Deciding On A Mortgage For Buying A Fixer Upper

Deciding On A Mortgage For Buying A Fixer UpperIt can be difficult to find a dream house, so many potential homeowners might be looking to save money by purchasing a home that they need to repair. Often referred to as a fixer-upper, this is a house that may require some extra work to restore to a livable condition. Not only is this a great opportunity to customize a home, but it could also be a valuable investment. At the same time, homeowners need to take out enough money to not only purchase the house but also cover the cost of repairs. How can potential homeowners decide what loan is best for a fixer-upper? There are a few options available. 

Consider Taking Out An FHA 203(k) Mortgage

One option is something called an FHA 203(k) mortgage. This is a loan from the Federal Housing Administration that has been specifically designed to help potential homeowners who are purchasing a house that needs a significant amount of repairs. As long as the cost of the home and the estimated repairs do not exceed 110 percent of the appraised value of the home, homeowners should be able to take out this type of loan.

Borrowers have to put down at least 3.5 percent and they need to have a minimum credit score of 580. Then, applicants can place themselves in a position to get approved for this loan. Keep in mind that the total cost of the property has to be less than the FHA mortgage limit for that local area. 

Look At A Fannie Mae HomeStyle Renovation Mortgage

Another option to consider is called the Fannie Mae HomeStyle Renovation Mortgage. This is a great option if the house requires major renovations. Borrowers can borrow money to cover potential repairs that are as high as half of the appraised value of the property. This could include energy efficiency enhancements, remodeling work, and repairs. As long as the repairs increase the value of the home, they should be covered by this mortgage. The loan will cover the cost of getting permits, hiring an architect, and purchasing materials. Even though this mortgage may be a bit more competitive, it also has a higher borrowing limit, opening more doors for homeowners.

What’s Ahead For Mortgage Rates This Week – November 30, 2015

Whats Ahead For Mortgage Rates This Week November 30 2015

Although last week’s economic calendar was cut short by the Thanksgiving holiday, several housing-related reports were released. The FHFA reported on third quarter results for its Housing Market Index and the Commerce Department reported on new home sales for October. Freddie Mac released its weekly report on mortgage rates and data on new weekly jobless claims was also released.

FHFA, Commerce Department report Gains for Home Prices, New Home Sales

Home prices for mortgages associated with mortgages owned or backed by Fannie Mae and Freddie Mac increased 1.30 percent during the quarter ended September 30. This was the 17th consecutive seasonally adjusted quarterly increases for home prices based on sale-only transactions. FHFA home prices rose by 0.80 percent from the second to third quarter of 2015 and rose by 5.70 percent from third quarter 2014 to third quarter 2015 readings.

New home sales rose by a seasonally adjusted annual rate of 10.70 percent to 495,000 sales based on a downwardly revised September reading of 447,000 new home sales.

New home sales results were mixed according to the Commerce Department. Sales of newly built homes rose by an astounding 135.30 percent in the Northeast and increased by 8.90 percent in the South and by 5.30 percent in the Midwest. Sales of new homes declined in the West with a reading of -0.90 percent.

Home shoppers received good news as the median price of a new home fell 6 percent to $281,500. Inventory of new homes increased to its highest level since 2010. Higher inventory could ease demand and rapidly rising home prices associated with low supplies of new homes for sale.

Mortgage Rates Mixed, Jobless Claims Lower

Average mortgage rates varied last week according to Freddie Mac. 30-year fixed mortgage rates were two basis points lower at 3.95 percent; the average rate for a 15-year fixed rate mortgage was unchanged at 3.18 percent, and the average rate for a 5/1 adjustable rate mortgage was three basis points higher at 3.01 percent. Average discount points where 0.70 for a 30 year fixed rate mortgage and averaged 0.50 percent for 15-year fixed rate mortgages and 5/1 adjustable rate mortgages.

New jobless claims fell from the prior week’s reading of 272,000 new claims to 260,000 new claims. Analysts expected a reading of 270,000 new claims. The four-week rolling average of new jobless claims was unchanged at 271,000 after an adjustment to the prior week’s average of 270,750 new claims to a weekly average of 271,000 claims filed over the previous four weeks.

What’s Ahead

This week’s scheduled economic news includes reports on construction spending along with Labor Department releases on the national unemployment rate and Nonfarm Payrolls. Freddie Mac’s report on mortgage rates and weekly data on new jobless claims will be released as usual.

Case-Shiller: August Home Prices Accelerate

Case-Shiller August Home Prices AccelerateAccording to the Case-Shiller 20-City Home Price Index, U.S. home prices increased by 0.40 percent in August, which boosted year-over-year home price growth to 5.10 percent. Denver, Colorado continued to lead in home price gains with a monthly increase of 0.90 percent and a year-over-year gain of 10.70 percent. San Francisco, California also posted a year-over-year gain of 10.70 percent, but posted a month-to-month loss of -0.10 percent. Portland, Oregon posted a year-over-year gain of 9.40 percent with a month-to-month gain of 1.10 percent.

Cities with the slowest growing home prices year-over-year included New York City with a reading of 1.80 percent; Chicago, Illinois and Washington D.C. each posted year-over-year gains of 1.90 percent.

Majority of Cities Show Home Price Gains

Before seasonal adjustments, home prices were higher in 18 of 20 cities; after seasonal adjustments, 11 cities had higher home prices, four were unchanged and five cities had lower home prices. After adjustments for inflation, current home price growth approached rates seen in the housing boom of 2005and 2006, but current home price growth is driven by a slim supply of available homes rather than excessive demand seen during the housing boom.

The Federal Housing Finance Agency reported that home prices for sales of homes related to mortgages owned by Fannie Mae and Freddie Mac rose by 5.50 percent year over year.

New Home Sales Slump in September

Sales of new homes dropped by 11.50 percent in September; this was the lowest level since last November. The drop largely attributed to a steeper than usual drop in home sales in the Northeast, which accounted for 62 percent of slumping home prices. Over the past two years, the Northeast region accounted for 32 percent of declining home sales. Low inventories of available homes and rising home prices contributed to the slump in sales; home builders are working to close the gap between available homes and current demand. September’s supply of available homes increased to a 5.80 month supply from August’s reading of a 4.90 percent

Analysts said that September’s inventory of homes for sale reached its highest level in and a half years and also noted that homes under construction had achieved their highest volume in six and a half years. Although millennials are expected to boost home sales as they begin to start families, some analysts pointed out that the slump in sales coincided with indications that third quarter growth may be weaker than economic growth during the second quarter of 2015.