18
Jun
By Mike Pfefferman
Home Buyer Tips

Celebrating National Homeownership Month and How First-Time Buyer Programs Make It Possible

June is National Homeownership Month, a time to celebrate the dream of owning a home and spotlight the many programs designed to help first-time buyers turn that dream into reality. For many Americans, the biggest challenge to buying a home is coming up with the funds for a down payment or qualifying for a loan. Fortunately, there are a wide variety of mortgage options and assistance programs available to make homeownership more achievable.

FHA Loan 
One of the most widely used mortgage programs for first-time buyers is the FHA loan, backed by the Federal Housing Administration. FHA loans typically require lower credit scores and offer down payment requirements as low as 3.5 percent. This makes them an excellent choice for buyers who may not have perfect credit or a large amount of savings.

VA Loan 
Another valuable option is the VA loan, available to eligible veterans, active-duty service members, and certain members of the National Guard and Reserves. VA loans do not require a down payment or private mortgage insurance, which can save borrowers thousands of dollars upfront and over time. These loans are a strong way to thank those who have served our country while helping them build stability through homeownership.

USDA Loan
USDA loans also support first-time buyers by offering zero-down payment options in qualifying rural and suburban areas. Designed to promote homeownership in less densely populated communities, these loans are income-based and come with competitive interest rates.

Additional Loan Options
Beyond these federal programs, many state and local governments offer down payment and closing cost assistance to help first-time buyers get into a home. These programs may include grants, deferred-payment loans, or forgivable loans that reduce the financial burden of homebuying. Some also offer matching savings programs to help future homeowners reach their goals more quickly.

National Homeownership Month is the perfect time to explore these opportunities. Real estate markets often pick up in the spring and summer, and many buyers aim to move before the new school year begins in the fall. Starting your homeownership journey in June gives you time to get pre-approved, explore your options, and find the right home with confidence.

If you are considering buying your first home, contact us to help you understand the programs available in your area. The right guidance can open doors you did not know existed and put you on the path to becoming a homeowner sooner than you think.

Homeownership builds equity, stability, and a sense of pride. National Homeownership Month is a celebration of those values and a reminder that with the right support, it is possible for more families to achieve this important milestone.

25
Apr
By Mike Pfefferman
Home Buyer Tips

Can I Finance Home Renovations Into My Mortgage at Closing?

Purchasing a home that needs renovations or upgrading your current home can be costly, but financing home improvements through your mortgage can be an effective solution. Instead of taking out a separate loan for renovations, some mortgage programs allow you to roll the cost of home improvements into your home loan at closing. This strategy can help you spread renovation costs over time while securing a potentially lower interest rate compared to personal loans or credit cards.

How Financing Renovations Into Your Mortgage Works
When you finance renovations into your mortgage, the loan amount includes both the purchase price (or refinance amount) and the estimated cost of home improvements. The lender typically requires contractor estimates for the work, and funds for renovations may be placed in an escrow account and disbursed as the project progresses.

Loan Options for Financing Home Renovations
Several mortgage programs allow borrowers to finance home improvements at closing:

FHA 203(k) Loan—This government-backed loan is ideal for buyers or homeowners who want to finance major renovations. It comes in two options:

  • Limited 203(k) Loan—Covers minor repairs and upgrades up to $35,000.
  • Standard 203(k) Loan—Designed for extensive renovations, requiring a licensed contractor and consultant oversight.

Fannie Mae HomeStyle Renovation Loan—Available for both homebuyers and homeowners, this loan allows you to finance nearly any type of renovation, including luxury upgrades. It requires a higher credit score but offers competitive interest rates.

Freddie Mac CHOICERenovation Loan—This program offers flexible financing for home improvements, including repairs to protect against natural disasters, with options for borrowers to complete some work themselves.

VA Renovation Loan—Eligible veterans and service members can finance renovations through their VA loan, though restrictions apply, and lender participation is limited.

Conventional Cash-Out Refinance—Homeowners with existing equity can refinance their mortgage for a higher amount and use the extra cash for renovations.

Benefits of Financing Renovations Into Your Mortgage

  • Lower Interest Rates—Mortgage rates are typically lower than personal loans or credit cards, making this a cost-effective option.
  • Single Loan Payment—Instead of managing multiple loans, you have one mortgage payment covering both the home and renovations.
  • Increased Home Value—Renovations can boost your property value, potentially improving your home s long-term equity.

Considerations Before Choosing a Renovation Mortgage

  • Loan Requirements—Some programs require higher credit scores or contractor oversight.
  • Project Scope and Costs—Lenders may require detailed renovation plans and cost estimates.
  • Disbursement Process—Funds are often released in stages, which can impact project timelines.

Financing renovations through your mortgage can be a smart way to improve your home without taking on additional debt. Whether you re purchasing a fixer-upper or upgrading your current home, exploring renovation loan options can help you achieve your goals while maintaining financial stability. Consulting with a mortgage professional can help you determine the best financing solution for your needs.

18
Mar
By Mike Pfefferman
Home Buyer Tips

How Debt-to-Income Ratio Affects Your Mortgage Eligibility

When applying for a mortgage, lenders evaluate several factors to determine your loan eligibility. One of the most critical metrics is your Debt-to-Income Ratio (DTI). Understanding how DTI impacts mortgage approval can help you better prepare for homeownership and improve your chances of securing the loan you need.

What is Debt-to-Income Ratio (DTI)?

DTI measures the percentage of your gross monthly income that goes toward monthly debt obligations. Lenders use this ratio to assess your ability to manage additional debt responsibly.

There are two types of DTI:

1. Front-End DTI: Focuses solely on your housing expenses, including mortgage principal, interest, property taxes, homeowners insurance, and any HOA fees.

2. Back-End DTI: Includes all your monthly debt obligations, such as housing costs, auto loans, student loans, credit card payments, personal loans, and child support.

How is DTI Calculated?

To calculate your DTI, use this formula:

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

For example, if your total monthly debt payments amount to $2,000 and your gross monthly income is $6,000, your DTI is 33%.

Why Does DTI Matter in Mortgage Approval?

Lenders use DTI to determine your ability to take on a mortgage while maintaining financial stability. Generally, the lower your DTI, the more favorable your loan terms will be.

Most lenders follow these DTI guidelines:

  • Conventional Loans: Typically require a back-end DTI of 43% or lower, though some lenders may allow up to 50% with strong compensating factors.
  • FHA Loans: Allow DTI ratios up to 57% in certain cases, making them more accessible to borrowers with higher debt.
  • VA Loans: Do not have a strict DTI cap, but 41% or lower is preferred for approval without additional scrutiny.
  • USDA Loans: Generally require a back-end DTI of 41% or lower, but exceptions may apply with strong credit and financial reserves.

How to Improve Your DTI for Mortgage Approval

If your DTI is too high, consider these strategies to improve your financial standing before applying for a mortgage:

  1. Pay Down Existing Debt: Reduce balances on credit cards, auto loans, and personal loans to lower your monthly obligations.
  2. Increase Your Income: Consider a side job, freelance work, or asking for a raise to boost your gross income.
  3. Avoid Taking on New Debt: Delay financing major purchases like a car or furniture until after securing your mortgage.
  4. Refinance High-Interest Debt: Consolidating debt into lower-interest loans can reduce monthly payments and improve your DTI.
  5. Make a Larger Down Payment: A higher down payment can lower your loan amount and monthly mortgage payment, reducing your DTI.

Your DTI plays a crucial role in determining your mortgage eligibility. While a lower DTI increases your chances of approval and better loan terms, exceeding lender limits can pose challenges. Understanding your DTI and taking steps to improve it before applying for a mortgage can position you for success.

If you’re considering buying a home and want guidance on your DTI, give us a call to explore your best options.