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WASHINGTON — A plan by the Department of Veterans Affairs to introduce a low-interest refinancing option for veterans with VA-backed loans facing foreclosure drew ire of a House lawmaker who complained some homeowners might choose to default for lower monthly payments.
Rep. Merrick Van Orden, R-Wis., chairman of the House Committee on Veterans’ Affairs subpanel on economic opportunity, on Thursday questioned whether the new VA Servicing Purchase program — also known as VASP — will cause some homeowners to forgo paying back home loans to qualify for VA refinancing at the lower rate of 2.5% offered by the program.
The average interest rate now for a 30-year fixed mortgage is 7.24%, according to Bankrate, a consumer financial services company that surveys major lenders weekly.
“It is essential that we support the dream of home ownership for veterans who served our country,” said Van Orden, a Navy veteran who used a traditional VA home loan to buy his house. “I have used this program myself, and it is awesome.”
But he also said he has “grave reservations” that the new VASP program would result in unintended consequences that could destroy the VA home loan program.
The refinancing option is expected to be rolled out in spring, according to the VA.
Under the program, the VA would purchase the loan from the servicer to hold it in its own portfolio. Qualifying veterans would be allowed to refinance their mortgages under the VASP rate of 2.5% after falling behind on at least two mortgage payments.
“I am concerned that this program poses a moral hazard and will encourage veterans to become delinquent on their loans to let VA take over the servicing of their payments,” Van Orden said at a House hearing about the home loan program.
He said if the VA then experienced high delinquency rates under the VASP program, it could end up being responsible for thousands of home loans it serviced.
Van Orden questioned whether the VA should be in the business of servicing loans and expressed concern that the VA would force veterans out of their homes if they failed to pay down their mortgages.
Given that veterans are 50% more likely to be homeless than others, Van Orden said he could not imagine “the VA would go so far as to be kicking people out of their homes — default or no default.”
Under those circumstances, Van Orden speculated the federal government would end up owning mortgage-delinquent properties and letting the veterans stay in their homes.
“It is no longer private property. It is public property with private citizens living in public property. That was tried in the Soviet Union. I am not signing up for that,” he said.
Van Orden said the House subcommittee has received little information on how the VASP program will operate, its costs and its overall effect on the mortgage markets.
“All of this is a cause for concern,” he said. “We need answers on VASP.”
The VA announced the VASP program in November 2023 in the Federal Register that stated “VA is initiating an expanded program using existing refund provisions. Under this program, VA will exercise its statutory option to purchase the loan from the servicer and VA will hold the loan in VA’s own loan portfolio.”
VA-guaranteed loans comprise more than 10% of the mortgage market, according to the VA.
The VA worked to assist thousands of veterans during the coronavirus pandemic who fell behind on mortgage payments, said Rep. Mike Levin of California, the top Democrat on the subcommittee. He said many financial relief measures implemented during the pandemic have ended.
Levin said the VA in December 2023 paused foreclosures on VA home loans through May 31. The measure allows veterans who have defaulted on their loans to stay in their homes.
Under the foreclosure pause, the VA extended its coronavirus refund modification program that allowed the VA to purchase past due payments — along with additional principal amounts as necessary — and give veterans a second mortgage with no interest.
Lenders meanwhile are encouraged by the VA to work with delinquent homeowners to modify payments with plans that are more affordable. Last year, the VA helped more than 145,000 veterans and their families stay in their homes through various programs, the agency said.
“I understand that the VA cannot prevent every foreclosure. But I expect it to exhaust every option,” Levin said, in reference to VASP and other VA assistance programs.
VASP would provide refinancing at an interest rate lower than the current market rate, which would continue over the life span of the loan, said John Bell, executive director of the VA Home Loan Guaranty Program.
The VA estimates under a VASP Program loan — with a 2.5% fixed interest rate for 30 or 40 years — there would be an average payment reduction of 20%, in principal and interest, for homeowners.
“It is so important that we get this right,” said Levin, who urged the VA to let Congress know what additional tools it might need to assist borrowers in default and ensure that foreclosures occur only “in the most extreme circumstances.”
Bell said job loss, divorce and catastrophic illness can impact financial stability for homeowners.
The VA home loan program — established in 1944 during World War II for soldiers returning home — helps veterans, active-duty personnel, members of the reserves and National Guard, as well as their family members, buy homes, refinance loans and pay for home improvements.
VA has guaranteed more than 28 million loans, valued at nearly $4 trillion, since the program’s inception, Bell said.
One of the attractions of the VA home loan program is the offer of 100% financing without requiring a down payment. A veteran purchasing a home at $386,000 — the median rate now — could avoid a traditional 20% down payment of $77,000, he said.
In fiscal 2023, the VA received 860,000 calls from veterans seeking information and assistance with their home loans. He said 65,000 borrowers are at least 90 days late on their VA home loans.
Bell doubted homeowners would default on home loan payments, damage their credit and face foreclosure to secure a 2.5% interest rate through the VASP program.
“The VASP program is simply a more sustainable option for veterans who cannot afford other available loss mitigation options, such as repayment plans, special forbearances and traditional loan modifications,” he said.
But Van Orden disagreed.
“My focus is to ensure that veterans remain in their homes whenever possible,” he said. “But I am concerned that this program could evolve into a financial burden of billions of dollars in bailouts that fall on the shoulders of taxpayers.
Source: stripes.com
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Mortgage rates rose for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans moved higher.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. As the Federal Reserve stopped raising rates in 2023, mortgages rates started to drop at the end of Q4. At its Jan. 31 meeting, the central bank announced it would hold off changing rates and pointed to three rate cuts this year. Rate hikes and cuts affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates as of February 14, 2024.
The rates listed above are averages based on the assumptions here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, February 14th, 2024 at 7:30 a.m.
30-year fixed-rate mortgage moves up, +0.15%
The average rate for a 30-year fixed mortgage for today is 7.25 percent, up 15 basis points over the last week. Last month on the 14th, the average rate on a 30-year fixed mortgage was lower, at 7.01 percent.
At the current average rate, you’ll pay principal and interest of $682.18 for every $100,000 you borrow. That’s an additional $10.15 per $100,000 compared to last week.
The 30-year mortgage is the most popular option for borrowers. It has a number of advantages. Among them:
- Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower, more affordable payments spread over time.
- Stability: With a 30-year fixed mortgage, you lock in a set principal and interest payment, making it easier to plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance premiums and property taxes go up or, less likely, down.
- Buying power: With lower payments, you might qualify for a larger loan amount or a more expensive home.
- Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like building an emergency fund, contributing to retirement or college tuition, or saving for home repairs and maintenance.
15-year fixed mortgage rate advances, +0.13%
The average rate for the benchmark 15-year fixed mortgage is 6.61 percent, up 13 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $877 per $100,000 borrowed. The bigger payment may be a little tougher to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much faster.
5/1 adjustable rate mortgage moves higher, +0.03%
The average rate on a 5/1 ARM is 6.14 percent, rising 3 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.14 percent would cost about $609 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo loan interest rate advances, +0.16%
The average rate you’ll pay for a jumbo mortgage is 7.32 percent, up 16 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lesser at 7.06 percent.
At the current average rate, you’ll pay a combined $686.93 per month in principal and interest for every $100,000 you borrow. That’s up $10.85 from what it would have been last week.
Mortgage refinance rates
30-year mortgage refinance advances, +0.09%
The average 30-year fixed-refinance rate is 7.28 percent, up 9 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower at 7.22 percent.
At the current average rate, you’ll pay $684.21 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $6.10 higher.
Where are mortgage rates heading?
At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t expect rates to change drastically anytime soon.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t count on mortgage rates plummeting in the near future.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”
The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. The specific rate you’d qualify for is tied to your credit score, loan type and other variables.
What current rates mean for you and your mortgage
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
To help you uncover the best deal, get at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
More on current mortgage rates
Methodology
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Source: bankrate.com
Apache is functioning normally
The Broker Action Coalition (BAC) — an independent, nonprofit organization that initiates communications between mortgage brokers and their legislators — formed its first board of directors and leadership council as it kickstarts its work as an independent nonprofit organization.
The newly formed board has 10 voting member seats consisting of four lenders, four brokers, BAC chief advocacy officer and co-founder Brendan McKay, and CEO and co-founder Katie Sweeney.
The industry side of the board includes Eddy Perez, CEO of Equity Prime Mortgage (EPM); Phil Shoemaker, CEO of The Loan Store; Chris Vinson, CEO of Windsor Mortgage; and Kevin Peranio, chief lending officer of Paramount Residential Mortgage Group (PRMG).
Representing the broker side are Elena Boland of Wholesale Mortgage Services, Joseph Dionne of appli Home Loans, Major Singleton of Edge Home Finance and Daniel Iskander of West Capital Lending.
BAC also created seven nonvoting roles that include vendor advisory roles and a leadership council.
The three vendor advisers are Brian Vieaux, president and COO of FinLocker; Sam Parker, owner of My Credit Guy; and Sofia Rossato, president and general manager of Floify.
The leadership councils will focus on specific consumer groups to advocate for diverse causes across a wide range of initiatives, BAC said.
Gay Veale, a mortgage originator at Epoch Lending, will chair the Veteran Homeownership Leadership Council.
Mortgage broker Whitley Cooper from Advocate Home Loans will lead the Black Homeownership Leadership Council, while Amorette Hernandez from CMS Mortgage Solutions will be chair of the Hispanic Homeownership Leadership Council.
Additionally, mortgage broker Jerry Robinson from 1st Choice Mortgage Co. will chair the Government Affairs Leadership Council that focuses on federal legislation.
BAC plans to announce state legislative leadership in the coming weeks.
BAC was formed by AIME CEO Katie Sweeney in 2022 to gauge the industry’s appetite for advocacy and reform. There was no separate leadership group within BAC. Sweeney and McKay, former AIME president of advocacy, have been overseeing the work.
Since its establishment two years ago, Sweeney found immense work to be done on industry accountability and product reform, which led her to take on a full-time role at BAC.
Jonathon Haddad, president of Next Door Lending, will replace Sweeney as the chairman and CEO of AIME starting April 1.
The BAC will continue its efforts on passing the disabled veteran tax exemption bill, as well as efforts around trigger lead reform this year, Sweeney said in a previous interview with HousingWire.
Other regulatory issues that the coalition wants to tackle include the third-party originated (TPO) surcharge imposed by the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac.
Among the 65,000 members of AIME, BAC was able to engage more than 50,000, according to Sweeney.
In the third quarter of 2023, the broker-driven wholesale channel accounted for slightly more than 16% market share, with retail at 55% and correspondent at 29%, according to an Inside Mortgage Finance (IMF) analysis of first-lien mortgage originations.
Brokers originated $62 billion in Q3 2023, down from $67 billion in Q2 2023 and $81 billion in Q3 2022.
Related
Source: housingwire.com
Apache is functioning normally
A $450K mortgage payment is between $3,000 and $4,000 per month in the current interest-rate environment, depending on your loan type and term. This amount, however, does not include other variables that affect your payment, such as property taxes and insurance. Here’s the lowdown on what you can expect.
Cost of a $450,000 Mortgage
A $450K mortgage payment is primarily influenced by your loan term and interest rate. A 30-year loan at 7% interest would result in a monthly cost of $2,993 (not including taxes and insurance). But a 15-year loan at the same interest rate would have monthly payments of $4,044.
💡 Quick Tip: SoFi’s Lock and Look + feature allows you to lock in a low mortgage financing rate for 90 days while you search for the perfect place to call home.
Monthly Payments for a $450,000 Mortgage
The amount you pay each month for a $450,000 mortgage payment is going to be somewhere between $2,993 and $4,044. However, keep in mind that there are a few variables that affect your monthly payment. These include:
• Interest rate
• Fixed or variable interest rate
• Length of repayment period (15, 20, or 30 years)
• Mortgage insurance
• Property taxes
• Property insurance
Another thing to consider are homeowners association (HOA) fees. Although they are paid directly to the HOA association and shouldn’t affect your monthly mortgage payment, these fees are an additional living expense.
If you’re a first-time homebuyer, it’s important to understand the true cost of owning a home because your monthly payment is more complicated than simply the amount you borrow. Housing costs and property taxes, for example, vary based on location. If you’re open to where you live, you may want to compare the cost of living by state. The best affordable places to live in the U.S. may pique your interest!
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Where to Get a $450,000 Mortgage
Banks, credit unions, and online lenders can all provide you with a $450,000 mortgage. Make sure you shop around and compare lenders to get the lowest interest rate. As you apply, you’ll receive loan estimates that show the cost of a loan. While the annual percentage rate (APR) is certainly important, also compare expenses such as the loan origination fee and mortgage insurance.
What to Consider Before Applying for a $450,000 Mortgage
Before applying for a $450,000 mortgage, consider the cost difference between a shorter loan repayment period and a longer loan repayment period. For a 30-year mortgage with a 7% interest rate, the total interest paid during the life of the loan would be $627,791.
For a 15-year mortgage with the same interest rate, you would have a higher monthly payment, but the total amount you would pay in interest would be more than halved: just $278,050. For an extra $1,050 each month, a 15-year loan would save $349,739 in interest compared to a 30-year loan.
If you can’t afford a 15-year mortgage now, just remember that you can always do a mortgage refinance in the future.
$450,000 mortgage with a term of 30 years and a 7% interest rate:
Year | Beginning Balance | Monthly Payment | Total Interest Paid | Total Principal Paid | Remaining Balance |
---|---|---|---|---|---|
1 | $450,000 | $2,993.86 | $31,355.19 | $4,571.14 | $445,428.86 |
2 | $445,428.86 | $2,993.86 | $31,024.74 | $4,901.59 | $440,527.26 |
3 | $440,527.26 | $2,993.86 | $30,670.41 | $5,255.93 | $435,271.33 |
4 | $435,271.33 | $2,993.86 | $30,290.45 | $5,635.88 | $429,635.45 |
5 | $429,635.45 | $2,993.86 | $29,883.04 | $6,043.30 | $423,592.15 |
6 | $423,592.15 | $2,993.86 | $29,446.17 | $6,480.17 | $417,111.98 |
7 | $417,111.98 | $2,993.86 | $28,977.71 | $6,948.62 | $410,163.36 |
8 | $410,163.36 | $2,993.86 | $28,475.40 | $7,450.94 | $402,712.43 |
9 | $402,712.43 | $2,993.86 | $27,936.77 | $7,989.57 | $394,722.86 |
10 | $394,722.86 | $2,993.86 | $27,359.20 | $8,567.13 | $386,155.73 |
11 | $386,155.73 | $2,993.86 | $26,739.88 | $9,186.45 | $376,969.27 |
12 | $376,969.27 | $2,993.86 | $26,075.79 | $9,850.54 | $367,118.73 |
13 | $367,118.73 | $2,993.86 | $25,363.70 | $10,562.64 | $356,556.09 |
14 | $356,556.09 | $2,993.86 | $24,600.12 | $11,326.21 | $345,229.88 |
15 | $345,229.88 | $2,993.86 | $23,781.35 | $12,144.98 | $333,084.90 |
16 | $333,084.90 | $2,993.86 | $22,903.39 | $13,022.95 | $320,061.95 |
17 | $320,061.95 | $2,993.86 | $21,961.96 | $13,964.38 | $306,097.58 |
18 | $306,097.58 | $2,993.86 | $20,952.47 | $14,973.86 | $291,123.71 |
19 | $291,123.71 | $2,993.86 | $19,870.01 | $16,056.32 | $275,067.39 |
20 | $275,067.39 | $2,993.86 | $18,709.30 | $17,217.04 | $257,850.35 |
21 | $257,850.35 | $2,993.86 | $17,464.68 | $18,461.66 | $239,388.69 |
22 | $239,388.69 | $2,993.86 | $16,130.08 | $19,796.25 | $219,592.44 |
23 | $219,592.44 | $2,993.86 | $14,699.01 | $21,227.33 | $198,365.12 |
24 | $198,365.12 | $2,993.86 | $13,164.48 | $22,761.85 | $175,603.27 |
25 | $175,603.27 | $2,993.86 | $11,519.03 | $24,407.31 | $151,195.96 |
26 | $151,195.96 | $2,993.86 | $9,754.62 | $26,171.71 | $125,024.25 |
27 | $125,024.25 | $2,993.86 | $7,862.67 | $28,063.67 | $96,960.58 |
28 | $96,960.58 | $2,993.86 | $5,833.94 | $30,092.39 | $66,868.19 |
29 | $66,868.19 | $2,993.86 | $3,658.56 | $32,267.77 | $34,600.41 |
30 | $34,600.41 | $2,993.86 | $1,325.92 | $34,600.41 | $0 |
$450,000 mortgage with a term of 15 years and 7% interest rate:
Year | Beginning Balance | Monthly Payment | Total Interest Paid | Total Principal Paid | Remaining Balance |
---|---|---|---|---|---|
1 | $450,000 | $4,044.73 | $30,942.64 | $17,594.09 | $432,405.91 |
2 | $432,405.91 | $4,044.73 | $29,670.76 | $18,865.97 | $413,539.94 |
3 | $413,539.94 | $4,044.73 | $28,306.94 | $20,229.79 | $393,310.15 |
4 | $393,310.15 | $4,044.73 | $26,844.52 | $21,692.20 | $371,617.94 |
5 | $371,617.94 | $4,044.73 | $25,276.39 | $23,260.34 | $348,357.61 |
6 | $348,357.61 | $4,044.73 | $23,594.90 | $24,941.83 | $323,415.78 |
7 | $323,415.78 | $4,044.73 | $21,791.85 | $26,744.87 | $296,670.91 |
8 | $296,670.91 | $4,044.73 | $19,858.46 | $28,678.26 | $267,992.64 |
9 | $267,992.64 | $4,044.73 | $17,785.31 | $30,751.42 | $237,241.23 |
10 | $237,241.23 | $4,044.73 | $15,562.29 | $32,974.44 | $204,266.79 |
11 | $204,266.79 | $4,044.73 | $13,178.56 | $35,358.16 | $168,908.62 |
12 | $168,908.62 | $4,044.73 | $10,622.52 | $37,914.21 | $130,994.41 |
13 | $130,994.41 | $4,044.73 | $7,881.70 | $40,655.03 | $76,144.79 |
14 | $76,144.79 | $4,044.73 | $4,942.74 | $43,593.99 | $31,524.68 |
15 | $31,524.68 | $4,044.73 | $1,791.33 | $46,745.40 | $0 |
It’s important to understand how costs vary between the different types of mortgage loans. A mortgage calculator can help you get a quick idea of what to expect before you commit to a home mortgage loan.
How to Get a $450,000 Mortgage
To get a $450,000 mortgage, you need a strong credit score, a steady source of income, and a low debt-to-income ratio. Other tips to qualify for a mortgage include things like saving up for a higher down payment and submitting all of the appropriate paperwork to your lender in a timely manner. If you’re just starting out on your home buying journey, a home loan help center may be a good resource.
💡 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
Payment on a $450,000 mortgage is influenced by a few different variables, such as your loan term and interest rate. Other factors that come into play include mortgage insurance, property taxes, and property insurance. A higher down payment and a stronger credit score may help lower your monthly payment.
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
How much is $450K mortgage a month?
A $450,000 mortgage should cost you around $3,000 to $4,000. Just remember to also include property taxes and insurance in your calculations.
How much income is required for $450,000 mortgage?
You probably need to earn around $140,000 a year to afford a $450,000 mortgage. A general guideline is that all of your housing costs should be at or below 30% of your gross income. Assuming you opt for a 30-year loan, your mortgage payment, property tax, and insurance cost would total around $3,200 per month. Factor in a budget for utilities and repairs and your total annual cost would be $42,000 — that’s 30% of $140,000.
How much is a down payment on a $450,000 mortgage?
A conventional loan requires a down payment of at least 3%. Therefore, your down payment should be, at minimum, $13,500. A down payment of 20% ($113,000 on a property costing $563,000) would allow you to skip paying the additional cost of mortgage insurance.
Can I afford a $450K house with a $70K salary?
It’s not likely. Assuming you choose a 30-year loan, your monthly payment would be around $3,000, which would be more than 50% of your gross income — well over the 30% that is considered the maximum amount you should spend on housing. The only way to make it work would be to have a large down payment (more than $150,000) to lower the amount you would have to borrow and thus your monthly payments.
Photo credit: iStock/AntonioGuillem
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*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.
+Lock and Look program: Terms and conditions apply. Applies to conventional purchase loans only. Rate will lock for 91 calendar days at the time of preapproval. An executed purchase contract is required within 60 days of your initial rate lock. If current market pricing improves by 0.25 percentage points or more from the original locked rate, you may request your loan officer to review your loan application to determine if you qualify for a one-time float down. SoFi reserves the right to change or terminate this offer at any time with or without notice to you.
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.
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.
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Source: sofi.com
Apache is functioning normally
There’s no doubt that being a single mom is challenging. There’s also no doubt that qualifying for a mortgage can be difficult even under normal circumstances.
The National Association of Realtors found that single female buyers account for 9% of all home purchases. This figure is down from 20% in 2010. And the median purchase price for single female buyers was $189,000, which is the lowest of all median home purchases.
For many single mothers, trying to qualify for a mortgage with only one income can feel next to impossible. But as a parent, it’s normal to want to provide a comfortable home for your children.
And thankfully, there are loans and financial assistance programs available that can help you do just that. Let’s look at some of the best mortgage programs available for single moms.
Challenges Single Moms Face in Buying a Home
One of the most difficult challenges that many single mothers face is a lack of income. They are responsible for providing for themselves and their children on one income, and they don’t always receive child support.
It can be challenging because mortgage companies want to see that you have a certain amount of disposable income before they’re willing to lend to you. You need to prove that you can make your monthly mortgage payments, have a low debt-to-income ratio, and a strong credit history.
Plus, most lenders require down payments between 10% and 20%. Most people struggle to come up with this kind of cash, so it can be especially challenging for a single mother.
5 Home Loans for Single Moms
If you’re a single mom looking to purchase a home, there are options available to you. Listed below are the five best mortgage assistance programs for single moms.
1. Down Payment Assistance Programs
Homeownership is a dream for many, but the initial costs can sometimes stand as a formidable barrier. For aspiring homeowners facing this challenge, down payment assistance programs act as a financial bridge, easing the burden of upfront expenses. Offered across various states and localities, these programs are crafted to cater to differing financial situations.
Lifting financial barriers: The highlight of these programs is their primary purpose – reducing the initial costs of buying a home. By either lowering or completely covering the down payment, they create a more accessible route to homeownership for many who might find it out of reach otherwise.
Local solutions for local challenges: Many states and cities have their unique down payment assistance programs designed with their residents in mind. From specific grants to interest-free loans, the types and benefits of these programs can vary widely based on the region.
Multiple options: Some programs might offer flat monetary assistance, like a set grant amount, while others could provide a percentage of the home’s price. Additionally, there might be options that assist not just with the down payment but also with closing costs.
Criteria and eligibility: Like any financial program, these assistance initiatives come with their sets of requirements. Factors like income levels, property location, and first-time homebuyer status can influence eligibility.
Your next steps: If the prospect of reduced initial costs sounds appealing, dive into research specific to your state or city. Local housing agencies and official state websites often provide comprehensive lists of available down payment assistance programs. By understanding what’s accessible in your region, you can make a more informed decision on your path to homeownership.
2. FHA Loans
FHA loans are a popular option for single parents struggling to come up with a down payment. You can apply for this type of home loan through a bank or online mortgage lender, and the Federal Housing Administration (FHA) and the U.S. Department of Housing and Urban Development (HUD) guarantee the home loan.
Flexible credit requirements: One of the most significant advantages of an FHA loan is its lenient credit criteria. Even if your credit score isn’t perfect, you may still be eligible for this loan, offering a lifeline to many potential homeowners who’ve faced financial hiccups in the past.
Lower down payments: Traditional loans often demand a hefty down payment, but with an FHA loan, you can potentially secure your dream home with as little as 3.5% down. This makes the path to homeownership more feasible for individuals without vast savings.
Debt-to-income leeway: Where many conventional loans are strict about debt-to-income ratios, FHA loans often provide a bit more wiggle room, accommodating borrowers with higher debt levels.
Government assurance: With the Federal Housing Administration backing these loans, lenders often feel a heightened sense of security. As a result, borrowers can often enjoy more favorable loan terms and conditions.
Understanding the criteria: While FHA loans offer flexibility, there are still criteria to meet. This includes ensuring the property meets specific standards and falls within set loan limits. Additionally, borrowers will need to pay a mortgage insurance premium (MIP), which can add to the monthly payment. It is usually more expensive than a conventional loan, and it remains in place until you refinance or sell the property.
Getting started with an FHA loan: If the benefits of an FHA loan resonate with your situation, the next logical step is to consult with an FHA-approved lender. They’ll guide you through the process, ensuring you’re informed, prepared, and ready to make the best decision for your homeownership dreams.
3. USDA Loans
When thinking of affordable homeownership, rural areas might not be the first thing that comes to mind. Yet, the U.S. Department of Agriculture (USDA) has paved a unique path to homeownership, especially in these lesser-populated regions. USDA loans stand as a testament to the government’s commitment to making homeownership accessible to a broader audience, regardless of urban or rural preferences.
Zero down payment: The standout feature of USDA loans is the possibility to finance the entire purchase price of a home. Imagine walking into your new home without the stress of a hefty upfront payment. That’s the magic of the USDA.
Flexible location choices: While the term “rural” defines the USDA’s primary target, many suburban areas also fall within their eligibility map. It’s not just about countryside homes; it’s about expanding homeownership in less densely populated areas.
Competitive interest rates: Often, USDA loans come with interest rates that are either at par or even better than conventional loans. This can translate into significant savings over the life of the mortgage.
Government guarantee: With the backing of the U.S. Department of Agriculture, lenders often extend more favorable terms to borrowers. This backing ensures lower risks for lenders and better loan conditions for aspiring homeowners.
Understanding eligibility: To be a part of the USDA’s vision, you’ll need to meet specific criteria. This includes income restrictions based on the median in your area and ensuring the property falls within the USDA’s designated zones.
Starting the USDA adventure: If the prospect of a no-down-payment home in a tranquil setting appeals to you, look into the USDA loan process. Engaging with a lender familiar with USDA loans will offer clarity and set you on a promising path toward a home that aligns with your dreams.
4. VA Loans
For those who have bravely served in our nation’s military, VA loans are the government’s way of saying thanks. Whether you’re a veteran, an active-duty service member, or the widow of someone who served, these loans offer distinct benefits tailored to recognize and support your sacrifices.
No down payment: What sets VA loans apart is the option to finance 100% of a home’s purchase price. That means you can step into homeownership without the heavy upfront cost that often deters potential buyers.
Low-interest rates: Traditionally, VA loans come with interest rates that are more competitive than many conventional loans. Over the lifespan of your mortgage, this could equate to substantial savings.
Skip the PMI: With many mortgages, if you can’t put down a certain percentage, you’re hit with the additional monthly cost of private mortgage insurance (PMI). However, with VA loans, you won’t have to factor in PMI, no matter your down payment amount.
Government assurance: With 100% backing from the government, lenders often offer more favorable terms. It’s a win-win; you get better conditions, and they get added security.
Meeting the criteria: To take advantage of a VA loan, you’ll need to meet specific service stipulations. The criteria vary based on your military service’s nature and duration. Additionally, the property you choose must meet VA standards, which entails an inspection and appraisal by a licensed professional.
If a VA loan sounds like a good fit, your next step is to consult with a VA-approved lender. They’ll walk you through the ins and outs, ensuring that you’re both eligible and fully informed.
5. HomeReady Mortgage by Fannie Mae
If you’re a single mom or a first-time homebuyer searching for a more flexible mortgage option, the HomeReady Mortgage by Fannie Mae might be just what you’re looking for. This program is designed to assist individuals, like you, in accessing affordable home financing.
Low down payment: With HomeReady, the daunting hurdle of a large down payment becomes more manageable. This program allows for down payments as low as 3%, enabling homeownership for those who might be limited by savings.
Inclusive co-borrowing: Understanding that households today come in all forms, HomeReady offers a unique feature. It permits co-borrowers who won’t be residing in the house, like a supportive relative or close friend. This flexibility can significantly enhance borrowing capacity.
Reduced PMI: While many mortgages saddle borrowers with hefty private mortgage insurance (PMI) premiums, the HomeReady program shines with its reduced rates. Over time, this can result in tangible savings.
Government-backed confidence: Fannie Mae’s backing offers lenders the assurance they need, which often translates to more favorable loan terms and conditions for borrowers.
Meeting the guidelines: Like all specialized loan programs, HomeReady comes with its specific criteria. It’s essential to understand these requirements and ensure that both the borrower and the property align with them.
Stepping into HomeReady: If the features of the HomeReady Mortgage align with your situation, the next step is to liaise with a lender experienced with Fannie Mae’s offerings. Their guidance can illuminate the home buying process, ensuring that you make an informed choice, well-suited to your housing aspirations.
Preparing for Homeownership: Key Steps for Single Moms
Taking the first step towards homeownership as a single mom can feel daunting, but with the right preparation, it becomes a more manageable process. To ensure you’re making the right choices for you and your family, consider these foundational steps:
- Determine your budget: Before diving into the property market, it’s crucial to have a clear understanding of your financial standing. Assess your monthly income, expenses, and potential home-related costs. This will give you a clear picture of the mortgage payment you can afford without straining your finances. Remember, it’s not just the monthly mortgage you have to account for; consider property taxes, utilities, and potential maintenance costs too.
- Search for low down payment options: Not all home loans for single moms require a hefty down payment. It’s beneficial to look for home buying programs that offer low down payment options. This can help in making homeownership more attainable without depleting your savings.
- Establish a savings plan: Even if you opt for a low down payment loan, you’ll still likely need to pay some upfront costs. Establishing a dedicated savings goal can help. Consider opening a high-interest savings account where your money can grow over time, helping you reach your down payment goal faster.
- Stay informed: Securing home loans for single moms can be a challenging process. Stay informed by researching and comparing different home loan options. Consider reaching out to financial advisors or housing counselors who can guide you through the home buying process.
In addition to these steps, it’s also beneficial to look into loan programs tailored for low-income borrowers. Such programs can offer favorable loan terms, grants, or even down payment assistance, making homeownership even more achievable.
See also: Best Home Loans for Low-Income Borrowers
Home Loans for Single Mothers FAQs
Can I buy a home as a single mom?
Yes, you can purchase a home as a single mom. However, it can be more difficult to qualify for traditional home loans when you are a single parent.
You may need to look into government-backed loans such as FHA loans or USDA loans, which may have more flexible qualification requirements. Alternatively, you could look into owner-financing or rent-to-own options.
What types of home loans are available for single moms?
Single moms may be eligible for several types of home loans, including FHA loans, USDA loans, VA loans, and conventional loans.
How much money can single mothers borrow when applying for a home loan?
The amount of money that single mothers can borrow when applying for a home loan depends on several factors. These include income, credit score, debt-to-income ratio, and down payment.
Lenders will look at your income to determine how much they are willing to lend, and your credit score will determine the interest rate you receive. It is also important to have a sufficient down payment, typically at least 3-5% of the home’s value.
Additionally, lenders will want to see that your debt-to-income ratio is less than 43%, meaning that your monthly debt payments are less than 43% of your monthly income. With good credit and a sufficient down payment, single mothers may be able to borrow up to 97% of the home’s value.
What is the minimum credit score required to get a home loan for single mothers?
The minimum credit score required to get a home loan for single mothers can vary depending on the type of loan and the mortgage lender.
Generally speaking, FHA loans tend to have the lowest credit score requirements, with a minimum score of 500. This can be helpful for single mothers who may not have the best credit.
Other types of loans, such as a conventional loan, may have a minimum credit score requirement of 620 or higher. It is important to check with the lender to find out the exact credit score requirements for the type of loan you are applying for.
Are there any special programs available for single mothers looking to purchase a home?
Yes, there are several programs available across the U.S. designed to assist single mothers and low-income families in their quest for homeownership. These programs can make the home-buying process more affordable through a combination of grants, low-interest loans, down payment assistance, and more. Aside from the ones we mentioned above, here are some other notable ones:
- State-specific programs: Various states offer specific programs to assist single parents or low-income individuals. For instance, states might have special housing grants for single mothers, or they may offer seminars and classes on home buying that come with financial incentives upon completion.
- Habitat for Humanity: This non-profit organization helps families build and rehabilitate their homes. Single mothers can offer volunteer hours to the organization as a form of ‘down payment,’ assisting in constructing their own homes or others.
- Individual Development Account (IDA): IDAs are matched savings accounts, where for every dollar saved, it gets matched by federal and non-federal funds. This can be a boon for single mothers looking to accumulate a down payment.
- Section 8 Homeownership Voucher: While Section 8 is often associated with rental assistance, there’s a homeownership option that allows eligible participants to use voucher payments to make mortgage payments.
Are there any special tax benefits for single mothers who purchase a home?
Yes, there are several tax benefits available to single mothers who purchase a home, such as the mortgage interest deduction and the homeowner’s tax credit.
How can a single parent save for a house?
- Set a budget and stick to it: Make sure to create a budget and stick to it. Track your income and expenses and cut out unnecessary costs.
- Set realistic goals: Set realistic goals for what you can afford and how much you will need to save each month.
- Automate your savings: Set up an automatic transfer from your checking account to savings each month.
- Reduce interest-bearing debt: Pay off as much debt as possible.
- Use tax-advantaged savings accounts: Consider using tax-advantaged savings accounts, such as an IRA or 401k, to save for a house.
- Take advantage of grants and assistance programs: Research grants and assistance programs available to single parents and take advantage of any that you may qualify for.
- Make extra money: Look for ways to make extra money, such as a part-time job, side hustle, freelance work, or selling items online.
- Live below your means: Live below your means and make sacrifices if necessary.
- Talk to a financial advisor: Speak to a financial advisor or real estate agent to get advice on the best way to save for a house.
Does child support count as income for a mortgage?
Yes, child support may be counted as income when applying for a mortgage. Lenders will usually require proof of the payments, such as a tax return or court order.
Bottom Line
None of the home buying programs outlined above are specific to single mothers. However, hopefully, you can see that it’s possible to find an affordable mortgage with a low down payment. Purchasing a home as a single mother can be challenging, but it’s also very doable. Make sure you compare your options and find the program that works best for your family.
Source: crediful.com
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In a standard home purchase scenario, prospective homebuyers apply with a lender to obtain conventional financing to get the new home on their wishlist.
Did you know, however, that there may be another financing option that could possibly benefit both the buyer and the seller under the right circumstances? We’re talking about the Assumable Mortgage.
What Is an Assumable Mortgage?
An assumable mortgage is a special type of home financing that allows a homebuyer to take over (or, assume) the seller’s existing mortgage and all of the terms that come with it, such as the interest rate, current balance, and repayment period. In cases where interest rates have gone up significantly since the seller originally bought and financed the home, this can present a savings opportunity that includes the low interest rate on the mortgage as part of the purchase of the home.
Which Types of Mortgages Are Assumable?
The loans that most often qualify for assumption are VA and FHA loans, which are backed by the federal government. Under certain circumstances conventional mortgages can also be assumable, but the majority of those loans contain a due-on-sale clause requiring the full balance of the loan to be paid upon transfer of property ownership, which makes the loan ineligible for assumption.
How Do Assumable Mortgages Work?
If you’re selling your home and the mortgage on the home is eligible for assumption, you can allow a qualified interested buyer to take over your mortgage as part of the sale of your home.
With the approval of your lender, the buyer would take over all of the responsibilities of your existing mortgage along with the home itself — including the interest rate and monthly payment — which can be significantly lower than the current rates and terms available for new mortgages. All of the terms of the loan would stay as is and simply be transferred over in the buyer’s name. You’ll want to be sure to get a written release of liability signed by both you (the original loan holder) and the lender to remove yourself from any further responsibility on the loan.
In the right circumstances, your buyer could save tens of thousands of dollars on an assumed mortgage since they’re effectively grandfathered in on what could be more favorable terms secured when the original loan was obtained. Given this unique benefit, you could potentially leverage that savings to justify a higher asking price for your home.
To illustrate the savings and benefits of this unique transaction, let’s explore an example scenario below from the buyer’s perspective.
Saving Money With an Assumable Mortgage
Let’s say you’re buying a home and you’d like to assume the mortgage on the home, appraised at $230,769 with a current remaining principal loan balance of $203,249. This means you would take over the payments on the remaining $203,249 and enjoy the original terms allotted to the assumed mortgage.
That still leaves $27,520 that must be paid in cash to the seller, which you can settle during the loan assumption transaction, much like a traditional down payment. If you cannot produce that entire cash amount to assume the loan, you may possibly be able to secure an additional personal loan to cover a portion of the difference. Keep in mind, however, that in most cases lenders who provide secondary financing will typically want to make sure that no more than 85 to 90 percent of the total appraised value of the home is being financed.
Here is an example comparison of a standard new FHA mortgage on a home selling for $230,769, versus an assumed FHA mortgage on the same home, with a lower fixed interest rate and five years already paid on the term.
New FHA Mortgage: A new 30-year FHA loan for a home priced and appraised at $230,769, with a principal loan balance of $222,692 (after the buyer put a minimum of 3.5% down, or approximately $8,077) with a fixed interest rate of 6.25%, will result in monthly payments of $1,371.15 (principal and interest only, excluding property taxes and insurance) totaling $493,615.06 over the life of the mortgage.
Assumable Mortgage: The assumption of a 30-year FHA loan with 25 years left on the term for a home selling for $230,769 with a remaining principal balance of $203,249 at the original interest rate of 2.5% results in a monthly payment of $911.81 and an approximate total loan cost of $273,543.07 (paid over 25 years).
New 30-Year FHA Mortgage |
Assumable FHA Mortgage |
Savings | |
---|---|---|---|
Principal Loan Balance | $222,692 | $203,249 | N/A |
Interest Rate | 6.25% | 2.5% | N/A |
Down Payment | $8,077 | $27,520 | N/A |
Monthly Payment(s) | $1,371.15 | $911.81 | $459.34 |
Total Loan Cost (principal +interest) |
$493,615.06 | $273,543.07 | $220,071.99 |
Note: The example above does not include mortgage insurance. Mortgage Insurance (MI) may change depending on the LTV. Ask your loan officer for more information.
As illustrated above, if you are able to assume an eligible loan with an interest rate significantly lower than what is available on the market and have the ability to put down the additional cash to cover the equity owned by the seller (or obtain secondary financing), your savings could be substantial.
In the example scenario, your monthly mortgage payments for the 25 years remaining on the assumed loan would be $911.81. Compared to a new FHA loan with a higher market rate, this would result in a monthly savings of $459.34 and $220,071.99 saved over the entire life of your mortgage.
It is also worth noting that the less equity a seller has in their home, the more attractive an assumable mortgage may be to a buyer. For example, if that same assumable loan had an unpaid principal balance of $215,000, you’d only be responsible for a $15,769 difference instead of $27,520.
FHA Assumable Mortgage Requirements
Federal Housing Authority (FHA) loans qualify for assumption because they are free from the restrictions of due-on-sale clauses that are common in conventional mortgages.
Buyers wishing to assume an FHA mortgage must have a minimum credit score of 620, although buyers with scores above 580 may be eligible with additional restrictions. Similar to a conventional loan, your debt-to-income ratio including the assumed loan’s payment, cannot exceed 43% (although in special circumstances it can go as high as 50%).
VA Assumable Mortgage Requirements
The United States Department of Veterans Affairs (VA) has long offered one of the best home loan programs available for qualifying veterans, active military and their dependents.
A few important facts about VA loan assumptions:
- As long as the buyer is VA-eligible, the seller’s VA entitlement remains intact.
- If a buyer who is not VA-eligible assumes a VA loan, the seller loses their VA entitlement, as it will be tied to that original loan.
- Buyers must meet all VA standards for creditworthiness and income, and the assumption must be approved by both the VA and the lender.
- All mortgage obligations are assumed by the buyer, up to and including the obligation to repay the VA should the buyer default on the loan.
- A “VA funding fee” equal to 0.5% of the current loan balance (only the principal amount) will be charged.
Want to know more about VA mortgages and whether you or a family member qualifies?
Discover the special rates and benefits of VA home loans.
All mortgage payments must be current at the time of closing. You should plan to provide funds necessary to clear any outstanding payments before you can assume the loan. Either the buyer or seller can bring the loan to good standing.
Special Circumstances for Assuming a Mortgage
There are several special circumstances in which a buyer or inheritor must assume a mortgage in order to take possession of a home.
May I Assume the Mortgage of an Inherited Home?
Yes. In the unfortunate circumstance of a loved one passing, assuming the mortgage of the home that’s been willed to you would be useful if you wish to keep it in the family or live in it.
Federal law requires lenders to allow heirs to assume the mortgage of an inherited home, regardless of any due-on-sale clause included on the loan. It’s best to seek the advice of an estate attorney to ensure all bases are covered under these circumstances. As you figure out your options, be sure to continue making the regular monthly payments on the mortgage to prevent foreclosure of the property.
Assuming the Mortgage in Case of a Divorce
In the event of a divorce, one party or the other may have been awarded the family home.
If you’re the one keeping the home with a mortgage, you’ll need to qualify with the lender to assume the mortgage under your individual income and credit score, or by showing six months of timely payments you’ve made on your own without the help of your spouse.
Once the awarded party assumes the mortgage, the person who will no longer reside in the home should be released from all liability with the proper signed paperwork, as required by the lender.
May I Assume the Mortgage of a Home in Foreclosure?
Yes. Facing foreclosure is difficult, and a homeowner may want to do anything to prevent it. Allowing another party to assume the mortgage may be a good option.
In this type of purchase scenario, the buyer will need to pay off the entire past due amount before the assumption can occur. Buyers may accomplish this with cash or through a separate loan.
If it’s a Fannie Mae loan in question, Fannie Mae will review the prospective borrower’s financial packet to determine if they can afford the payments on the mortgage. Each investor or insurer will have specific requirements around what is required to complete the assumption.
If you’re set on the property as your ideal home, the default amount isn’t unreasonable, and the interest rate you’re assuming is favorable, then it can be worth the extra cost and effort to secure the loan.
From Applying to Signing on the Dotted Line: Important Facts
If you apply to assume a mortgage, expect to provide all the standard financial information normally required from a lender for a home loan application. This can include pay stubs, bank statements, W2s, and any other means to prove your ability to take over the mortgage.
While many may appreciate that an appraisal isn’t typically required, it might be beneficial to request one. That way you can ensure that the asking price for the home is fair in the current market.
Make sure a title check is performed as well to clear up any possibility of outstanding liens or encumbrances on the property before signing on the dotted line.
While closing costs can be lower with an assumed mortgage, an assumption fee may be charged.
- FHA assumption closing costs are typically between 2 and 6 percent of the sale price of the home.
- The VA charges a funding fee of 0.5% of the principal loan balance.
- If you’re assuming the loan of an inherited property, it may be within your rights to avoid an assumption fee. Be sure to consult with an estate attorney if questions arise.
If you end up borrowing from more than one lender to complete the mortgage assumption, be sure that each lender is informed of all loan activity for the home. Each lender may require slightly different information, so prepare ahead of time for varying requests during the financial evaluation process.
Key Takeaways For Assumable Mortgages
- Under the right circumstances, an assumable mortgage can mean thousands in savings for a qualified buyer.
- A seller can leverage those savings to attract buyers and increase the asking price for the home.
- The lender is the party with the final say over whether a buyer can assume a seller’s current mortgage.
- The amount of equity in the home owned by the seller can be a key factor in whether assuming a loan is the right route for a buyer to take.
- VA-eligible home sellers should take extra precaution when considering an assumption to protect their VA entitlement.
Is a Mortgage Assumption the Right Move?
The advantages for both sellers and buyers in this type of transaction is clear, as long as the interest rate on the mortgage is lower than what is available on the current market, the equity owned by the seller isn’t too great, and the lender approves of the assumption along with a release of liability to the original borrower on the loan.
If you’re selling your home that you have an FHA or VA mortgage for and the interest rate is lower than what the current market offers, you may want to connect your prospective buyers with your lender to see if an assumption is possible.
Questions about your existing mortgage or looking to buy a home soon? We’re here for you. Connect with a Pennymac Loan Expert to explore your home loan options or get started on a BuyerReady Certification today.
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Source: pennymac.com
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Shopping for your first home is an exciting time. You are choosing a place to plant yourself and bloom for many years to come.
However, home shopping is not all fun and games. Not only do you have to find the perfect home, but also the right financing terms for your new mortgage. If you have bad credit, you are likely worried about your mortgage options.
As a first-time homebuyer, the process of buying a home can be overwhelming. Before you lose hope, it is entirely possible to secure a home loan with bad credit. Many mortgage lenders offer subprime home loans that work specifically with borrowers with poor credit. We will dive into the details to help you get through the first-time home-buying process more easily.
How Bad Credit Can Affect Your Home Loan
Typically, lenders that approve loans to borrowers with bad credit offer less than favorable terms. In most cases, you can expect to pay a higher interest rate.
A slightly higher interest rate might not seem like a big deal. However, even a slight increase in your interest rate could result in thousands of dollars in interest payments over the course of your loan.
When you sort through your loan offers, make sure to run the numbers. You might not be willing to pay the premium rates for the opportunity to buy a home right now.
Other Factors that Mortgage Lenders Consider
As a borrower, your credit score is not the only factor lenders consider. Before a mortgage lender approves a large loan, it will look at various other factors, including:
- The amount of money in your savings account. If you have a healthy savings account, that may offset your bad credit.
- Income. The higher your income, the more likely you are to be approved.
- Employment history. If you just landed a high paying job, then the lender might be less willing to work with you. However, consistently earning a high income for many years will strengthen your application.
- Debt-to-income ratio. If you already have a high debt burden, then lenders may be less willing to work with you.
- Current expenses. If your current rent payment is similar to the mortgage payment, then a lender may see that you are able to easily handle that expense.
When you go through the home buying process, expect to provide a lot of paperwork to verify this information. In many cases, you will be required to provide tax statements, paychecks, and more. However, if you stay organized throughout the process, your sanity will thank you later.
How to Secure Home Financing with Bad Credit
To qualify for a bad credit home loan, you will need to be willing to put in the time. Finding the best option for your situation may require some patience. Not all options will work for everyone, but it is likely that at least one option will work for everyone.
See Where You Stand
Before you start looking for homes, take a closer look at your financial health.
Start by checking your credit score. A free way to do this is through Credit Karma. Once you know where your credit score is, take the time to find your credit report. Once you have your credit report, read through for any errors. A mistake on your credit report may be dragging your score down. If you find any mistakes, you can dispute them.
After digging into your credit score, take a step back. Assess your savings. Have you grown it steadily? Either way, it is crucial to understand exactly how much house you can afford.
Consider Saving for a Larger Down Payment
One way to secure a mortgage loan with more favorable terms with bad credit is to provide a larger down payment. Bigger down payments give the mortgage lender reassurance that you are able to repay the loan.
For conventional loans, banks typically require a down payment of at least 20%, but there are many options for a lower down payment. But you can usually secure better terms if you wait until you’ve saved a sizable down payment.
Find A Lender that Will Work with You
Not every lender is willing to work with bad credit borrowers. Although, you may not be able to secure a conventional loan from a well-known bank, it is entirely possible to find a lender.
If you have bad credit, you’ll need to find a lender that offers subprime home loans or that works with government-backed programs.
Luckily, many mortgage lenders are likely willing to work with you. The tricky part can be finding your choices. Check out our top mortgage lenders to get started.
Financing Options for First Time Homebuyers with Bad Credit
The federal government offers several assistance programs for buying your first home. Take a minute to find out if you qualify for any of these programs.
FHA Loans
If you have bad credit, an FHA loan might be your best option. The minimum credit score to qualify for an FHA loan is just 500! Of course, some mortgage lenders may require a slightly higher score to approve you. But you can shop around to find a lender willing to work with you.
If your credit score is between 500 and 579, the Federal Housing Administration (FHA) requires a minimum down payment of at least 10%. However, if you have a minimum credit score of 580, you’ll only be required to put down 3.5%.
With FHA loans, a mortgage insurance premium (MIP) is required along with an upfront MIP fee of 1.75% of the loan amount.
As a first-time homebuyer with bad credit, the benefits of this program can help your home purchase go smoothly.
USDA Loans
If you are willing to live in a rural community, a USDA loan could be a suitable option. These loans are guaranteed by the United States Department of Agriculture, and don’t private mortgage insurance (PMI).
Typically, you’ll need a minimum credit score of 640 to score a USDA loan. However, a lower credit score does not automatically disqualify you.
If you have a low credit score, then the lender will look more closely at other contributing factors before deciding on your loan application. You may need to prove that your credit was damaged by something outside your control or provide credit references like utility statements to prove your creditworthiness.
VA Loans
A VA home loan is guaranteed by the Department of Veteran Affairs. If you meet the requirements of service, then you could qualify for a no down payment option to secure the home of your dreams.
In contrast to traditional lenders, the VA home loan program has less strict requirements when it comes to their loans. The goal of the program is to get the bravest in our nation into a safe home. With that, lenders that provide VA-backed loans can offer loans to borrowers with lower credit scores.
Almost every member or veteran of the military, reserve, or National Guard is eligible to apply for these loans. The first step you should take is to secure your Certificate of Eligibility. With that, you’ll be able to apply for a VA loan with an approved lender.
See also: How to Get a VA Loan with Bad Credit
Research State Assistance Programs
The U.S. Department of Housing and Urban Development works to provide affordable homeownership options throughout the country. In many states, they offer first-time homebuyers assistance.
Depending on your area and income, the type of assistance may vary. For example, in some areas, you may qualify for a down payment grant that will help you secure your home purchase. With a higher down payment, you may be able to offset the negative effects of your poor credit score.
Compare Mortgage Rates
Once you have determined the best path for you, it is time to compare lenders. If you take the time to shop around for the best loan terms, you stand to save thousands of dollars over the course of your loan.
Shopping around for the right lender might be the most important part of your entire home buying process. Find a lender that you are comfortable with and that is willing to work with your poor credit score.
Work on Your Credit Score
A surefire way to secure better mortgage terms is to improve your credit score. If you can wait on your home purchase, then you might have a stronger loan application.
Improving your credit score will take time. But if you put in the effort the long-term benefits are worth it. Not only will you be more likely to be approved for loans, but also will likely pay less in interest payments.
To start improving your credit score make sure to pay bills on time and work towards paying off your debt.
First-Time Home Buyer with Bad Credit FAQs
Can I buy a house with bad credit?
Yes, it is possible to get a home loan with bad credit. However, the interest rate and other loan terms may be more expensive than if you had good credit.
You may also need to have a bigger down payment and show proof of income. However, there are also lenders who specialize in offering mortgages to people with low credit scores.
What are the requirements for getting a mortgage with bad credit?
- Have a steady income: Lenders want to know that you have a consistent income, so they will want to see evidence of your income such as pay stubs or W2s.
- Have enough money saved for a down payment: With poor credit, most lenders will require a down payment of at least 5-10% of the purchase price.
- Accept higher interest rates and fees: With a weak credit history, you may be required to pay higher interest rates and fees.
- Find a cosigner: Having a cosigner can help you get approved for a mortgage with bad credit. The cosigner will be held responsible for the loan if you are unable to make your monthly mortgage payments.
What do mortgage lenders consider a bad credit score?
Lenders generally consider a credit score below 580 to be bad credit. Lenders may also consider scores between 580 and 669 to be fair credit. Credit scores of 670 or higher are typically considered good credit.
What is the minimum credit score needed for a mortgage?
Minimum credit scores needed for a mortgage varies by lender, but typically a score of 620 or higher is required for conventional loans, and a score of 500 or higher is required for FHA loans.
The minimum credit score needed for USDA loans is typically 640, and the minimum credit score needed for VA loans is typically 620.
What type of mortgage loan is best for someone with bad credit?
The best type of loan for someone with bad credit is usually an FHA loan. These loans are typically easier to qualify for than other types of loans, as they have more lenient credit score minimums and down payment requirements.
What other factors do lenders consider when evaluating my loan application?
Lenders will typically look at your credit score and credit report to assess your creditworthiness. They may also consider your down payment, debt-to-income ratio (DTI), income, employment history, and assets when evaluating your loan application.
Your down payment can show lenders that you are committed to the loan, and can also help to reduce the amount of the loan. Your DTI ratio is a measure of how much of your income is going towards paying off your existing debts. A higher DTI ratio can indicate to lenders that you may not be able to afford a loan.
Your income, employment history, and assets provide further evidence that you are a reliable borrower, and can help to establish your ability to repay the loan.
What is a conventional loan?
A conventional loan is a type of loan that is issued by private lenders and purchased by government-sponsored enterprises such as Fannie Mae and Freddie Mac.
How can I improve my credit scores?
- Pay your bills on time: Payment history is the most important factor in your credit score, so be sure to make payments on all your bills on time.
- Keep credit card balances low: Your credit utilization ratio, or the amount of available credit you are using, makes up 30% of your credit score. Try to keep your credit card balances low by using no more than 30% of your credit limit.
- Don’t open too many new accounts: Opening too many accounts in a short period of time can be a red flag for lenders and can hurt your credit score.
- Check your credit report: Make sure to regularly check your credit report for errors or other negative information that can hurt your score.
- Consider a credit builder loan: Credit builder loans are designed to help people with no or low credit build a payment history and improve their credit score over time.
Bottom Line
Purchasing the home of your dreams with bad credit is not impossible. You will need to put in the time to figure out which path is the right one for you.
Once you see your financial path to your home, make steps towards that goal every single day. Your new home is not as far away as you think!
Source: crediful.com
Apache is functioning normally
Mortgage rates saw some spikes and then smoothed out over the last week. While 15-year fixed mortgage rates are hovering around mid-6%, interest rates on 30-year fixed mortgages have remained above 7%.
- 30-year fixed mortgage: 7.14%
- 15-year fixed mortgage: 6.52%
- 5/1 adjustable-rate mortgage: 6.14%
High mortgage rates, expensive home prices and tight inventory kept homebuying out of reach for many last year. The current housing market won’t recover overnight, but the good news is that mortgage rates are projected to move lower in the coming months.
“Housing market activity has been so depressed that it wouldn’t take much for 2024 to be better than 2023,” says Matt Graham of Mortgage News Daily. “Whether that means a ‘return to balance’ really depends on how we define balance.”
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Today’s mortgage rates
If you’re in the market for a home, check out how today’s mortgage rates compare to last week’s. We use data collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the US:
Average mortgage interest rates
Product | Rate | Last week | Change |
---|---|---|---|
30-year fixed | 7.14% | 7.11% | +0.03 |
15-year fixed | 6.52% | 6.55% | -0.03 |
30-year jumbo mortgage rate | 7.19% | 7.19% | N/C |
30-year mortgage refinance rate | 7.18% | 7.21% | -0.03 |
Rates as of Feb. 13, 2024
Mortgage predictions for 2024
High inflation and the Federal Reserve’s aggressive interest rate hikes drove up mortgage rates over the last several years. With inflation now decelerating, the Fed is positioning itself to make its first interest rate cut, though that may still be several months away.
While mortgage forecasters base their projections on different data, most experts and market watchers predict rates will move toward 6% or lower by the end of 2024. Here’s a look at where some major housing authorities expect average mortgage rates to land.
What affects mortgage rates?
While it’s important to monitor mortgage rates if you’re shopping for a home, remember that no one has a crystal ball. It’s impossible to time the mortgage market, and rates will always have some level of volatility because so many factors are at play.
“Mortgage rates tend to follow long-date Treasury yields, a function of current inflation and economic growth as well as expectations about future economic conditions,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
Here are the factors that influence the average rates on home loans.
- Federal Reserve monetary policy: The nation’s central bank doesn’t set interest rates, but when it adjusts the federal funds rate, mortgages tend to go in the same direction.
- Inflation: Mortgage rates tend to increase during high inflation. Lenders usually set higher interest rates on loans to compensate for the loss of purchasing power.
- The bond market: Mortgage lenders often use long-term bond yields, like the 10-Year Treasury, as a benchmark to set interest rates on home loans. When yields rise, mortgage rates typically increase.
- Geopolitical events: World events, such as elections, pandemics or economic crises, can also affect home loan rates, particularly when global financial markets face uncertainty.
- Other economic factors: The bond market, employment data, investor confidence and housing market trends, such as supply and demand, can also affect the direction of mortgage rates.
This graph shows the fluctuation of mortgage rates from the start of the pandemic to the end of last year:
What to know before choosing a mortgage
When picking a mortgage, consider the loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. You’ll also need to choose between a fixed-rate mortgage, where the interest rate is set for the duration of the loan, and an adjustable-rate mortgage. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market’s current interest rate. Fixed-rate mortgages offer more stability and are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
30-year fixed-rate mortgages
For a 30-year, fixed-rate mortgage, the average rate you’ll pay is 7.14%, which is an increase of 3 basis points from one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.52%, which is a decrease of 3 basis points from seven days ago. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 6.14%, an increase of 3 basis points from the same time last week. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
Expert tips for the best mortgage rates
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
- Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
- Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
- Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
- Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
- Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.
Source: cnet.com
Apache is functioning normally
A $150,000 mortgage will cost a total of $341,318 over the lifetime of the loan, assuming an interest rate of 6.5% and a 30-year term. It might be tempting to think that a $150,000 mortgage will cost…well, $150,000. But lenders need to earn a living for their services and mortgage loans come with interest.
What’s the True Cost of a $150,000 Mortgage?
The specific price you will pay to borrow $150,000 depends on your interest rate — which, in turn, is based on a wide range of factors including your credit score, income stability, and much more. Here’s what you need to know to get an estimate of how much a $150,000 home mortgage loan might cost in your specific circumstances.
💡 Quick Tip: If you refinance your mortgage and shorten your loan term, you could save a substantial amount in interest over the lifetime of the loan.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Where Do You Get a $150,000 Mortgage?
Good news: There are many banks and institutions that offer $150,000 mortgages. For 2024, the maximum amount for most conventional loans is more than $750,000, so the loan you’re considering is well within reach. To see how your salary, debts, and down payment savings affect how much home you can afford, use a home affordability calculator.
However, it’s important to understand that even a $150,000 mortgage may cost far more than the sticker price after interest and associated fees. For instance, let’s say you purchase a $200,000 home with a 25% down payment and a $150,000 mortgage. If your interest rate is 7% and your loan term is 30 years, the total amount you’d pay over that time is $359,263.35 — which means you’d actually pay more than the home price ($209,263.35) in interest alone. (And that’s before closing costs, home insurance, property taxes, or mortgage insurance.)
At prices like that, it may seem like taking out a mortgage at all is a bad deal. Fortunately, property has a tendency to increase in value (or appreciate) over time, which helps offset the overall cost of interest. (Of course, nothing is guaranteed.)
Keep in mind that you can potentially lower the interest rate you qualify for by lowering your debt-to-income (DTI) ratio, improving your credit score, or increasing your cash flow by getting a better-paying job. Even a small decrease in interest can have a big effect over the lifetime of a loan. In our example above, with all else being equal, you’d pay only $139,883.68 in interest if your rate were 5% instead of 7% — a savings of nearly $70,000!
Recommended: The Best Affordable Places to Live in the U.S.
Monthly Payments for a $150,000 Mortgage
When you take out a $150,000 mortgage, you’ll repay it over time in monthly installments — of a fixed amount, if you have a fixed mortgage, or amounts that can change if you take out a variable rate loan.
Your monthly $150K mortgage payment includes both principal (the amount you borrowed) and interest (the amount you’re being charged), and may also wrap in your property taxes, homeowners insurance, and mortgage insurance if applicable. (You’ll only need to pay mortgage insurance if your down payment is less than 20%.)
But there is another caveat here that some first-time homebuyers don’t know about. Even if your mortgage payments are fixed each month, the proportion of how much principal you’re paying to how much interest you’re paying does change over time — a process known as the amortization of the loan. It’s a big word, but its bottom line is simple: Earlier on in the loan’s life, you’re likely paying more interest than principal, which increases the amount of money the bank earns overall. Later on in the loan, you’ll usually pay more principal than interest.
What to Consider Before Applying for a $150,000 Mortgage
Amortization is important to understand because it can affect your future financial decisions. For example, if you’re not planning on staying in your house for many years, you may find you have less equity in your home than you originally imagined by the time you’re ready to sell — because the bulk of your mortgage payments thus far have been going toward interest. It might also affect when it makes sense to refinance your mortgage.
Most lenders make it easy to make larger payments or additional payments against the principal you owe so that you can chip away at your debt total faster, but be sure to double-check that your lender doesn’t have early repayment penalties.
Of course, there are different types of home loans. Here are some sample amortization schedules for two $150,000 home loans. (You can also build your own based on your specific details with a mortgage calculator or an amortization calculator online.)
Amortization Schedule, 30-year, 7% Fixed
Years Since Purchase | Beginning Balance | Monthly Payment | Total Interest Paid | Total Principal Paid | Remaining Balance |
---|---|---|---|---|---|
1 | $150,000 | $997.95 | $10,451.73 | $1,523.71 | $148,476.29 |
3 | $146,842.42 | $997.95 | $10,223.47 | $1,751.98 | $145,090.44 |
5 | $143,211.82 | $997.95 | $9,961.01 | $2,014.43 | $141,197.38 |
10 | $131,574.29 | $997.95 | $9,119.73 | $2,855.71 | $128,718.58 |
15 | $115,076.63 | $997.95 | $7,927.12 | $4,048.33 | $111,028.30 |
20 | $91,689.13 | $997.95 | $6,236.43 | $5,739.01 | $85,950.12 |
30 | $11,533.47 | $997.95 | $441.97 | $11,975.44 | $0.00 |
Notice that, for more than the first half of the loan’s lifetime, you’ll pay substantially more interest than principal each year — even though your mortgage payments remain fixed in amount.
Amortization Schedule, 15-year, 7% Fixed
Years Since Purchase | Beginning Balance | Monthly Payment | Total Interest Paid | Total Principal Paid | Remaining Balance |
---|---|---|---|---|---|
1 | $150,000 | $1,348.24 | $10,314.21 | $5,864.70 | $144,135.30 |
3 | $137,846.65 | $1,348.24 | $9,435.65 | $6,743.26 | $131,103.38 |
5 | $123,872.65 | $1,348.24 | $8,425.46 | $7,753.45 | $116,119.20 |
7 | $107,805.26 | $1,348.24 | $7,263.95 | $8,914.96 | $98,890.30 |
10 | $79,080.41 | $1,348.24 | $5,187.43 | $10,991.48 | $68,088.93 |
12 | $56,302.87 | $1,348.24 | $3,540.84 | $12,638.07 | $43,664.80 |
15 | $15,581.80 | $1,348.24 | $597.11 | $15,581.80 | $0.00 |
While a shorter loan term may help you build equity in your home more quickly, it comes at the cost of a higher monthly payment.
How to Get a $150,000 Mortgage
To apply for a $150,000 mortgage, you can search for providers online or go into a local brick-and-mortar bank or credit union you trust. You’ll need to provide a variety of information to qualify for the loan, including your employment history, income level, credit score, debt level, and more.
The higher your credit score, lower your debt, and more robust your cash flow, the more likely you are to qualify for a $150,000 mortgage — and, ideally, one at the lowest possible interest rate. That said, mortgage interest rates are also subject to market influences and fluctuations, and sometimes rates are simply higher than others overall.
💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.
The Takeaway
A $150,000 mortgage can actually cost far more than $150,000. Depending on your interest rate and your loan term, you may spend more than you borrowed in principal in the first place on interest, and you’ll likely pay a higher proportional amount of interest per monthly payment for about the first half of your loan’s lifetime.
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
How much is $150K mortgage a month?
A 30-year, $150,000 mortgage at a 7% fixed interest rate will be about $998 per month (not including property taxes or mortgage interest), while a 15-year mortgage at the same rate would cost about $1,348 monthly. The exact monthly payment you owe on a $150,000 mortgage will vary depending on factors like your interest rate and what other fees, like mortgage insurance, are rolled into the bill.
How much income is required for a $150,000 mortgage?
Those who earn about $55,000 or more per year may be more likely to qualify for a $150,000 mortgage than those who earn less. Although your income is an important marker for lenders, it’s far from the only one — and even people who earn a lot of money may not qualify for a mortgage if they have a high debt total or a poor credit score. (Still, the best way to learn whether or not you qualify is to ask your lender.)
How much is a downpayment on a $150,000 mortgage?
To avoid paying mortgage insurance, you’d want to put down 20% of the home’s purchase price, which if you are borrowing $150,000 would be $50,000 for a home priced at $200,000. Some lenders allow you to put down as little as 3.5% of the home’s price. So if you had a $150,000 mortgage and put down 3.5%, your down payment would be $5,440 and the home price would be $155,440. (Keep in mind these figures do not include closing costs.)
Can I afford a $150K house with $70K salary?
Yes, as long as you don’t have a lot of other debt, you can probably afford a $150,000 home if you’re making $70,000 a year. There’s a basic rule of thumb to spend less than a third of your gross income on your housing. With an income of $70,000 per year, you’re making about $5,833.33 per month before taxes — and a third of that figure is $1,925. A $150,000 mortgage might have a monthly payment of as little as $998 per month, even with a 7% interest rate, so it should be affordable for you as long as you don’t have other substantial debts.
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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.
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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*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.
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.
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.
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Source: sofi.com