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


November 19th, 2020

Projected Loan Limit Size:   -  According to a detailed analysis this week posted by Matthew Graham COO of Mortgage News Daily just a few days ago the nationwide Conventional loan limit is projected to increase roughly $40,000 to around $550,000 for single family dwellings. While the formal announcement is set to be released next Tuesday November 24th, for Florida and Alabama this means an increase from $510,400 in 2020 to an estimated projection of $550,000 in 2021.  Any increase is always a positive for the general housing market even if you don't have a loan at all but given that many of us are spending more time at home and have increased needs for our families this impacts many people who have or plan to get a conventional loan in a good way that maybe it hadn't prior to 2021 especially since rates are where they are.  We will be posting some more breaking news regarding rates and products since the volatility that has been 2020.

While we don't have time to explain the many was this increase is a big deal, the impact directly impacts VA and jumbo loans as well.  Since VA entitlement is based on this limit, veterans get that additional affordability on refinances and purchases.  For some who were we stuck buying or refinancing with only a jumbo option any years prior to 2020, this will certainly translate to more availability of options, better rates, and possibly higher LTVs which is never bad.

If you want to know how this change might help you, please email us or submit an online application on our secure website.  Exciting times!!!!

Quick note:  We have been very busy in 2020 and haven't had much time to post to this blog but we have hired more staff and will ramp up the flow of information to the public starting today November 19th, 2020.  

Posted by Devin Murray on June 22nd, 2021 3:35 PM

Last week we received a call from a young professional who is gearing up to make his first home purchase.   He had good credit, steady annual income, and enough money saved for a small down payment on a new home for the family.   During the call, he voiced concern about the pre-approval amount he qualified for because of his student loans.  He had basically no debt other than a little over $130k in student loans all in deferment for the next 11 months and was of the mindset that this debt would not count against him as a result.  His credit report showed a $0/mo payment and he was a little confused as to why when he spoke to different lenders local, regional, and national each offered very different opinions on the purchase amount he could qualify for.

In the universe of mortgage financing student loans are analyzed by credit underwriters according to three main data points that normally appear on your credit report in order of importance: Repayment status, monthly payment, and current balance.

While monthly payment and balance don’t need further elaboration, knowing your repayment status and how it impacts how your payment is viewed by creditors is a little confusing.  For anyone seeking a mortgage your student loan is considered to be in a Regular Repayment status if the monthly payment is fixed and is fully amortized over full term (i.e. 5,10, 15 or 20 years) of the loan.  The best case scenario here is when the fully amortized monthly payment amount(s) appear on the credit report along with your balance(s).   In some cases you can be at the start (or restart) of regular repayment status, but the payment amount does not show on the credit report and you can clear this up with documentation from your student loan servicer showing what the payment should be.

If your student loan is not in a regular repayment status you are most likely in Deferment, Forbearance, Graduated Payment plan, or an Income Drive Repayment (IDR) plan.  No matter what your scenario, having one of these status means you are paying an amount less than the fully amortized payment or you aren't paying anything at all.   When applying for a mortgage your credit report will show one of the following:  no monthly payment (as in no number appears in the payment field), a $0/month payment is listed, or a payment significantly smaller monthly payment with respect to the balance of the student loan(s).  None of this disqualifies you from getting a loan but the debt will most likely be counted toward your debt ratio using several different methods which will impact what you can and cannot finance.  

FHA: FHA underwriting is the most inflexible next to USDA with respect to student loans.  If you are not in regular repayment status, FHA will use the greater of 1% of the outstanding principal balance or the monthly payment on the credit report.    While highly unlikely, if documenting the fully amortized payment over the life of the loan proves to be less than the 1% or payment showing on the credit the fully amortized payment can be used.

  • So if our borrower from the above example wanted to go with an FHA mortgage an underwriter would likely calculate $1,300/mo in future payments since his credit report showed $0/mo for each of the deferred loans.  FHA isn’t evil because of this nor should you avoid FHA loans if you have student loans.   FHA allows for many other things with debt ratios and credit scores that conventional cannot, so FHA loans are still great financial tools in many circumstances.

USDA (Rural): USDA underwriting always defaults to 1% of student loan balance monthly payment calculation method or the payment that appears on the credit report, whichever is more, no exceptions.  Combined with the most conservative debt ratio across the board the USDA loan can be very difficult for any borrower(s) with student loans.  Other restrictions like family household income limits and property eligibility also apply to USDA loans.  Just as with FHA, USDA loans have great offerings too.

Conventional:  If you are talking to a lender, regardless if you have student loans, ask if they offer both conventional loans underwritten by both Fannie and Freddie Mac.  If they don’t and you are buying/refinancing in Alabama or Florida call us at 888-269-8335.  We say this because not all conventional loans are the same and this advice will be true even if you have no student loan debt.

  • As a general rule conventional loans afford borrowers breaks that FHA and USDA do not.   According to Fannie Mae if a monthly student loan payment is on credit, as long as it is not zero dollars, can be used.   This means borrowers in both Graduated Payment and IDR plans can potentially catch a huge break with Fannie Mae if a payment greater than $0 is reporting.  For those in deferment or forbearance status the lower of the 1% of the loan balance OR documented fully amortized payment can be used.   
  • In better news Freddie Mac is easier and more flexible than Fannie Mae.  The same break applies with Graduated Payment and IDR plans as with Fannie Mae but those in deferment or forbearance status can use the lower of the 0.5% of the loan balance OR documented fully amortized payment can be used.  Also unlike Fannie, Freddie will actually allow $0 payments to be counted in some unique instances where deferment extends 12 months beyond the closing date.

So for our example above using a conventional loan underwritten by Freddie Mac versus Fannie Mae, Freddie is twice as flexible with the student loan debt in that it would calculate our borrower’s projected student loan payments at $650/mo versus $1,300/mo.  

VA: For eligible veterans it is no surprise that the VA is likely the most flexible with student loans.  VA underwriters will use the greater of the student loan payment listed on credit report or 0.42% of the balance (that is 5% divided by 12 months).  If the 0.42% is greater the actual payments can be used with a letter from the servicer.  IDR plans resulting in a monthly payment greater than $0/mo can be used, and IDR plans resulting in a $0/mo payment can be used if they continue 12 months beyond the loan funding date.  Also loans deferred loans beyond 12 months of the loan funding date can be calculated at $0.

If our borrower would have been eligible for a VA loan, the payment calculated by underwriting would be $546/mo versus $650 (Freddie) or $1,300 (Fannie Mae).

Jumbo:  Other than to state our own, there is no industry-wide standard for student loan requirements on jumbo loans (amounts over $484,500 as of Oct 2019 in AL and FL (exclude Monroe Co)).   Loans in repayment can use the payment on the credit report or documentation of actual.  Any loans showing a $0 payment will use the 1% of balance monthly payment calculation.  We have other info available on this blog for Jumbo Loans and Jumbo Construction Loans.

If the numerical differences between how these student loans are calculated from program to program doesn’t seem important, know that for this buyer it meant being able to afford the $325,000 home in a much better neighborhood with better schools over a $210,000 property.  For some it might mean the ability to buy versus not being able to buy at all.  For others it might mean being unable to refinance their existing loan.   

Other than Google (j/k Google) there is no evil company preventing people from getting the most truthful information.  With loan guidelines that are updated several times a year and lenders enacting their own overlays on top of those rules will only result in growing public confusion on this and many other topics related to mortgages.   Missing just a little information about how debt impacts you can lead to all kinds of financial decisions that can impact you and your family today and for many years to come.  We believe that empowering yourself with solid information and picking a lender with the highest level of expertise in the marketplace are your keys to success with home buying and refinancing.

If you have student loans and are buying, refinancing, or building a home in Alabama or Florida we urge you to seek out information like this and contact us with questions. No two scenarios are ever the same and we’d love the chance to get to know you and help you plan your future.  

If you want to find out how much you can qualify for today, complete our online application 24 hours a day, 7 days a week.

Can I buy a house if I have student loans?

Can deferred student loans keep me from getting a mortgage?

Do deferred student loans count when applying for a mortgage?

Will student loans in forbearance keep me from getting a mortgage?

Can I afford more house if my student loans are in a graduated re-payment plan?

Does student loan forgiveness in the future allow me to buy a house now?

Posted by Devin Murray on September 30th, 2019 8:15 PM

Archives:

Categories:

My Favorite Blogs:

Sites That Link to This Blog:


English French German Portuguese Spanish