FHA Shuts Out Non-Permanent Residents: What You Need To Know

Non-Contingent: Guaranteed Backup Contract

Be A Cash Buyer With Our Cash Offer Loan

Buy Before You Sell–Instant Equity Bridge Loan

Cash Offer Loans + Buy Before You Sell

I’m excited to share three options to enhance your negotiating power when making an offer on your dream home. You can become a cash buyer with just a 5% down payment, allowing you to lock in savings, beat out competing offers, as well as allowing for quick closings in as little as 10 days. Our Buy Before You Sell Instant Equity Unlocked Program offers great flexibility and is especially cost-effective compared to similar programs. Last but not least, our Guaranteed Backup Contract for those who want to be non-contingent on their departing residence is a game-changer for many. Please let me know if you have any questions about these options!

Home Title Theft: How To Protect Yourself

Step-by-Step Guide to Buying a Home | Everything You Need to Know!

Homebuyer Education Resources

Hello!This is a collection of resources covering many different topics and frequently asked questions that come up. Feel free to peruse and watch at your convenience.Thanks!~Nathan

Why Lock Your Loan? The Risks Of Rate Locks

Already Pre-Approved? Save $$$ With YOUR CURRENT Lender – Full Video 2 Min

Already Pre-Approved? Save $$$ With YOUR CURRENT Lender – 1 Minute

This 1 Minute Video Could Save You Thousands

How to Spot a Bad Refinance!

Self Employed? Critical Tax Filing Info!

Why Get Pre-Approved

Buy Now Vs Wait Till Rates Drop

Housing Market Update 1/21 – Updated Weekly!

Lower Interest Rates Could Cost You More in the Long Run

Interest rates are a hot topic in the housing market, and many prospective homebuyers are holding off on purchasing a home hoping these rates will drop. While this might seem like a smart move at first glance, the reality is that this strategy could cost you more money in the long run. Let’s dive into why waiting for lower rates could be a costly mistake.The Appeal of Lower Interest RatesAt first, the idea of waiting for a lower interest rate to purchase a home seems logical. A lower rate means:Lower monthly payments: A reduced interest rate can significantly decrease your monthly mortgage payment, making your home more affordable.Increased buying power: Lower rates mean you can qualify for a larger loan, potentially allowing you to afford a more expensive home.Overall savings: Over the life of a 30-year mortgage, even a 1% difference in the interest rate can save you thousands of dollars.These points make the argument for waiting compelling. However, there are several reasons why this strategy may not be as beneficial as it seems.Everyone is Waiting for the Same ThingThe biggest issue with waiting for lower interest rates is that you’re not the only one with this idea. When rates eventually drop, it’s likely that:Increased competition: As more buyers flood the market, competition for homes will surge. This increase in demand can drive home prices up, negating the savings from a lower interest rate.Bidding wars: With more buyers in the market, bidding wars become more common, often pushing the final sale price well above the asking price.In essence, by waiting, you could find yourself paying significantly more for the same home you could have purchased for less in a less competitive market.Demographic Factors: The Surge of First-Time HomebuyersAnother critical factor to consider is the demographic shift happening in the U.S. right now. The average age of first-time homebuyers is around 35 years old, and this age group is currently the largest cohort in the country. This means:High demand for starter homes: With so many first-time buyers entering the market, demand for starter homes is skyrocketing.Limited supply: Many current homeowners with low interest rates on their existing mortgages are choosing to rent out their previous homes rather than sell them. This limits the supply of homes available for first-time buyers, further driving up prices.With such a significant demand for homes, prices are likely to continue rising, making it more expensive to buy the longer you wait.Pent-Up Demand: Living at Home LongerThere is also a growing trend of young adults living at home longer. Currently, 17% of people are living with their parents, the highest percentage since 1940. This pent-up demand represents a large group of potential buyers who will eventually enter the market, further increasing demand and pushing prices up.The Financial Impact of WaitingLet’s break down the numbers to see the potential financial impact of waiting for a lower interest rate:Current ScenarioPurchase price: $500,000Down payment (3%): $15,000Interest rate: 6%Monthly payment (Principal & Interest): $2,907In the current market, it’s possible to negotiate seller concessions, potentially reducing the cash needed at closing. But what happens if you wait?Waiting for a 5% Interest RateIf you wait a year for rates to drop to 5%:Monthly payment reduction: $304 per month ($3,648 per year).Price appreciation: If home prices appreciate by 5% (as they did from 2023 to 2024), the home now costs $525,000.New down payment (3%): $15,750Increased competition: Less likelihood of seller concessions due to increased buyer demand.In this scenario, the overall cost to purchase has increased by $25,000, and you’ve missed out on building equity. The small monthly savings from the lower interest rate don’t compensate for the higher home price and the extra cash needed at closing.Refinancing: A Strategy to ConsiderAnother point often overlooked is the option to refinance. If you purchase a home now at a 6% interest rate, you always have the opportunity to refinance your mortgage if rates drop in the future. This allows you to:Lock in current home prices: By buying now, you can secure a home at today’s prices before they increase further.Reduce your rate later: If and when rates drop, refinancing can lower your monthly payment without the risk of paying a higher purchase price in a more competitive market.The Bottom Line: Don’t Follow the CrowdThe numbers clearly show that waiting for a lower interest rate can be a costly decision. By purchasing now, you can avoid the inevitable competition and price increases that will come when rates drop. Plus, you always have the option to refinance later, securing a lower rate without the downside of a higher purchase price.If you’re considering buying a home and have questions about your unique situation, don’t hesitate to reach out. I’m here to help you make the best financial decision for your future.

Federal Reserve Rate Cut Explained: What It Means for Your Mortgage Rates!

The Federal Reserve rate cut, the recent decision to cut the federal funds rate by 50 basis points, has been dominating the headlines. Many are wondering how this significant move will influence mortgage interest rates.Contrary to popular belief, the relationship between the Fed rate and mortgage rates isn’t as straightforward as it might seem. In this article, we’ll break down the implications of this rate cut, why mortgage rates behave differently, and what it means for homeowners and potential buyers.What Does the Federal Reserve Rate Cut Mean?When the Federal Reserve (Fed) cuts the federal funds rate, it’s essentially lowering the cost of borrowing for banks. This decision is typically made to stimulate the economy by making borrowing cheaper for consumers and businesses. However, many people mistakenly assume that a cut in the Fed rate directly leads to a decrease in mortgage interest rates. This isn’t always the case.Why Did Mortgage Rates Go Up After the Fed Cut?Despite the Fed’s rate cut, mortgage rates actually increased slightly. To understand why this happened, it’s important to know how mortgage rates are determined. Mortgage rates are closely tied to the performance of mortgage-backed securities (MBS), which are bonds traded much like stocks. These securities influence how lenders price their mortgage rates daily, and on particularly volatile days, multiple adjustments can happen.Mortgage Rates and MBS: Mortgage rates generally move in the opposite direction of MBS prices. When MBS prices go up, mortgage rates go down, and vice versa.Daily Fluctuations: Because MBS are traded in the open market, mortgage rates can fluctuate multiple times a day, reflecting the ongoing demand and supply dynamics.Understanding the Recent Trend in Mortgage RatesOver the past few months, mortgage rates have been trending downward, thanks to a variety of factors, including expectations of the Fed’s rate cuts and a cooling economy. However, mortgage rates aren’t directly tied to the Fed rate but are more influenced by the 10-year Treasury yield. As the yield on the 10-year Treasury has fallen, mortgage rates have followed suit, making home loans more affordable.Key Points to Consider:Inverse Relationship with Treasury Yields: Mortgage rates often follow the 10-year Treasury yield because investors see MBS as a safer investment during economic uncertainty, leading to increased demand and lower yields.Market Expectations: The market had already anticipated the Fed’s rate cut, so much of this expectation was already priced into mortgage rates before the announcement.What Should Homeowners and Buyers Do Now?With the Fed’s rate cut, many homeowners and potential buyers are considering whether now is the time to lock in a lower mortgage rate. Here’s what you should keep in mind:Current Rate Levels: We are currently seeing some of the best mortgage pricing since early 2023. This could be a good opportunity for those looking to refinance, especially if their current rates are in the 6-8% range.Future Rate Cuts: The likelihood of the Fed cutting rates by another 50 basis points in the near future is low. Expect smaller cuts of around 25 basis points instead. This means we may not see drastic drops in mortgage rates in the coming months.Long-Term Outlook: If inflation remains under control and economic indicators are stable, we can expect mortgage rates to continue their gradual decline over the next one to two years. However, if inflation surprises on the upside, mortgage rates could rise again.Why Refinancing Now Might Be a Smart MoveIf you’re a homeowner with a mortgage rate above current levels, now could be the right time to consider refinancing. Lowering your rate can reduce your monthly payments and save you a significant amount of money over the life of your loan.Protect Against Future Increases: If the economic situation changes and inflation picks up, the Fed could be forced to raise rates again. Locking in a lower rate now could shield you from potential increases in the future.Take Advantage of Low Rates: Current rates represent some of the lowest levels we’ve seen in the past few years. Refinancing now can help you capitalize on these favorable conditions.What’s Next for Mortgage Rates?While the immediate effect of the Fed’s rate cut on mortgage rates has been muted, the overall trend remains favorable for borrowers. Here’s what to watch for in the coming months:Economic Data Releases: Key indicators like unemployment rates, GDP growth, and inflation will play a significant role in the Fed’s future decisions. Strong data could mean higher rates, while weaker data might push rates lower.Fed Policy Signals: Listen for signals from the Fed regarding their future policy moves. Any hints of more aggressive cuts or a pause in rate adjustments will influence the direction of mortgage rates.Final ThoughtsThe recent Fed rate cut has led to a lot of speculation and confusion around mortgage rates. While it’s tempting to assume that a lower Fed rate means lower mortgage rates, the reality is more complex. Mortgage rates are influenced by a variety of factors, including MBS performance and the broader economic outlook.If you’re in the market for a home loan or considering refinancing, now is a great time to speak with a mortgage professional. They can help you navigate these changes and find the best option for your situation.Need Help with Your Mortgage?If you’re unsure about your mortgage options or want to learn more about how the recent Fed rate cut could impact you, reach out to us today. Our team is here to provide personalized advice and help you make the best decision for your financial future.FAQ: Understanding the Federal Reserve and Its Impact on Mortgage RatesThis FAQ aims to address common questions regarding the Federal Reserve’s recent rate cut and how it affects mortgage rates. If you’re trying to make sense of these changes, this guide will help clarify the basics and provide insights on what this means for homeowners and buyers.What is the Federal Reserve?The Federal Reserve, often referred to as “the Fed,” is the central banking system of the United States. It plays a crucial role in managing the country’s monetary policy by regulating interest rates, controlling inflation, and maintaining economic stability.What does it mean when the Federal Reserve cuts interest rates?When the Federal Reserve cuts interest rates, it lowers the cost of borrowing for banks, which can lead to lower interest rates for consumers on various types of loans, including mortgages, auto loans, and personal loans. The goal is to stimulate economic activity by making borrowing cheaper and encouraging spending.How does the Federal Reserve rate cut affect mortgage rates?Contrary to popular belief, the Federal Reserve’s interest rate cut doesn’t directly influence mortgage rates. Mortgage rates are more closely tied to the performance of mortgage-backed securities (MBS) and the 10-year Treasury yield. While the Fed’s actions can indirectly impact these factors, mortgage rates don’t always move in tandem with the Fed rate.Why did mortgage rates go up after the Federal Reserve cut rates?Mortgage rates can fluctuate based on investor behavior in the bond market, even if the Federal Reserve cuts rates. After the recent Fed rate cut, mortgage rates actually went up slightly because the cut was already anticipated and priced into the market. Additionally, mortgage rates are influenced by supply and demand dynamics in the mortgage-backed securities market.What is the relationship between the Federal Reserve rate and mortgage rates?The Federal Reserve rate and mortgage rates have an indirect relationship. While the Fed rate impacts the cost of borrowing for banks and short-term interest rates, mortgage rates are more influenced by long-term economic factors such as inflation expectations, the 10-year Treasury yield, and global economic conditions.How do mortgage-backed securities (MBS) influence mortgage rates?Mortgage-backed securities are bonds secured by home loans. Lenders sell these securities to investors, which helps fund more home loans. The performance of MBS influences how lenders set mortgage rates. When MBS prices go up, mortgage rates generally go down, and vice versa. This is why mortgage rates can change daily, or even multiple times per day, based on market activity.Will the Federal Reserve cut interest rates again?It’s possible, but not guaranteed. The Federal Reserve’s future rate decisions will depend on various economic indicators such as inflation, unemployment rates, and overall economic growth. Most experts expect any future rate cuts to be smaller, around 25 basis points, rather than the recent 50 basis point cut.What should I do if I’m considering refinancing my mortgage?If you have a mortgage rate in the 6-8% range, now may be a good time to consider refinancing. Even though the Federal Reserve rate cut hasn’t drastically lowered mortgage rates, current rates are still some of the best seen in recent months. Refinancing can help reduce your monthly payments and protect you from potential rate increases in the future.How long will mortgage rates stay low?While no one can predict the future with certainty, many analysts believe that mortgage rates will remain relatively low for the next one to two years, provided that inflation remains under control and the economy continues to stabilize. However, any unexpected economic events could change this outlook.What should I expect from mortgage rates in the near future?Mortgage rates are expected to trend slowly downward but may not see dramatic decreases. The recent Fed rate cut was largely anticipated by the market, meaning that any immediate effects are already reflected in current mortgage rates. Future rate movements will depend on ongoing economic data and Federal Reserve policy decisions.Is now a good time to buy a home or refinance?Yes, now could be a good time to buy a home or refinance, especially if you’re currently locked into a high mortgage rate. With mortgage rates hovering near recent lows, you have the opportunity to secure better terms on your home loan. It’s always best to consult with a mortgage professional to understand your options and make an informed decision.How can I stay updated on Federal Reserve decisions and mortgage rates?To stay informed about Federal Reserve decisions and their impact on mortgage rates, consider subscribing to financial news outlets, following updates from the Federal Reserve’s official website, or working with a mortgage professional who can provide insights tailored to your situation.If you have more questions about the Federal Reserve or mortgage rates, feel free to reach out to us. We’re here to help you navigate these changes and make the best financial decisions for your future.

How to Qualify for a Home Loan Using Future Employment Income

Today, I want to address a common concern for many looking to buy a home: how to qualify for a mortgage using income from a future job. Let’s dive into the details to help you understand the process and avoid any pitfalls.Why Future Employment Matters in Home LoansWhen you’re planning to move for a new job and need a place to live, it can get tricky. Lenders are cautious when it comes to approving loans based on future employment. Here’s why:Income Verification: Lenders need assurance that you will have a steady income to cover your mortgage payments.Job Stability: They prefer salaried positions or guaranteed full-time hours to mitigate the risk of income variability.Key Considerations for Using Future Employment Income1. Salary vs. Variable IncomeSalary Employment: It’s much easier to qualify if your new job offer includes a salary or guaranteed full-time hours. This stable income can be used to calculate your loan eligibility.Variable Income: If your income includes overtime, bonuses, or commissions, it falls under variable income. In such cases, lenders require at least one pay stub showing this income before they can approve the loan.2. Clearing ContingenciesNon-Contingent Offers: Your job offer should not be contingent on any conditions like background checks or drug tests. Lenders need confirmation that all contingencies are cleared.Employer Letter: Obtain a letter from your employer stating that all contingencies have been met and you have a secure position.3. Timing of Employment StartStart Date Window: The start of your new job should be within 30 days before or after the loan closing date. This ensures lenders that you will have an income stream soon after closing.Reserve Funds: You need to have enough reserve funds to cover your mortgage payments and other debts during any employment gap.Steps to Ensure Loan ApprovalSecure a Non-Contingent Job Offer: Make sure your offer letter states that your employment is not contingent on any pending conditions.Provide Proof of Income: If you have variable income, ensure you can provide a pay stub that matches the income used to qualify for the loan.Timing is Crucial: Align your job start date with the loan closing date within the 30-day window to meet lender requirements.Maintain Reserve Funds: Keep sufficient funds in your account to cover mortgage payments and debts for the transition period.Common QuestionsWhat if I’m Moving to a Higher-Paying Job?If your new job comes with a higher salary, it’s crucial to demonstrate that you can handle the increased mortgage payments. This involves showing adequate reserve funds and ensuring your income aligns with the lender’s calculations.What Happens During an Employment Gap?Lenders are wary of gaps in employment. Even if you plan to keep working until your new job starts, the lender needs assurance through your reserve funds. This helps them see that you can make payments even if there’s an unexpected job change.ConclusionQualifying for a home loan with future employment income is possible, but it requires careful planning and documentation. Ensure your job offer is non-contingent, align your employment start date with the loan closing date, and maintain sufficient reserve funds. By following these steps, you can navigate the process smoothly and secure your dream home.If you have any more questions or need further assistance, feel free to reach out. Have a great day!

When is the Right Time to Refinance Your Mortgage?

When is the right time to do a refinance? This is a question I get a lot at Mortgage Architects, especially as interest rates begin to come back down after a couple of years of increases.Timing the MarketOne of the first things to understand about refinancing is that it’s nearly impossible to perfectly time the market. You might get lucky and hit the exact bottom of the interest rate cycle, but it’s more likely that you won’t. Instead, the goal should be to refinance when rates come down to a favorable level. This approach helps mitigate the risk of rates spiking unexpectedly due to factors like inflation.Why Timing is TrickyMarket Volatility: Economic conditions can change rapidly, affecting interest rates.Inflation: Persistent inflation can keep rates high for extended periods.Global Events: Unpredictable global events can also influence interest rates.Refinancing StrategyWhen considering a refinance, it’s important to have a strategic approach. Let’s explore the best practices and what to avoid.Avoid Overly Aggressive Rate CutsImagine you have a current mortgage on a $650,000 property with a loan amount of $413,000 at an interest rate of 7.625%. If you refinance aggressively to drop the interest rate by a full percentage point, the new loan amount might increase to $422,000. This increase can be problematic for several reasons:Increased Loan Amount: Adding to your loan amount means higher monthly payments and more interest paid over time.Future Rate Drops: If rates continue to fall, refinancing again will add even more to your loan amount, compounding the problem.A Balanced ApproachA more balanced approach would be to reduce the interest rate by five-eighths of a point instead. This method offers significant savings without excessively increasing your loan amount. For example, this could save you $180 per month while only adding about $3,000 to your loan.Managing Added Loan AmountIf you do end up adding to your loan amount, there are strategies to mitigate this impact.Skipping a PaymentWhen you refinance, you typically skip one monthly payment. Instead of pocketing this amount, apply it to your new loan. For instance, if your skipped payment is $3,421, applying it to your new loan immediately reduces the added amount.Escrow AdjustmentsYour new lender will collect escrows for taxes and insurance, which initially increases your loan amount. However, your old lender will refund the previously collected escrows. Apply this refund to your new loan, further reducing the balance.Continuous Refinancing StrategyOne effective strategy is to refinance every six to seven months, following the interest rates down. After making six monthly payments on your new loan, you can refinance again. This method allows you to progressively lower your interest rate and loan amount over time.Cash-Out RefinancingAnother consideration is cash-out refinancing, especially if you have high-interest debt. For example, if you have credit card debt with rates in the 20-30% range, a cash-out refi can be a smart move. Even if your mortgage rate is relatively low, using the equity in your home to pay off high-interest debt can save you a significant amount of money and improve your financial stability.Benefits of Cash-Out RefinancingDebt Consolidation: Pay off high-interest debt.Credit Improvement: Reduce your credit utilization ratio, potentially boosting your credit score.Financial Flexibility: Gain more control over your monthly cash flow.ConclusionRefinancing can be a powerful financial tool when done strategically. Whether you’re aiming to lower your interest rate or consolidate debt, it’s important to approach refinancing with a clear plan and avoid overly aggressive tactics that could increase your loan amount unnecessarily. If you have any questions or would like to see what refinancing could look like for your specific situation, feel free to reach out to us at Mortgage Architects. We’re here to help you navigate the complexities and make the best decision for your financial future.Key TakeawaysTiming: Refinance when rates are favorable, but don’t aim for perfection.Strategy: Avoid aggressive rate cuts that significantly increase your loan amount.Manage Loan Amount: Use skipped payments and escrow refunds to reduce added amounts.Continuous Refinancing: Follow interest rates down by refinancing every six to seven months.Cash-Out Refi: Consider for high-interest debt to improve financial health.We’ll be happy to build out a personalized refinancing scenario for you. Talk to you soon!FAQs on Refinancing Your MortgageWhat is refinancing?Refinancing involves replacing your current mortgage with a new one, usually to take advantage of lower interest rates, change the loan term, or access home equity.When is the best time to refinance?The best time to refinance is when interest rates are lower than your current mortgage rate. However, timing the market perfectly is challenging, so it’s advisable to refinance when rates are favorable rather than trying to hit the exact bottom.What are the benefits of refinancing?Refinancing can lower your monthly mortgage payments, reduce your interest rate, shorten your loan term, or allow you to access the equity in your home for other financial needs.What should I avoid when refinancing?Avoid overly aggressive rate cuts that significantly increase your loan amount. This can lead to higher monthly payments and more interest paid over time, especially if you plan to refinance again in the future.How often can I refinance my mortgage?You can refinance your mortgage as often as it makes financial sense. Generally, it’s advisable to refinance every six to seven months if rates are consistently falling, allowing you to follow the rates down and continually improve your loan terms.What is a cash-out refinance?A cash-out refinance allows you to take out a new mortgage for more than you owe on your current one, receiving the difference in cash. This can be useful for consolidating high-interest debt, such as credit card balances, at a lower mortgage rate.Will refinancing affect my credit score?Refinancing can temporarily lower your credit score due to the credit inquiry and the new account on your credit report. However, if refinancing reduces your debt or improves your financial situation, it can positively impact your credit score in the long run.What are the costs associated with refinancing?Refinancing costs can include application fees, appraisal fees, title insurance, and closing costs. It’s important to compare these costs with the potential savings from a lower interest rate to determine if refinancing makes financial sense.How do skipped payments and escrow adjustments affect refinancing?When you refinance, you usually skip one monthly payment, which can be applied to your new loan to reduce the principal. Additionally, your new lender will collect escrows for taxes and insurance, but your old lender will refund the previously collected escrows. Applying this refund to your new loan can further reduce the balance.Can I refinance if I have bad credit?Refinancing with bad credit can be challenging, but it’s not impossible. You may need to explore options like FHA loans or find a co-signer. Additionally, improving your credit score before refinancing can help you secure better terms.What if I have a high amount of credit card debt?If you have high-interest credit card debt, a cash-out refinance can be a smart move. Using the equity in your home to pay off high-interest debt can save you money and improve your financial stability. After the cash-out refinance, you can follow the strategy of refinancing to lower your mortgage rate as interest rates fall.How do I start the refinancing process?To start the refinancing process, contact your mortgage lender or a mortgage broker to discuss your options. They can help you compare different loan products and determine the best refinancing strategy for your financial situation.How can I determine if refinancing is right for me?Refinancing is a personal decision that depends on your financial goals, current mortgage terms, and market conditions. Consulting with a mortgage professional can help you evaluate your situation and decide if refinancing is the right move for you.

House Hacking with FHA Loans: A Pathway to Real Estate Investment

House hacking with FHA loans has been a popular topic in real estate circles for years. This strategy is particularly advantageous for first-time homebuyers looking to enter the real estate market by purchasing a multi-unit property.By leveraging rental income from additional units, homeowners can significantly reduce their monthly expenses and start building a real estate portfolio. This comprehensive guide will walk you through the essentials of house hacking with FHA loans, including recent updates to loan guidelines, and offer practical scenarios to illustrate the benefits.Understanding House HackingHouse hacking involves purchasing a property with multiple units and living in one while renting out the others. This approach allows homeowners to use rental income to offset mortgage payments and other housing costs. For first-time homebuyers, using an FHA loan can make this process even more accessible due to its lower down payment requirements.Key Benefits of House HackingLower Monthly Expenses: Rental income from additional units can cover a significant portion of the mortgage payment.Building a Real Estate Portfolio: House hacking is an excellent way to start investing in real estate without needing substantial upfront capital.Increased Purchase Power: Rental income can help buyers qualify for larger loans.FHA Loans vs. Conventional LoansFHA loans require a down payment of just 3.5%, making them an attractive option for first-time buyers. Recently, Fannie Mae and Freddie Mac updated their guidelines to allow conventional loans to be used for multi-unit properties with a down payment as low as 5%. However, each loan type has its nuances.FHA Loan HighlightsLower Down Payment: 3.5% down payment requirement.Interest Rates: Generally around 6.25%, as of now.Self-Sufficiency Test: Required for properties with three or more units, ensuring that the property generates enough rental income to cover mortgage payments.Conventional Loan HighlightsDown Payment: 5% down payment requirement.Interest Rates: Typically higher than FHA loans.No Self-Sufficiency Test: Makes it easier to qualify for larger multi-unit properties.Reserve Requirements: Requires six months of reserves, which can include retirement accounts.Practical ScenariosTo better understand the benefits and challenges of house hacking, let’s explore a few scenarios.Scenario 1: Single-Family ResidenceCurrent Rent: $1,500/monthPurchase Price: $280,000Down Payment (3.5%): $9,800Interest Rate: 6.25%Monthly Mortgage Payment: $2,400Scenario 2: Two-Unit BuildingPurchase Price: $350,000Down Payment (3.5%): $12,250Interest Rate: 6.25%Monthly Mortgage Payment: $3,000Rental Income from Second Unit: $1,500Net Monthly Expense: $1,500Scenario 3: Three-Unit BuildingPurchase Price: $400,000Down Payment (3.5%): $14,000Interest Rate: 6.25%Monthly Mortgage Payment: $3,400Rental Income from Two Units: $3,000Net Monthly Expense: $400The Self-Sufficiency TestFor a three- or four-unit property, the FHA loan requires a self-sufficiency test. This test mandates that 75% of the rental income from the property must exceed the monthly mortgage payment, including HOA dues.Total Rental Income: $4,500 (assuming $1,500 per unit)75% of Rental Income: $3,375Monthly Mortgage Payment: $3,370In this scenario, the property just passes the self-sufficiency test.Conventional Loan ConsiderationsSwitching to a conventional loan for a $400,000 property means no self-sufficiency test, but higher interest rates and mortgage payments. The buyer would also need six months of reserves, which could come from cash savings or retirement accounts.ConclusionHouse hacking with FHA loans offers a powerful strategy for first-time homebuyers to enter the real estate market, reduce monthly expenses, and start building wealth through property ownership.By understanding the differences between FHA and conventional loans and considering the specific requirements and benefits of each, buyers can make informed decisions that align with their financial goals.If you have any questions or need personalized advice, feel free to reach out to us. We’re here to help you navigate the complexities of real estate investment and find the best solution for your needs.Frequently Asked Questions (FAQ) about House Hacking with FHA Loans1. What is house hacking?House hacking is a strategy where you purchase a property with multiple units and live in one while renting out the others. The rental income from the additional units helps offset your mortgage payments and other housing costs.2. Why use an FHA loan for house hacking?FHA loans are popular for house hacking because they require a lower down payment (3.5%) compared to conventional loans. This makes it easier for first-time homebuyers to afford a multi-unit property.3. What is the minimum down payment for an FHA loan?The minimum down payment for an FHA loan is 3.5% of the purchase price.4. What are the recent changes to conventional loan guidelines?As of November 18th, 2023, Fannie Mae and Freddie Mac have updated guidelines allowing conventional loans to be used for multi-unit properties with a down payment as low as 5%.5. What is the self-sufficiency test for FHA loans?The self-sufficiency test is required for FHA loans on properties with three or more units. It ensures that 75% of the rental income from the property is enough to cover the monthly mortgage payment, including HOA dues.6. How is rental income calculated for the self-sufficiency test?Rental income is calculated based on an appraisal of the property. For the self-sufficiency test, only 75% of the total rental income is considered to account for potential vacancies and maintenance costs.7. What are the pros and cons of using a conventional loan for house hacking?Pros:No self-sufficiency test.Potentially easier qualification for larger properties.Cons:Higher interest rates compared to FHA loans.Higher mortgage insurance costs based on credit score.Requires six months of reserves, which can include cash savings or retirement accounts.8. How does house hacking help build a real estate portfolio?By purchasing a multi-unit property and using rental income to cover mortgage payments, homeowners can save money and potentially reinvest in additional properties. This strategy allows for the gradual building of a real estate portfolio with minimal upfront capital.9. What should I consider before deciding between an FHA and a conventional loan?Consider the following factors:Down Payment: FHA loans require 3.5%, conventional loans require 5%.Interest Rates: FHA loans generally have lower interest rates.Self-Sufficiency Test: Required for FHA loans on properties with three or more units.Reserve Requirements: Conventional loans require six months of reserves.Overall Costs: Factor in mortgage insurance and monthly payments.10. Can rental income help me qualify for a larger loan?Yes, rental income from additional units can be used to help qualify for a larger loan. This increases your purchasing power and allows you to afford more expensive properties.If you have more questions or need personalized advice, feel free to reach out to us. We’re here to help you navigate the complexities of real estate investment and find the best solution for your needs.

Why Using A Buyer’s Agent Is Worth Every Penny

Hello, Future Homebuyer.You have an important decision to make and one that has garnered a lot of attention lately: Whether or not to use a buyers agent when purchasing your home?Watch the video above for an understanding of what buyer's agent does for you throughout the process and why using a great agent is worth every penny.Feel free to call me anytime to discuss any questions you may have.Nathan.......................................You can view our Google reviews here and check out my team here. 

Market Update 8.26.2024

Hello Everyone.This is the market update regarding lending and real estate.Also, quick note that the rates shown on the side are national averages, while the presentation above is today's rate scenarios with The Mortgage Architects. You can access the rate comparison by clicking on the Mortgage Coach presentation on the right, or if you are looking on your phone, it will be below this text.8.26.2024. Stocks are higher and Mortgage Bonds are trading near unchanged levels to start the week. The 10-year continues to test formidable support at 3.80%, which is a level yields have not been able to sustain a move below.2019 ComparisonThe Fed is historically tight right now, with the Fed Funds Rate at 5.25% to 5.50%. We know the Fed is going to start cutting on September 18, but they are behind the curve and have a lot of room to cut rates. Let’s take a look at some of the economic readings today vs pre-pandemic in 2019 – There is not much in common and the Fed is clearly overly restrictive.2019 vs TodayCore PCE: 1.8% vs 2.6%Unemployment Rate: 3.6% vs 4.3%Job Openings to Unemployment Ratio: 1.24% vs 1.2%Hiring Rate: 3.8% vs 3.4%Fed Funds Rate: 2.5% vs 5.375%10-year Treasury: 2.8% to 1.9% vs 3.80%30-year Fixed Mortgage Rate: 4% vs 6.5%Inflation is higher today but is on the way down. Notably, labor is much weaker across the board, yet the Fed Funds Rate is much higher. 10-year yields are 1-2% higher than 2019, while Mortgage Rates are 2.5% higher today…And we think yields and rates will continue to move lower, albeit not in a straight line and over time.Durable Goods OrdersDurable Goods Orders in July rose almost 10%, which appeared to be much stronger than market estimates of +5%. But this report is heavily influenced by aircraft orders, and when stripping out transportation, the index fell 0.2%...which was worse than estimates of -0.1%. There was also a big downward revision to June, making this report even weaker.Core Durable Goods Orders fell by 0.1%, which was weaker than estimates of a flat reading, but there was a positive revision to the previous report. Year over year, capital spending has been weak, up only 1.2% and pointing to a slowdown in the economy.Also of note, the shipments of those Core Goods, gets plugged into GDP, fell 0.4%. All else equal, this will trim Q2 GDP estimates when revised next.News This WeekMonday: Durable Goods OrdersTuesday: Case Shiller & FHFA Appreciation reports, Consumer ConfidenceWednesday: Mortgage ApplicationsThursday: Initial Jobless Claims, Q2 GDP (second reading), Pending Home SalesFriday: Personal Consumption ExpendituresThe highlight of the week will be Friday’s PCE (Personal Consumption Expenditures), which is the Fed’s favorite measure of inflation. The Core reading was last reported at 2.63%. The market is anticipating some low monthly readings, but because the comparisons from last year are so low, it will be difficult to make progress on the year over year readings.We do think the monthly readings will be favorable, and possibly beneath market estimates for two key reasons – The Producer Price Index, which was released earlier this month, was below and well beneath expectations. This is important because a lot of the components within the PPI report are shared by the PCE.Secondly, the Consumer Price Index Inflation report, also released earlier in the month, was pretty low, despite shelter costs artificially keeping it higher. When taking out shelter and motor vehicle insurance, all of the other items actually fell 0.1% in the month. Because PCE has much less of a weighting for shelter, we believe it will not be influenced as much and since all the other items dropped in aggregate, we feel there is a good chance PCE comes in beneath estimates and is favorable to the Bond market.Technical AnalysisMortgage Bonds had been able to show important resistance at 100.79 on Friday. Bonds have since back tested this level as support, which is holding for now. Bonds are now in a new range with the next ceiling up at 101.18, over 30bp above present levels.The 10-year yield is once again testing an important floor at 3.80%. The last few times tested, this level has held up, but a convincing break beneath it means that yields could go as low as 3.68%. If yields are rejected, there is room for them to move higher until reaching a ceiling at 3.92% - 3.95%. Which way yields go will be important to monitor.Thanks!Nathan

Illinois – Down Payment Assistance Programs Compared

Understanding Down Payment AssistanceComparison: Standard FHA loan vs. Down Payment AssistanceScenario: First-time homebuyer, 680 FICO score, $450,000 home purchaseKey Programs OverviewExclusion: Metro DPA (due to fund uncertainties)Program 1: FHA Loan 3.5% down payment, 6% interest rateProgram 2: FHA IHDA ACCESS DEFERRED 6.125%Program 3: Orion DPA Full down payment coverage, 6.625% interest rate, second lienProgram 4: EPM DPA Grant-based, 7.75% interest rate, higher monthly payment, refinance option (When video was recorded rate was 8.25%)Financial ConsiderationsSecond Liens & Mortgages: Impact on interest rates and paymentsAlternatives: Seller concessions and gift fundsCredit Score Impact: Limitations on using gift fundsDebt to Income Limitations and higher interest rates may limit the purchase price rangeChoosing the Right ProgramIndividual Financial Situation: Key to program selectionGraphs & Calculations: To illustrate differencesRefinancing Options: Post-six monthly payments, if applicableConclusion & Contact InformationResources: Video and sidebar materials for deeper understanding

Colorado – Down Payment Assistance Programs Compared

Understanding Down Payment AssistanceComparison: Standard FHA loan vs. Down Payment AssistanceScenario: First-time homebuyer, 680 FICO score, $450,000 home purchaseKey Programs OverviewExclusion: Metro DPA (due to fund uncertainties)Program 1: FHA Loan3.5% down payment, 6% interest rateProgram 2: CHAFA4% loan assistance, 7.25% interest rate, silent second mortgageProgram 3: Orion DPAFull down payment coverage, 6.625% interest rate, second lienProgram 4: EPM DPA Grant-based, 7.75% interest rate, higher monthly payment, refinance option (When video was recorded rate was 8.25%)Financial ConsiderationsSecond Liens & Mortgages: Impact on interest rates and paymentsAlternatives: Seller concessions and gift fundsCredit Score Impact: Limitations on using gift fundsDebt to Income Limitations and higher interest rates may limit purchase price rangeChoosing the Right ProgramIndividual Financial Situation: Key to program selectionGraphs & Calculations: To illustrate differencesRefinancing Options: Post six monthly payments, if applicableConclusion & Contact InformationResources: Video and sidebar materials for deeper understanding