Conforming & VA Loan Limit Changes for 2020
Conforming & VA Loan Limit Changes for 2020 admin
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FHFA Announced Increase in Conforming Loan Limits for 2020

The Federal Housing Finance Agency announced that it is raising the conforming loan limits for Fannie Mae and Freddie Mac to more than $510,000.

In most of the U.S., the 2020 maximum conforming loan limit will be raised to $510,400, up from 2019’s level to $484,350.

Median home values generally increased in high-cost areas in 2019, driving up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas will be $765,600 — or 150% of $510,400.

For a map showing the 2020 maximum loan limits across the U.S., click here

Government backed loans typically follow suit and will match the new conforming loan limits but no formal announcement has been made.

Vellum is immediately accepting mortgage applications with the new loan limits.

VA Loan Limits to be Lifted in 2020

Earlier this year, the President signed a bill into law that allows the Department of Veterans Affairs to back loans that exceed the conforming loan limit. The bill, H.R. 299, enables homebuyers using a VA loan to borrow above the 2019 limit of $484,350 for most counties, without any down payment.

In addition to alleviating limits for veterans looking to purchase a home, H.R. 299 temporarily increases rates for certain loans by 0.15-0.30%, the VA said. The slight bump in loan fees is intended to help finance health care costs for veterans who are suffering the effects of Agent Orange exposure as a result of their service.

Additional changes to the VA’s loan guaranty program include the elimination of funding fee differences for borrowers who are veterans versus those who are members of the Reserve. It also removes the loan limit for the Native American Direct Loan Program, exempts Purple Heart recipients from paying loan fees and authorizes VA-designated appraisers to rely on third parties for appraisal-related information.

VA loan limit will be lifted for loans that are guaranteed on or after January 1, 2020.

How a 20-year home mortgage can save you money
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The 30-year fixed-rate home mortgage dominates the housing market, particularly for first-time buyers who appreciate the ability to extend their home loan payments for the longest possible term.

The second most common fixed-rate loan term is 15 years, but many lenders also offer loan terms of 10 or 20 years. Sometimes lenders even offer a personalized term chosen by the borrower.

On average, a person will save a significant amount of interest when either purchasing or refinancing into a 20-year mortgage compared to a 30-year. Here are four reasons to consider a 20-year mortgage:

  • Save on interest:
    The most obvious reason is that the interest rate of a 20-year mortgage is typically one-fourth of one point to three-eighths of one point lower than a 30-year fixed mortgage. This means, on an average, a person will save a significant amount of interest when either purchasing or refinancing into a 20-year mortgage compared to a 30-year. Because of a shorter loan term and a lower interest rate, on a $280,000 loan amount, a borrower can save approximately $85,000 in interest over the life of the loan.
  • Pay off the loan faster:
    When a borrower is refinancing to get a lower interest rate, instead of taking their original 30-year mortgage and refinancing it into another 30-year mortgage, they’re able to take their original 30-year mortgage and refinance into a 20-year mortgage, which would potentially keep them on their payoff goal. Thus, they don’t have to start all over with a new 30-year mortgage.
  • Match the payoff to retirement goals:
    Let’s say a borrower is in their late 30s or 40s and their retirement plan is to retire in their 60s. Applying for a 30-year mortgage would push their potential payoff of their house into their 70s. Choosing a 20-year mortgage would keep them potentially on track for having their house paid off in their 60s.
  • Affordable payments:
    A 20-year mortgage is a good alternative to a 15-year mortgage, as many home buyers can’t stretch their budget to make the higher payments required to pay off a mortgage in 15 years, but yet they want to pay off the home faster. The borrower is still paying off the loan in 10 years less than a 30-year mortgage, and if the borrower ever wanted to, they have the ability to make extra payments.

Speaking with a Vellum mortgage professional will ensure that you obtain the mortgage that’s right for your story.

Source: Washington Post

What’s the Point?
What’s the Point? 628 419 patrickgardner

What's the Point?

Your financial house is in order and you’re ready to make your dream of homeownership a reality. Now it’s time to get a mortgage. So what are these so called “points” and is there a point in paying them?

A “point” equals one percent of the loan. Discount points are used by borrowers to buy down their mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower interest rate on your fixed-rate mortgage. So if you are borrowing $200,000, paying one discount point would mean paying $2,000 upfront at closing – but it may end up saving you more in interest payments over the life of the loan.

Deciding whether to pay more points for a lower interest rate or pay less/no points and pay a higher interest rate depends on your personal circumstances. They include factors like how long you expect to stay in the home and whether you can afford to make an upfront payment.

Interested in seeing how paying extra points might lower your rate? At Vellum we are experts in assisting you with your overall financial picture. Ask your Vellum Loan Officer for more details!

Source: Freddie Mac

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Should You Refinance to a Shorter-Term Loan?
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Should You Refinance to a Shorter-Term Loan?

New homebuyers often choose to take out longer term mortgages such as a 30 year term mortgage on their new homes due to the security and peace of mind that a consistent monthly mortgage payment provides. However, a 30 year term can be really long time! It is especially long when thinking about things like putting kids through college, saving for retirement or all the fun surprises life likes to throw your way.  

Paying off your mortgage sooner will free up a lot of cash that can be used for other upcoming commitments. It also means you will save money in interest over the life of your loan because you are paying down your mortgage significantly faster. But can you really afford to do it?

You have a steady and reliable income, you may be a prime candidate for mortgage refinancing because you can afford the bump in expense that a shorter term loan will most likely bring.

For example, a 30 year loan of $100,000 at 4.5% would cost roughly $506 per month (principal and interest). A 15 year loan at the same rate would be approximately $765. For home owners who currently already have some extra disposable income at the end of the month the $259 increase between the two terms would be manageable. Keep in mind, a higher debt to income ratio would be required on the 15-year term because of the higher monthly payments.

Refinancing a home for a shorter term makes sense for those homeowners who have an interest rate of 4% or higher and who have not refinanced in the past six months. It also would make sense for people who are looking to build equity in their home sooner.

Is there an option for homeowners who don’t meet the criteria to refinance? For those homeowners who are afraid of committing to a larger monthly payment or who can’t meet the new income to debt ratio that the shorter term requires, they can still get the same benefits by consistently paying extra on the principal of their mortgage. Another option might be a variety of shorter terms such as 20 years instead of 15 or 10.

There are many things to consider when refinancing a home. We are happy to take a look at your current financial picture and see what option would best work for you and your long term goals.

The post Should You Refinance to a Shorter-Term Loan? appeared first on Vellum Mortgage.