Millennial

Saving to buy a home while you watch prices and interest rates increase feels like an impossible goal. You have little or no money saved and feel like homeownership isn’t in the near future for you. You checked into FHA loans and learned it only requires 3.5% of the purchase price as a down payment. But then you learned about the high, and permanent, mortgage insurance premiums. No thanks. So what other options do you have?

Don’t give up on your dream of homeownership! There are loan programs for creditworthy individuals with just 3% down payment.

The Affordable Solution

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible Mortgage, are making it easier for people to buy a home and start building equity. These loan programs are designed to help low to moderate income borrowers get into a home with little to no money of their own. The minimum down payment for each program is as low as 3% of the purchase price, and there’s a lot of flexibility for where you’re allowed to get that money.

For both Freddie and Fannie’s programs, the down payment can come from a gift, a community second mortgage, or a down payment assistance program – when available. These sources can also cover your closing costs. A total of zero dollars need to come from your own money.

The bottom line is that by using these programs, you can potentially own a home even if you haven’t saved a dime.

Who/What Qualifies

Buyers and property types may qualify under these guidelines:

Embracing Mortgage Insurance

Private Mortgage Insurance (PMI) is required on loans with less than 20% down payment. This essentially is an insurance policy that protects the lender up to a certain percentage of loss if you were to default on your home loan. Both HomeReady and Home Possible mortgages require you to pay this mortgage insurance premium, but the cost is often less than both a conventional 5% down program and an FHA loan. And unlike an FHA loan, you may be eligible to drop the mortgage insurance once there is 20% equity in the property. Equity is accumulated by a combination of loan repayment and property appreciation.

Getting Started

No matter where you live, these loan programs represent a great opportunity in today’s real estate market. The downside is that not everybody can qualify. It’s important to speak with a seasoned mortgage professional to help structure a plan that best fits your current financial situation and future goals as a homeowner. While the Fannie Mae HomeReady and Freddie Mac Home Possible Mortgage are fantastic loan options, everybody’s situation is unique. There is an abundance of programs available, and a good loan officer will provide you with the guidance you deserve. Call for your free consultation and pre-approval today.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735

We know of Millennials as the resourceful generation of independent minds shaping the world today through technology and start-up companies. They were referred to as the generation of renters with little interest in homeownership. However, times have changed and statistics show that Millennials make up the largest group of homebuyers today at 45% of new home purchases. This may be true, but research also shows that Millennials are still going through the stress of student loan debt while at the same time struggling to pay rent. With home values on the rise and inventory down compared to just a year ago, Millennials also have a hard time competing for a new home against move-up buyers.

The cost of rent has been a hot topic and is arguably one of biggest expenses someone may face. Research was completed by RentCafe as they turned to the U.S. Census to find out how much Millennials, specifically single individuals from the age of 22 to 29, spend in rent over that 8 year period. To even the field, the research was done for median income individuals in that age range.

The statistics show the burden of rent on twenty-something’s and why Millennials are shifting their mindset towards homeownership.

Millennials will pay $92,600 in rent before they turn 30 years of age. Remember, this is for those with the median income for that age range throughout the U.S…but where do you live? Are you in the city or suburb? If you are in Chicago and paying $1,800 per month, you will pay close to $175,000 in rent in just 8 years. These numbers become even more staggering when you consider the cost of rent increasing each year you sign a new lease.

If you rent or have been a renter for years, these numbers may not surprise you. However, are you aware that it’s recommended that rent be no more than 30% of your income and the average Millennial is spending close to 45% of their income on rent? This means that an individual earning $60,000 annually or $5,000 per month is spending $2,250 on rent when it’s recommended to be $1,500. At 45% of your income, you are spending more than Gen X and your Baby Boomer parents did.

Here is a previous article to learn more about Home Buying as a Millennial

What questions do you have? I’m happy to be a resource of information for you, walk you through the pros and cons of homeownership and help educate you so you make the right decision for YOU. I also conduct home buying seminars and even lunch & learn sessions for you and your coworkers. Call or message me for more information.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735

One of the most common questions I get asked as people begin their new home search is “what is the max purchase price that I can afford?”

My answer is always the same, “it depends.”

I get it. You want to know the cap so you are searching in the right price range, but there are many moving parts that will determine what you can afford and there are different lending guidelines depending on the loan product. Keep in mind that so many things impact your approvability, i.e. credit scores, down payment, occupancy, property type and whether you are salaried or self-employed. For the sake of this discussion, I’m keeping this strictly to affordability. So let’s dive in.

First and foremost, we look at your debt-to-income (DTI) ratio when qualifying. What is this and how is it calculated? Debt-to-income is the percentage of your gross monthly income that is allocated to all your monthly debts. We look at your monthly liabilities, including revolving credit card payments, student loans, car loans, etc., plus your new mortgage payment and divide that by your gross monthly income. We aim to keep this ratio of debts vs. income below 40%. For example, if you earn $10,000 a month, then your total monthly debt payments including the new mortgage should not exceed $4,000. So if you already have $1,500 in revolving monthly liabilities, then your new mortgage payment should not exceed $2,500. We work backwards from there to find the purchase price that would keep your payments around $2,500. However, we could never tell you exactly what the max home price you can afford is because the mortgage payment will be different depending on the property taxes of the home and/or association fees on various condos you may be interested in.

In the example above, I used 40% as the debt ratio we aim to keep you at or below. This gives us a buffer since most often we can actually go up to 45% and sometimes 50% with compensating factors like high down payment and excellent credit scores. Some government sponsored loans like FHA may even go higher but at a certain point you will become too much of a risk for the banks to lend. The entire profile of the loan is reviewed in order to make an underwriting decision, so there is no exact science to determining how much home you can afford. You’ll need to rely on the experience of your loan officer to help provide guidance.

Loan product can also impact how much home you can afford. The conforming loan limit is currently $453,100. Any loan amount over this is considered a jumbo loan, which has a different set of guidelines. Not only are debt-to-income ratios more strict on jumbo loans, but while somebody might be able to afford the monthly payment on a million dollar loan, they won’t find a program if they only have 5% down payment.

Payment SHOCK! Now that we’ve determined what you can qualify for on paper, you need to determine what you are comfortable with paying. There are various things we don’t account for in your debt ratio and you just might not be ready for the higher living expense. Maybe its day care or future private school tuition for you kids. Maybe it’s your lifestyle choices or hobby of collecting vintage wines. Or maybe… you were just living rent free with your parents and you’re about to take on a housing expense for the first time. Whatever it maybe, you may find yourself having “payment shock”, and regardless of what you may qualify for, at the end of the day it comes down to your level of comfort.

Give me a call for a free pre-approval. It’s important we have a discussion about your current and future goals as a homeowner so that I can help guide you towards the right price range that you don’t just qualify for, but you are comfortable with as well.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735

While we continue to seek “normal”, the housing market has been a roller coaster ride of volatility. Whether you are a homeowner, renter, buyer or seller, here are some statistics that might interest you.

Renters
More Americans are renting today than in recent decades — some by choice and some simply due market conditions. Thirty-seven percent of American households are renters — about 43.7 million homes — which is an increase of 6.9 million homes since 2005. While part of the rise in renters is due to the 8 million homes lost to foreclosure during the recession, renters today also prize the maintenance-free and flexible lifestyle renting offers.

• Renters skew younger: The typical renter has a median age of 32 years old.
• Nearly half of renters are single, including a third who have never married.
• Although the majority of renters are single, 78 percent live with others, most often this is another family member.
• The median rent across the U.S. is $1,010 with highest rents in the West and lowest rents in the Midwest.
• Renting can be expensive: 79% of renters who moved in the past year had a rent increase.
• More than half of renters (57%) had a rent increase impact their decision to move and 37% of renters who aren’t moving say it’s because they can’t afford to.

Buyers
Buying is tough in all markets. For most Americans, it’s the biggest purchase they’ll ever make as well as a significant financial investment they’ll tap into as part of retirement. In particular cities, purchasing a home has become a competitive game, complete with bidding wars and offer negotiations. It makes sense that most buyers rely on agents to help them through the process.

• Today’s buyers have a median age of 40, although the majority (71%) of first-time buyers are Millennials.
• The median household income of the typical buyer is $87,500 and most buyers are married or partnered, relying on two incomes to purchase a home.
• The typical home in the U.S. purchased has 3 bedrooms, 2 1/2 bathrooms, measures 1,800 square feet and costs $200,000.
• Buyers take an average of 4.3 months to search for their new homes — although Millennials take just under four months (3.9 months).
• The suburbs rule: 49% of buyers buy there, followed by 31% of buyers buying in urban locations and just 19% of American buyers purchasing in rural regions.

Sellers
Although some hot markets have favorable conditions for sellers, selling is still rarely an easy process. Sellers have two main goals when they list their homes: one- to sell their home in their preferred time frame, and two, sell for their desired price. Balancing the two, timing and price, create a delicate dance and throw in the fact that most sellers are also buyers and searching for their new home, creates a often stressful experience.

• Sellers have a median age of 45 although Millennials make up nearly one-third of todays’ sellers.
• Sellers have a higher median income than homeowners at $87,500.
• The typical seller has lived in their home for 12 years.
• Most sellers are selling for the first time (61%) and looking to buy at the same time (71%).
• Seventy-six percent of sellers have to make at least one concession to sell their home — most often being a price reduction.
• One in two sellers sell their home for less than their original listing price.

Homeowners
As anyone will tell you, owning a home is a lot of work. It’s also a great investment, especially in many of today’s markets were annual appreciation rates are higher than they have been in decades. Beyond the work and the financial piece, home ownership often has an emotional component as well.

• Homeowners are the oldest, with a median age of 57 years and just 14% are Millennials.
• Homeowners have a median household income of $62,500 and 71% live with a spouse or partner.
• Forty percent of homeowners have a pet (with dogs ranking in top at 30%).
• Almost half of homeowners (46 percent) live in the first home they purchased, although this percentage decreases with age.
• Eighty-six percent of homeowners have no plan to sell in the next three years.
• Less than a quarter of homeowners say their home is in “like-new” condition and more than 60% say their home could use a little updating. The top of homeowners’ to-do list for the next year include: painting the interior (25%), improving the bathroom (22 percent) and landscaping (21 percent).

Which category do you fall in? Never hesitate to call, email or message me if you have questions.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735

Statistic Source: Zillow

I’d like to preface things by saying that every market, state, county and city is different. More so than that, different price points come with different types of buyers. So while you might be living in a town with several million dollar home listings, I’d like to focus on the types of homes that the largest share of home buyers are in need of. According to the National Association of Realtors, 34% of buyers are 36 years old and younger and of these individuals, 66% of them are first-time buyers. The next biggest share of homebuyers are ages 37 to 51, making up 28% of buyers.

Historically, persistently weak participation of first-time buyers would suppress home purchase activity. So much so that the government even introduced a first-time homebuyer tax credit from 2008 to 2010 to spur growth and help battle the economic crisis, but the demand was restrained by high unemployment and declining income. However, as the labor market continues to heal and young-adult incomes have begun to recover, participation is no longer an issue. The inventory of “starter homes” is the issue. [A starter home is one that falls at the lower end of the home price distribution and typically less than 2,000 square feet. Prior to the housing bubble, 71% of homes owned by first-time home buyers were less than 2,000 square feet. – Fannie Mae]

So why is inventory an issue?

Many starter homes have shifted from owner occupancy to rentals. In part, this is a product of existing homebuyers losing some equity during the housing collapse and while they are ready to move up to their next home, they aren’t ready to sell until some of that lost equity returns. We’ve also seen the cost of renting go up. With the economic downturn and foreclosure crisis, many people who damaged their credit are not yet able to purchase a home. With heightened rental demand and higher rents collected, there is more of an incentive for move-up buyers to lease out their property in lieu of selling. Fannie Mae reports that between 2005 and 2013 (the most recent year for which data are available) the inventory for owner-occupied starter homes has declined by more than 1 million units, whereas the inventory of renter-occupied starter homes rose by 2 million. In addition, analysis finds that home builders have moved away from building new starter homes, dropping from 40% to 32% over that same time span.

In turn, the tight starter home supply and associated rapid price gains in the lower tiers of the home sales market are reducing first-time homebuyer affordability. This leaves a very specific home at a very specific price point for the largest share of people in the market for purchasing. So what can you do as a first-time homebuyer? Be prepared. Get your pre-approval lined up. Go over your options with your lender. Work with your lender and your realtor to put a home buying plan in place so you are ready to make an offer when the right home that’s the right fit for you comes to market.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735

Let’s face it. The term Millennial is thrown around so often that it’s hard to get thru a day without hearing it. Being a Millennial comes with its labels, sometimes even stereotypes- some good and some not so good- to those that were born in the early 80’s and after. However, this is such an important and talked about demographic nowadays because this class of individuals has entered and continues to enter the workforce. They have become the new entrepreneurs. They’re climbing the corporate ladders, impacting the economy and ultimately shaping the future of this country.

After years of many experts lamenting how Millennials weren’t interested in becoming homeowners, statistics are showing just the opposite. According to Ellie Mae, Millennials are the largest group of homebuyers today, representing about 45% of all home purchases.

Here lies the problem. Their path to homeownership isn’t easy as they are competing against move up buyers. This has created a shortage of inventory, driving up home prices, particularly among starter homes that tend to fall within first-time buyer’s budgets. According to Zillow, home values are up 7% from a year ago with around 3% fewer homes on the market. Move up buyers tend to have additional down payment from earned equity on their home sale, and since they’ve done this once before, they know what to expect, prepare accordingly and have a buttoned up home buying plan.

So how do you, the millennial buyer, get an edge on others you may be competing with for a home purchase? Of course it’s important to work with a knowledgeable realtor, but believe it or not, it starts with financing and how qualified you are for purchasing. The stronger the buyer you are, the more options you may have when purchasing. Have you had your credit checked? A better credit rating can lead to a lower rate, which leads to a lower mortgage payment which in turn allows you to afford more home (purchase power) and come in with a stronger offer. Did you get your pre-approval from a lender and did they structure the pre-approval to show your strengths as a buyer? Did you discuss the difference between giving a low ball offer on a home versus offering the listing price? What does that difference actually mean to your monthly payment? Does the seller want to close quickly? Writing up a 30 day close might give you the edge over somebody with a similar offer putting in a 60 day close. Has your lender reviewed all your income, assets and supporting documents? Getting your financing in place helps assure a smoother loan process with typically quicker turn times from contract to close. Are you flexible on when you can move in? Does the seller know why you want to buy their home? Sometimes writing a short heartfelt letter can be the difference in winning the bid.

Let me help you by being a resource of information for you. Let’s talk about the pre-approval process and how to structure your loan so you can make an offer that not just gets you the house, but more importantly gets you a mortgage payment that you are comfortable with and aligns with your financial goals as a homeowner.

Written By: Chris Ulrich – United Home Loans
NMLS# 215735