USDA Drastically Reduces Guarantee Fees for 100% Financing

USDA Rural San JoaquinBeginning October 1st, 2016 USDA loans will drastically reduce their upfront and annual guarantee fees.  It will allow home buyers and homeowners in rural communities to reduce the costs associated with closing and holding a USDA 100% financed loan.

USDA guarantee fees are very similar to FHA’s MIP/ UFMIP(Mortgage Insurance Premium and Upfront MIP) or VA’s Funding fee.  Both FHA and USDA charge and upfront (financed) fee and an annual fee (paid monthly), while VA only charges an upfront funding fee.

 Upfront Guarantee FeeAnnual Guaranty Fee (Paid Monthly/12)
October 2016-20171.00%.35%
2015-2016 September2.75%.50%

Over the past several years delinquency rates and foreclosures have reduced to normal levels and USDA has reduced its risk which led to a reduction in the amount of insurance they need to collect.  This is a win for borrowers who plan to move into an USDA eligible community.

What areas can I buy a home and use a USDA home loan?

USDA will allow financing on homes in areas they have deemed rural.  Below is a list of some towns, cities and communities within 75 miles that will currently work:

Galt, Lathrop, Jackson, Sutter Creek, Wilton, Linden, Lockeford, Rancho Murieta, Plymouth, Thornton, Farmington, Escalon, Oakdale, San Andreas, Del Rio, Ripon, Patterson, Discovery bay, Newman, Waterloo, Valley Springs, Wallace, Walnut Grove, Rio Vista, Camino, Placerville, and many more in between

How much will the lower Guarantee fees save me?

On a $300,000 home, the new lower USDA upfront Guarantee fee of 1.0% will save you $5,250!  This will help keep your loan balance lower because the USDA upfront Guarantee fee is normally added to the loan balance.The new .35% annual fee (paid monthly) will reduce your monthly payment by approximately $37.50/month or $450/yea.

Why hasn’t my lender offered this program to me?

The truth is, Most lenders either don’t offer the program or don’t understand it.  It’s a Niche type of loan that isn’t available for use in big cities, so many large banks and lender don’t bother with it.  We live in an area that rightfully suits USDA financing due to the surrounding rural landscape ithat is far reaching and affordable.

Banks that don’t offer USDA or the other ‘niche’ loan programs that we offer, will often purposely withhold educating and informing their customers in hopes they don’t go elsewhere for their mortgage.

And don’t think USDA is the only low down payment option you have.

If you would like to find out of you can qualify for a USDA loan and interested in comparing that option with several other home buyer assistance programs that offer down payment and closing cost assistance, call me at 209-474-7111 or email jwomack@themortgagehouse.com

Is Stockton Ready for New Homes?

Is Stockton Ready for New Homes?

Stockton | Lodi | Elk Grove  | Sacramento

The current real estate market in Stockton, California is filled with buyers with nothing to purchase.  After 6 years of declining home values; Stockton’s residents have little or no equity available to put their homes on the market, and new home builders have been slow to recover from the losses they took during the recession.

Mortgage interest rates remain low and housing prices are still within reach, which has flooded Stockton with buyers ready to move.  Increased competition has led many homebuyers into the arms of local new home builders like KB Homes and Woodside Homes.  New communities are definitely enticing to frustrated buyers, but many can be overpriced when compared to similar properties in the area.

Yes, inventories are low and it will be difficult and time consuming to find the right home, but is convenience worth buying a new home the same way you would buy a new car?

After analyzing the current comparables, both Woodside and KB, new homes would place you 10-20% underwater the moment you sign on the dotted line. Home values are increasing due to demand and new homes will soon be great option, but Stockton’s values haven’t risen enough yet to make a new home a great investment.

Map KB Homes Stockton New home Lender MortgageAccording to KB’s website the Riverbend community ranges from $238,500-$299,500.  When looking for comparables I found three that range in price and square footage (see chart below).  All comparables have either been sold or are currently pending sale.  All comparables to the Riverbend community were far below the base new home advertised price.

 

 

 

 

KB Riverbend

Comparable 1

Comparable 2

Comparable 3

New Home Construction

2822 Hayden Brook

2526 Hayden Brook

2852 Pine Brook

$238,500-299,500

(For Sale)

$199,888

(Pending)

$165,000

(Sold)

$220,000

(Sold)

1,323-2209 Sqft

1,444 Sqft

2,209 Sqft

2,818 Sqft

New Home

Existing Home

Existing Home

Existing Home

2013

2010

2010

2008

Riverbend Community

Riverbend Community

Riverbend Community

Riverbend Community

Map Woodside Homes Stockton New home Lender MortgageWestside Homes, the Northbrook development is located along Lower Sacramento Rd and Eight Mile Rd.  According to their website prices range between $235,990-$315,990. When looking for comparables I found three that range in price and square footage (see chart below).  All comparables have either been sold or currently pending sale.  All comparables to the Northbrook community were far below the base asking price Woodside Homes is currently advertising on their website.

Northbrook

Comparable 1

Comparable 2

Comparable 3

New Home Construction

10519 Albert Dr

10513 Albert Dr

10547 Christopher Court

$235,990-315,990

(For Sale)

$189,000 (Pending)

$220,000

(pending)

$196,000

(Sold)

1,360-2555 Sqft

1,649 Sqft

2,005 Sqft

1646 Sqft

New Home

Existing Home

Existing Home

Existing Home

2013

2009

2009

2009

Northbrook Community

Northbrook Community

Northbrook Community

Northbrook Community

 

If you do decide to purchase a new home I strongly encourage you to consider the counsel of an independent realtor and lender that is not provided by the builder.  Some builders provide credits for using realtors and lenders that they control. It can quickly cost you more than your saving.

Realtors can provide comps, negotiate, and protect you throughout the transaction.  Inside sales representatives provided by the builder are representing the builder and may not be in your corner when you need them.  Not all builders allow outside counsel, but it’s worth seeking counsel before talking with a new home builder.

Preferred lenders are no different than those you find on your own except they have more knowledge of the exact subdivision. By shopping for rates and credits you can save thousands of dollars, because many preferred lenders quote higher rates knowing most don’t realize they can shop around for better rates.  Compare rates, fees, and credits with another lender to ensure the best deal.