AL and FL Mortgage News

Coming in just second to the increase seen in 2006, the 2022 conforming loan limits are out and available for use nearly 2.5 months earlier than expected.  That really is AWESOME news!! While limitations do apply, this can translate with approved credit the ability to buy an owner occupied single family home for $657,890 with 5% down, $694,440 with 10% down on a second home, and $781,250 for investment purchases with 20% down.  This applies to all counties in Alabama and Florida, if you are outside this area it may be different.

The advantage isn't just for those buying but for those buying to renovate, owners who want to renovate their existing home, or anyone building new construction using construction to permanent financing this is big news.

Announcements on USDA and FHA limits are expected to be on time in the final weeks of this year so check back with us on those.

If you want to know what this looked like in 2021 click here.

To learn more about renovation mortgages versus cashout-refinancing click here.

For ins and outs of residential construction financing click here.

Do you have questions, email Questions 

Please note purchase prices listed above are rounded down to the nearest $10 based on standard program maximum loan to values. Exceptions apply.  Nothing here constitutes an offer for financing and any information is based on approved credit.  For additional rate and cost information email service@gulfstatesfinancial.com NMLS # 835698. Equal Housing Lender.

Posted by Devin Murray on October 14th, 2021 12:05 PM

So I was getting a haircut at noon the other day and my stylist brought-up the cost of lumber in conversation.   She is extremely sharp, but it took me back because I know she is not buying, selling, or building and this was the second time in about 4 weeks she mentioned this.  A few weeks earlier I was at a family gathering where this came-up.   I overheard a couple discussing it while I was eating lunch in a downtown café a few weeks back.  It would seem that lumber prices (and maybe a shortage of chips for auto manufacturers) is the talk of the town everywhere I go.  Since I finance residential properties and pay attention to economic data, I felt compelled to contribute some factual and maybe useful information to the ongoing discussion.

After reading-up it appears the shutdowns in 2020 impacted the processing of lumber in the US at the mill level which eventually decreased supply while demand seemed relatively steady.  To heavily oversimplify the discussion anyone can track the price of lumber because it is a commodity and lumber futures (aka futures contracts) are traded on the NASDAQ exchange using symbol LBS.  In the real-world cash lumber prices we experience at the local store versus lumber futures are not exactly the same but let’s assume they are and skip the explanation of how and why they are different for now.

At quick glance at LBS you can see it did began a meteoric rise in early March 2021, reached a peak price of around $1,700 in early May but as of the third week of June prices have already corrected back to $900 early March levels.  For all of 2020 we saw an average in the $400-500 range (excluding when COVID immediately hit) and in the last five years the mean was somewhere around $350-400.  So is the cost of wood going to remain in the current territory of basically double and triple what we have seen in the last five years?  Economics say prices we have seen in the last 90 days aren’t sustainable and we have watched the sharp decline they predicted will continue.  But what does this actually mean for the hair stylist, my family members and the few dozen others who have mentioned it?

I never mentioned this to anyone but when prices were in the $1,600 range I ran into my contractor on the baseball field and yet again he brought it up.  When I asked this same question he smiled at me and said, “Let me put it to you this way, a lumber package for an average 2000 square foot house is about $25,000 higher than this exact time last year”.  Really I thought?  “Seriously, that’s it?” I said aloud.  

Given the price of lumber futures being down 40%+ since I had this conversation that would mean the cost difference for that same 2000 square foot home is now on $15,000.  To put that in to perspective that is about the cost of 75 additional square feet or a forced downgrade of flooring or cabinetry in most homes.  Coupled with the cost of what the full $25,000 was before March 2020, most people would never feel a significant impact of this at all.

In essence the cost of money plummeting in the last 15 months NOT lumber cost should still overshadow the hottest topic around town.  Fact is if you are buying, selling, building or remodeling this is a fair warning to get moving as quickly as possible as 30 year rates seem to be rising above the 3% mark yes even in a seller's market.   For anyone else not in this category, I would also encourage you to learn about why the cost of money is so different in 2021 especially those who are mortgage free.  

We are licensed in Florida and Alabama with more states coming soon.  If you want a quote or other information regarding mortgages you can plug-in your information securely on our site 24 hours a day, call us at 888-269-8335, or send us an email  Make it a great day! 

Posted by Devin Murray on June 21st, 2021 4:36 PM


With lot prices and construction costs steadily on the rise for the new year and beyond, many borrowers are finding it difficult to accomplish a new home build within the new conforming loan limits of $484,350.  For those who already own their land we have seen customers curb this problem by sacrificing finishes in kitchens and bathrooms, reducing square footage, or omitting other extras like pools and/or larger garages.  For those who don’t already own their land and are rolling a land purchase into the transaction, it is common to opt for a smaller or less desirable location as well as making similar cuts to the project just to make the numbers work.

 

There are and will continue to be many benefits you need to explore on the topic of borrowing within conventional loan limits regardless of what your plans are but when building a new home the single biggest challenge of exceeding this limit is when borrowers are forced to (or believe they must) use a construction loan versus a construction to permanent loan.  This can be unfortunate because a regular construction loans can cause the following common problems:

  1. A forced refinance out of your construction loan which requires two sets of closing costs
  2. Being subject to changing rate and economic market conditions until your house is complete 9-12+ months down the road
  3. Being required to put more down on a construction versus a jumbo construction-to-perm loan 
  4. Inability to use lot/land equity toward the required down payment even if you are a seasoned owner

The good news is that as of today you might not have to deal with these headaches, make these sacrifices and/or be subject to these potential risks with the help of our New Jumbo Construction-to-Permanent Loan!

While it is impossible to highlight all the ins and outs our Jumbo One Time Close product here, the good news is if you are building your primary residence you might be eligible to borrow up to $1,000,000 with a 760 credit score with just 15% down or 15% total equity, up to $1,500,000 with a 720 score and 20% down/total equity, and up to $3,000,000 with 30% down/total equity. 

Also new for this specific product is the ability to finance a second home with a construction-to-perm loan.  Under this program a second home requires a 720 score across the board and will allow up to $1,000,000 with 25% down/total equity, up to $1,500,000 with 30% down/total equity, and $2,000,000 with 35% down/total equity, and $2,500,000 with 40% down/total equity.

As with conventional construction-to-perm loans, you can lock in your permanent rate up front and have just one set of closing costs.  Likewise Jumbo Construction-to-Permanent interest rates will vary with the construction time period selected in addition to credit score, loan-to-value and other factors.  However the major Jumbo advantage is that build periods have been expanded to 12, 18, or up to 24 months for projects up to $1,000,000 and beyond so this limits completion date stress significantly.

To see if you qualify, to get more information or to discuss your construction-to-permanent scenario with one of our licensed professionals please feel free to email us 24 hours a day or call 866-269-8335 during our regular business hours.

Product guidelines and terms may be subject to change at any point without notice.

Disclaimer

Posted by Devin Murray on December 11th, 2018 11:55 AM

PART I of IV – Can I use my land equity and how much will be counted?

After writing tens of millions of dollars in construction-to-permanent loans for over 15 years we continue to find that a clear majority of consumers do not know if they can use lot or land equity towards a down payment on their construction loan.  This topic is directly associated with down payment requirements for construction-to-perm loans, which we will address in separate article.  For those who even know to ask, many are confused about the rules of using the equity (the “how to”) and most importantly of all why being able to maximize that equity is important even if you have a healthy down payment.   To clear-up these very muddy waters in the mortgage world, we are going to answer to answer the “can I use it” question to see where you fit into this picture and end this post on how we would calculate and apply it to your new loan.  We will follow-up with a second post about why it matters, a third on how to maximize it, and a forth for those who don’t own but are planning long term.    

For ease of discussion, let’s use the word “land” to represent a vacant residential lot or plot of land up to say 10 acres (see here for land size restrictions).  Also, let’s assume that you and/or a co-borrower are the current owner of record with a recorded deed in place.  With all this being said, if you want to know if can use your land equity and want to calculate how to apply that equity to your construction-to-permanent you must know the answers to three simple questions 1) when did you buy or have the lot/land gifted to you? 2) how much did you pay? 3) what is owed on the lot/land? 

Lot/Land Purchases

In the mortgage world we first look the time frame one or more borrowers have been on a recorded deed to land to calculate equity.  The industry jargon is “seasoning” of your ownership.  If you purchased your lot/land inside of four months for conventional loans, six months for FHA, or twelve months for VA we will use the original purchase price of the land as a best-case baseline to determine any equity regardless if it appraises for double or triple what you paid for it.  This seasoning time frame is calculated from the courthouse recording date on your deed to the day you sign your loan application.  The appraised value of the land if any exists is then determined with a construction-to-permanent appraisal. 

For example, if you paid $50,000 one month ago, you owe $40,000 today but it appraises for $60,000 we in the industry would only count $10,000 in equity towards your down payment in lot equity.  If you are going conventional and can wait a few months until you reach the four-month threshold before you sign your loan application the full $20,000 can be counted toward your down payment.  The truth is the construction planning process takes several months to start so if you are going conventional or FHA waiting to reach the time frame required is inherently easy.

Lot/Land Gifts

Meeting these land seasoning requirements to count land equity towards a down payment is most significant for borrowers who have land given to them or potentially acquire land at a substantial discount.  Using the same logic above, if a family member deeds you land, or you buy it for many thousands below what it is actually worth, we (the industry) can only count what the deed reflects it was sold inside the seasoning time frame.  This means that if someone sold you land a deep discount one month ago for $5,000, you owe $0 today, and it appraises for $60,000 we can only count $5,000 in seasoned equity unless you wait 4 months for conventional, 6 months for FHA, or 12 months for VA to apply for your construction-to-permanent loan.  Once you wait the required seasoning times the full $60,000 of equity per the appraisal would be counted towards your down payment.

Probably the most common scenario is where a family member deeds land to another family where the consideration or price is $0 because it was a gift. Just as in the above examples before none ($0) of the equity can be applied until you or a co-borrower are seasoned on title beyond the four, six, or twelve-month windows respectively.

If you want to speak with us about your land equity scenario as it relates to your construction-to-permanent project please feel free to email us or call us at 888-269-8335.


Posted by Devin Murray on October 3rd, 2018 10:46 AM
We are proud to announce as of January 25th, 2016 we are once again offering up to 95% Conventional Construction-to-Permanent financing for all of our customers in Alabama and Florida.  We have been closing VA and FHA one time close loans for the past several years but have been limited by FHA loan county loan limits in the majority of our counties. That being said, we can now lend up to $417,000 (and higher in some counties) on new construction with just 5% down.  For first time buyers we can do as little as 3% down.

This means no more being limited to builders subdivisions and pre-designed houses.  Pick your house plan, your builder, and your location and we can get it closed in as little as 45 days.  

If you have a scenario you'd like to discuss or general questions about how these loans work, we'd love to hear from you today. 
Call us at  888-269-8335  or email us at service@gulfstatesfinancial.com



Posted by Devin Murray on January 25th, 2016 1:35 PM

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