by Tim Storm | Dec 15, 2016 | Conventional Loan
A common request amongst Orange County home buyers is to get a loan with no mortgage insurance. But unless they have a down payment of 20%, or qualify for a specialized program like a VA loan, then understanding what PMI is and why it is beneficial to home buyers with less than 20% down is important. What is PMI? If you are entering into a Conventional loan and are going to be paying a down payment of less than 20 percent, the lender will require you pay Private Mortgage Insurance, or “PMI”. Having borrowers pay mortgage insurance protects lenders in the case that the borrower forecloses. Private Mortgage Insurance will usually vary between .2% and 1.5% and depend on your credit score and down payment size. Obviously, the better the credit score the lower the PMI factor. Also, the bigger the down payment percentage, the lower the PMI factor. It makes sense that a borrower with 15% equity and a FICO score of 740 will pay less for PMI than a borrower with 5% equity and a 620 FICO score. For example, if an Orange County first time home buyer is putting 5% down on a purchase price of $500,000, they will have loan amount of $475,000 (after their $25,000 down payment). If the PMI factor is .62%, then the monthly PMI would be $245, which will be part of the monthly mortgage payment. ($475,000 x .0062 / 12 = $245). Paying for PMI There are several potential ways that you can pay for PMI on your loan. The most common way to pay for PMI is through a...
by Tim Storm | Jan 14, 2016 | Conventional Loan
There are many common perceived hurdles to homeownership in Orange County, CA. However, studies have shown that many of the obstacles mentioned are perceived, not real. A recent study by Fannie Mae, What Do Consumers Know About The Mortgage Qualification Criteria?, revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage. Let’s break down three such challenges. Down Payment Perceptions Many Orange County renters believe that the lack of a big enough down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report: 40% of all renters don’t know what down payment is required 15% think you need at least 20% down An additional 4% think you need at least 10% down The Reality There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA actually allows $0 down payment up to a purchase price of $625,500 in Orange County. According to the National Association of Realtors, the typical down payment for a first time buyer is 6%. Credit Score Perceptions Many Orange County renters believe they do not have a high enough FICO score to move forward with the purchase of a home. According to the Fannie Mae report: 54% of all renters don’t know what credit score is required 5% think you need at least a 740 credit score The Reality Many mortgages are closed where the borrower has a FICO score less than 700. According to Ellie Mae, the average credit score on a closed FHA purchase is 687 and the average...
by Tim Storm | Jan 7, 2016 | Conventional Loan
There are many benefits to homeownership in Orange County, CA. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage. Rents have increased quickly over the past few years in Orange County, CA which is leaving many renters feeling trapped. They feel as though they have missed out on low prices and are not sure whether to wait for prices to drop again (will that happen any time soon) or move inland, like to the Inland Empire (Riverside or San Bernardino county). Don’t Become Trapped Renting in Orange County Jonathan Smoke, Chief Economist at realtor.com recently reported on what he calls a “Rental Affordability Crisis”. He warns that, “Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.” This is especially true in Orange County. The Joint Center for Housing Studies at Harvard University recently released their 2015 Report on Rental Housing, in which they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare. It’s Cheaper to Buy Than Rent In Smoke’s article, he went on to say, “Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into...
