2018 FHA Loan Limits and Conventional Loan Limits Increase in The Raleigh-Durham-Chapel Hill Metro Area

FHA Loan Limits

FHA Loan Limits

FHA loan limits  and conventional loan limits have increased for 2018. The new loan limits take effect on January 1, 2018.  FHA loan limits vary by county. These limits are determined by the Department of Housing and Urban Development (HUD).

In the Raleigh-Durham-Chapel Hill metro area, the 2018 loan limits increased significantly.  In 2017 the limits increased by 2.6% in Durham, Orange and Chatham Counties and 4.4% in Wake County.

The FHA loan limits for 2018 increased 8.2% in Durham, Orange and Chatham Counties and 3.12% in Wake County. 

These caps increase based on the size of the property, or specifically the number of units.  For instance, higher limits are usually allowed for two-family duplex homes as compared with single-family properties.

The FHA program can be used for single-family or multi-family properties with up to four units. Anything more than four units is generally considered to be commercial real estate.

2017 vs 2018 FHA Loan Limits

 

County

2017

1 Unit

2017

2 Units

2017

3 units

2017

4 Units

Orange

$350,750 $449,000 $542,750

$674,500

Durham

$350,750 $449,000 $542,750

$674,500

Chatham

$350,750 $449,000 $542,750

$674,500

Wake $300,150 $384,250 $464,450

$557,200

 

County

2018

1 Unit

2018

2 Units

2018

3 Units

2018

4 Units

Orange

$379,500 $485,800 $587,250

$729,800

Durham

$379,500 $485,800 $587,250

$729,800

Chatham $379,500 $485,800 $587,250

$729,800

Wake $318,550 $407,800 $$92,950 $612,600

Source: Housing Wire, December 2017

The National Mortgage Limit for FHA-insured Home Equity Conversion Mortgages, or Reverse Mortgages, will also increase from $636,150 to $679,650.

If you are looking to buy a single-family home or a multi-unit property, it is important to know that the FHA and conventional loan limits have increased.  This gives you – the buyer – more buying power!

As a quick reminder, the benefits of getting an FHA loan over a conventional loan is that an FHA loan has lower down payment requirements and less stringent credit score requirements.

Conventional loans have advantages. If you make at least a 20 percent down payment for your home, you will not have to pay private mortgage insurance (PMI). An FHA loan-– no matter the amount of down payment — requires an upfront premium and also a monthly premium for the life of the loan.

Don’t forget that the upfront premium can be paid for by the seller!  All you need is a great buyer’s agent who will negotiate this for you in the contract.  This is exactly what we at Real Estate Experts are here for.

Remember, FHA mortgage insurance is not cancelable.  Conventional mortgage insurance is cancelable once the home has 20% equity.

Conventional Loan Limits

For those of you that want a conventional loan, the 2018 limits are 6.8% higher than the 2017 limits.

2017 vs 2018 Conventional Loan Limits

Units

2017 2018

Single Family

$424,100

$453,100

2 Units

$543,000

$580,150

3 Units $656,350

$701,250

4 Units

$815,650

$871,450

Source: Academy Mortgage

The higher conventional loan limits mean that the loan can be higher, e.g., up to $453,100 for a single-family home, and not require a jumbo rate.  This is very significant because jumbo loan rates are higher than non-jumbo rates.  The higher loan amounts coupled with the lower rate give you the buyer more buying power at a lower cost.

If you are in the market to buy, we at Real Estate Experts are happy to guide you through the process.  We partner with fantastic, experienced lenders who know how to distill the complexities of getting a loan.

Our skilled buyer agents also know how to guide you through the home buying process so that you understand everything along the way.  We do everything we can to ensure a smooth home buying process.

How to improve your FICO score

Many people ask, how do I improve my FICO score and what is a FICO score anyway? Two very important questions for those looking to buy a home or who are at least curious about bettering their credit. Improving your FICO score — otherwise known as a credit score —  takes time and effort, just like anything else in this world. In this post, we will explain a little about FICO scores, tips for improving it, and useful tools to help you keep track of your credit score.

What exactly is a FICO Score?

The FICO score is a credit score.  It includes a combination of all the information found in your credit report. That includes information from the 3 major reporting bureaus.

Your FICO score is made up of the following:

Payment History: 35% of your overall FICO

Total Amounts Owed: 30%of your overall FICO

Length of Credit History: 15% of your overall FICO

New Credit: 10% of your overall FICO

Type of Credit in Use: 10% of your overall FICO

To find out what is impacting your FICO score you will want to review your credit reports.

Tips for Improving a FICO Score

There are multiple factors that way on your credit score and some way heavier than others. The tools we are going to share in this post will help you understand what those factors are. Here are a few tips to get you started:

  • Check Your Credit Reports: Fixing errors in your credit report can give you the most immediate score boost.
  • Pay Your Bills on Time: This one has a High Impact and should be taken seriously.
  • Keep Balances Low: They call this your “Utilization Score” and this factor ways heavy as well
  • Build Up Credit History: To create a good credit history, you’ll need to have open lines of credit that you use and pay off responsibly each month.
  • Pay off any Old Debts: If you owe money to the debt collectors, you better believe anyone you try to get a loan from will know about that debt. Take care of these items. 

What tools can help you track your FICO Score?

This information used to be a whole lot harder to get a hold of, but times have changed and the internet has opened the door to so many awesome tools. Many banks and credit cards now offer FICO scores as a Dashboard option within your online account. They run the score every quarter on most bank sites, but this could vary. There is also the universal way of getting your yearly scores, and that is by obtaining a free copy of your credit report from each of the three main credit reporting agencies — Equifax, TransUnion, and Experian — at www.annualcreditreport.com.

Then there are the online sites like Credit Karma which give you free access to your credit scores, reports and monitoring. Once you know where you stand, they help you figure out your next move. Maybe you need to dispute an error on your credit report. They could help with that. Maybe you’re paying too much in interest. They could help with that too. As you can see there are many new options available to monitor your FICO score so that the credit score improvement process can begin.

 

FICO Score Final Thoughts

Now that you know a little more than you did 5 minutes ago, what are you going to do with your newly acquired knowledge? Are you going to use this knowledge to better your odds of getting approved for a credit card? Are you thinking of buying a new car and you need to improve some things first? Maybe you are ready to buy that first home, and you are trying to make sure it’s feasible.  Whatever the case, we hope this information was helpful and ask that you reach out to us with any questions.

If you think you are ready for home ownership, contact Teresa Parker, Loan Officer at Cunningham & Company Mortgage BankersNMLS # 2024 at (919) 697-2598 or Teresap@cunninghammortgage.com. She can help you decide if it makes financial sense, and how to get started.

Cunningham Mortgage & Real Estate Experts are partners.  We help you find the home of your dreams and help you navigate through the home buying process and Cunningham Mortgage expertly helps you through the complicated lending process.

To see Real Estate Experts’ newest listings, click here, and feel free to give us a call anytime at 919-813-6449 or send us an email to  info@realestateexperts.net.

You may also want to read the following related posts:  Home Loan Preapproval vs. Home Loan PrequalificationRenting vs Buying – Which Is Better For You?, or Which Home Loans Are The Best?

Which Home Loans Are The Best?

Choosing the right home loan can be challenging as there are multiple options to choose from. Most home loans are either 15 year or 30 year terms, but those are not your only options.  Now before you go looking for the lowest rate on your purchase mortgage or refinance, you’ll need to decide on (or at least narrow down) a mortgage term that is right for you. By “mortgage term,” I mean the duration of your mortgage. Why does that matter? Well, your mortgage payments and the amount of interest you pay will be determined, in large part, by the term of your mortgage. In this post, we will show you your options and the pros and cons of each term length.

 

 

The Standard 30 Year Home Loan

The 30-year mortgage is one of the most popular options when it comes to borrowing money to buy a home. I think the most appealing part of a 30-year mortgage is the fact that you can get a lower monthly payment and therefore afford more house than you could with a shorter-term loan. At the same time, not all 30-year mortgages are fixed for 30-years. That’s right, there are a ton of mortgages based on a 30-year payoff schedule that can adjust monthly or annually.

A common example would be the 5/1 adjustable-rate mortgage, which is amortized over 30 years, but adjustable after just five.

It’s fixed for the first five years, and adjustable for the remaining 25, but still a 30-year term loan.

Same goes for a 7/1 or a 10/1 ARM, except their fixed period is seven or 10 years, respectively, before going adjustable.

 

The 15 Year Home Loan Is Also Very Common

The 15-year mortgage is not as popular as the 30-year mortgage, primarily because your monthly payment is significantly higher than on a 30-year mortgage. Also, we live in the age of “how big of a payment can I afford?”

While the payment amount should be affordable, it shouldn’t be the only determining factor of a purchase. What most people fail to realize is that choosing a 15-year mortgage term over a 30-year mortgage term results in a long-term monetary savings benefit that can easily run in the tens of thousands of dollars.

 

What other Home Loans are available?

The most common home loan terms are 30 and 15 year loans, but those aren’t your only options. There are plenty of other options, including 10 year, 20 year, 25 year, 40 year, and even five-year terms.

Yes, you could pay your mortgage off in just 10 years or stretch it out to 40 years if you need a little more time. Just make sure you look in to all your options before jumping into your next home loan.

 

The “Real” Average Home Loan Term

One thing to remember is that most people only hold onto their mortgages for about seven years.  This is a result of either selling the home and moving on, or refinancing the existing mortgage to take advantage of lower mortgage rates, or to get cash out.

What we are trying to say is that you should really think about your personal situation. Is this purchase going to be your last for the next 30 years, or does your life demand movement and therefore change?

Don’t pick a 20-year over a 30-year term if the rate isn’t significantly better.

And don’t go after a 15-year term if you think you’ll have a tough time making the larger payments, or if you think you may move in just a few years.

In Conclusion

The longer the term, the lower the mortgage payment, but the more interest you’ll pay and the longer it will take to build home equity. Take your time, make the right choices, and make sure you can live with those choices, because getting in too deep isn’t hard to do. No matter what kind of loan gets you into a home, do your homework beforehand and make sure there are no details about the mortgage loan you don’t understand.

If you think home ownership is for you, contact Teresa Parker, Loan Officer at Cunningham & Company Mortgage BankersNMLS # 2024 at (919) 697-2598 or Teresap@cunninghammortgage.com. She can help you decide if it makes financial sense, and how to get started.

Cunningham Mortgage & Real Estate Experts are partners.  We help you find the home of your dreams and help you navigate through the home buying process and Cunningham Mortgage expertly helps you through the complicated lending process.

To see Real Estate Experts’ newest listings, click here, and feel free to give us a call anytime at 919-813-6449 or send us an email to  info@realestateexperts.net.

You may also want to read the following related posts:  Home Loan Preapproval vs. Home Loan PrequalificationRenting vs Buying – Which Is Better For You?, or Does a 0.5% Rise in Interest Rates Equal a 5% Rise in Price?

Does a 0.5% Rise in Interest Rates Equal a 5% Rise in Price?

SincRising Interest Ratese the election, interest rates are rising and they will have a direct effect on the cost of housing. There is a rule of thumb that a ½% change in an interest rate is approximately equal to a 5% change in price.

As the interest rates go up, it will cost you more to live in the very same home, or to keep the payment the same, you’ll have to buy a lower priced home.

Before rates rise too much, this may be the best time to buy a home whether you’re going to use it for your principal residence or a rental property. Low interest rates and lower prices make housing more affordable.

Affects of interest rates on home prices

The Impact of Rising Interest Rates on Home Ownership

Many home buyers understand that rising home prices can affect their ability to buy.  Many people, however, don’t realize that rising interest rates have an even greater impact.  For the last few years, interest rates have been at historic lows.

According to Erik Martin, a reporter with The Mortgage Reports, “Housing agency Freddie Mac recently predicted that mortgage rates will rise to 4.0% in 2017. That’s more than 50 basis points (0.50%) higher than the current mortgage rate average.”

As illustrated above, as interest rates rise, your buying power decreases.   In this case, to keep your mortgage payment the same, a buyer would need to either put down more money, bring in a co-borrower for help, or look at a different form of financing than a conventional loan, such as an adjustable rate mortgage or an 80/10/10 piggy back loan.

If interest rates rise a full 1%, the typical buyer would need to spend $35,000 less on their home purchase.  This is significant!  In many places, home values are rising too so this amounts to a double whammy for home buyers.

Our recommendation at Real Estate Experts is to watch mortgage rates very closely.  If you are looking to buy, let one of our top realtors help you find the home of your dreams.

Home Loan Preapproval vs. Home Loan Prequalification

Home loan prequalification vs Home Loan preapproval

One of the first conversations we typically have with buyers is advising them to get a home loan preapproval or home loan prequalification letter.  One of the key questions is what is the difference between getting a pre-qualification letter and a pre-approval letter.

First, you want to get prequalified or preapproved with a trusted home lender.

What’s the difference between these two things?   Plenty…and by understanding the difference up front you may avoid major problems down the road.

Home Loan Preapproval vs. Home Loan Prequalifcation

Cunningham Mortgage has created a great video that explains the difference very well.

Getting Pre-Qualified vs. Pre-Approved

You can get “Prequalified” for a home loan based on information you provide verbally to your Loan Officer. Sometimes, the lender will obtain a credit report. If you are “prequalified,” the lender will give you a document that states an approximate dollar amount you might expect to borrow.

The next step in the lending process is to apply for  a home loan preapproval, where you will provide the lender with credit detail and other documents that verify your income and assets.

When you are preapproved, the lender has committed to an exact dollar amount they are willing to loan to you.

To a home seller, an offer presented from a preapproved buyer is much stronger than from one who is prequalified.

It is advantageous to complete one or both of these steps – pre-qualification and pre-approval – before you start to look for a home. That way, is that know how much you can borrow and you won’t waste time on homes that outside of your budget.

See a related article on rehab loans.

And, don’t forget. You can count on your expert loan officer to help you through the process.

This information has been provided to Real Estate Experts by one of our lender partners, Teresa Parker, with Cunningham Mortgage. Teresa’s contact information is below.

To search homes for sale in Chapel Hill, Carrboro, Durham, Cary, Apex, Morrisville and the Raleigh area, visit Real Estate Experts.

Teresa M. Parker
919-697-2598

Email teresap@cunninghammortgage.com

NMLS # 453354

Company NMLS # 2024

What Is A Buyer Ready Loan Program and Should You Do This?

Loan Application Approved Showing Credit Agreement

Searching for a new home is an exciting yet sometimes lengthy endeavor…and when you finally find the home of your dreams, the last thing you’ll want to deal with are unexpected delays or complications with your loan. That’s why Real Estate Experts has partnered with Cunningham & Company Mortgage Bankers, who offer a unique “Buyer Ready Loan Program” to help you avoid many unnecessary headaches related to your loan.

“Our Buyer Ready Program will allow you to start the loan process while you’re shopping for a house,” says Theresa Parker, a preferred lender with Cunningham & Company. “You can actually get full credit approval before you’ve even found the house of your dreams. We will fully credit underwrite you and have you ready, so that when you find your perfect home, your loan is ready as well.” Not to be confused with simply being “prequalified” for a loan, Buyer Ready approval means you will receive mortgage credit approval as you search for your new home. Additionally, it ensures full loan approval within the Due Diligence period and protects your Due Diligence fee and Earnest Money deposit.

Working with you, Cunningham & Company will determine a realistic loan request through Buyer Ready, which will typically lean towards a larger amount to allow some flexibility during your search. “If a client is looking at a home with a sale price of $275,000, I will suggest we bump that up and look at getting approved at a $300,000 sale price, so that if she or he finds the home of their dreams that happens to be $285,000, then we’re still ready to go,” says Theresa.

The Buyer Ready Program can also be indispensable in a competitive offer situation. In the case of two buyers who fall in love with the same house, offering the same amount, it’s a sure bet that the homeowner is going to sell to the client that presents the certificate he received from Buyer Ready stating that he has been fully preapproved. “I’ve seen this happen time and time again,” says Theresa. “I have had clients who have brought equal offers as multiple other buyers on the same property. The reason that they were the ones that were successful in their offer was 100 percent attributed to the Buyer Ready Program.”

Ready to apply? Contact Broker Jodi Bakst or Paul Barrett to begin the search for your dream home and start your loan process while you are house hunting: 919.928.5131, jodi@realestateexperts.net, or paul@realestateexperts.net. Visit them online at www.realestateexperts.net.