Wednesday, September 30, 2020

Minimum Down Payment For First-Time Home Buyers

Someone once asked me: With the way the economy 
has taken a toll on savings accounts, the traditional 20% down payment seems out of reach for many first-time home buyers like myself. Are more first-timers going the route of 5%-15% down payments? Or should I wait until I've got the 20% saved?

I can answer your question in two ways because you're asking two separate questions.

I take "realistic" to mean whatever makes sense for a buyer. There are some who believe that 20% is a "realistic" minimum down payment because it avoids mortgage insurance. Lenders view borrowers who make a smaller down payment as presenting more risk. Because of this, lenders require mortgage insurance to manage their risk. That insurance costs the borrower money.

If a buyer has enough money for a 20% down payment and closing costs and has something left over for cash reserves, 20% is fine. I say that with one caveat: if you carry any consumer debt with rates higher than that of a mortgage, it is FAR better to pay those more expensive items off with available cash than to put it into a home down payment. 

There are many loan programs designed for lower 
down payments 3% on conventional or
3.5% for FHA, No down payment for VA and USDA
. Down Payment Assistance (DPA) is offered by FHA Government Grant program for 2% - 3.5% do
wn payment help, that is considered a gift and doesn't have to be paid back. 

If a buyer doesn't quite have enough cash for a 20% down payment plus closing costs, waiting to save up the money can be very expensive. First, home values are increasing in most areas of the country today. This means that if there is an appreciation rate of 4%, the $300,000 home you have your eye on today will cost $312,000 a year from today. There is also the matter of rising interest rates. 

If you have the ability to buy today regardless of the amount of cash you have—as little as 3% plus closing costs can get you into a home—buying now is a good idea. Yes, there will be mortgage insurance (MI), but that is temporary; once you can demonstrate to the lender that your loan balance is 80% of the home's market value or less, if you have an FHA loan you will need to refinance to remove your mortgage insurance.. but generally once you have 20% equity you can get your MI removed. 

I hope this is useful. Call me if you want to get pre-approved and see how much you qualify for, then you just need to find a home.  

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 


Roxy Redenbaugh, Broker
Sr Mortgage Consultant
Residential and Commercial
The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,
NMLS#269926 Company NMLS#1930219

Thursday, September 3, 2020

Which FICO Score Is Most Important

 People often ask me:  Which FICO scores are most important for mortgage applications?


We GENERALLY use what is called the "mid score." Most people have three FICO scores—one from each of the three credit repositories (Equifax, Experian, and TransUnion). We discard the high and the low using the one in the middle—the mid score.

This is especially important when we are doing a "rapid rescore" or "credit bureau update." These both mean the same thing: using documentation acceptable to the credit bureaus, we can bypass the normal monthly reporting cycle for creditors. If we are paying down revolving debt, for example (credit cards), we will get a current statement from the borrower reflecting the lower balance. The credit report vendor will submit that document to the bureaus and get a new FICO score within about five days based on the lower balance. FICO scores begin to suffer when credit card balances exceed about 30% -50% of the credit limit. The credit report vendors charge a fee for the rescore service, and since we are only looking improve the mid score, only one or two bureaus need to be updated. This saves the borrower a couple of hundred dollars. I also have tools available that help to analyse your accounts and simulate a what if situation, meaning if I pay down this or that account how will it effect my credit scores. 
Credit standards are not as stringent as some believe. You can buy a home with lower scores than you might think. 

If you have questions about our credit, reach out. I'm here to help.

Thank you for visiting my blog, please leave me a comment and let me if you like my blog and the information I post. 


Roxy Redenbaugh, Broker
Sr Mortgage Consultant
Residential and Commercial
The Greatest Compliment I Can Receive Is A Referral From Friends, Family, and Business Associates,
NMLS#269926 Company NMLS#1930219