but not least, I thought I might also share some rates and information on programs that I don’t normally talk about, namely second-home and investment properties. With a second-home, rates are actually comparable to primary residence rates, hovering at around 5%. The main difference is that at least 10% down payment is going to be required on the purchase of a second home. For an investment property, a minimum of 15% down payment will be required (often this will be 20%) and the rate will likely go up to 5.875%. Investment properties are obviously more of a risk to an investor, therefore that risk is reflected in the rate. With all of the above scenarios that I quote, a 740 plus credit score is required and of course adequate income, credit history, employment and assets are all needed to qualify. Guidelines and rates change daily and knowing your product is paramount, so make sure you pick a loan office with the experience and knowledge to guide you in the right financial direction.
On a personal note, I competed in the NC State Bodybuilding Contest in High Point this weekend, and won 1st place in 50 Masters Division as well as 1st in the Lightweight Division against all age groups. Well that’s it for this week, until next, Be Blessed and Numbers 6:24-26 be on you.