No matter the housing market you choose for real estate investment, you always need to keep up with its trends so you know all the right moves to make. The…
Lawmakers in the U.S. House of Representatives have approved a bill that would reduce the cost of upfront mortgage insurance fees on Federal Housing Administration-sponsored loans for first-time buyers.
The bill comes with a caveat however, as first-time buyers would need to undergo a housing counseling program about sustaining homeownership in order to qualify for a 25 basis point discount on their FHA mortgage insurance loan.
The Housing Financial Literacy Act of 2019, H.R. 2162, hasn’t become law yet, as it still needs to pass a vote in the U.S. Senate, HousingWire reported.
The bill basically wants to reward first-time buyers who improve their financial literacy via the counseling course, which has been certified by the Department of Housing and Urban Development.
“Whether you are managing your credit, creating a budget, saving for retirement, or purchasing a home, understanding the basic principles of planning, saving, and investing for the future is vitally important,” Rep. Joyce Beatty, D-Ohio, who co-sponsored the bill with Rep. Steve Stivers, R-Ohio, said in a statement. “Studies show that pre-purchase housing counseling equips first-time home buyers with the much-needed financial skills and tools to make informed financial decisions that ultimately benefit not only their families but also the surrounding neighborhood and our entire economy.”
Important real estate industry bodies including the National Association of Realtors have already said they support the bill as it will make buying a home more affordable for low-income families.
“The NAR strongly supports efforts to reduce FHA premiums,” said NAR President John Smaby. “H.R. 2161 will promote affordable and sustainable homeownership for American families.”
The Mortgage Bankers Association said it too supports the bill, having advocated for years for increased access to housing counseling. However, it warned lawmakers they should consider any reductions in FHA insurance premiums carefully, so as to “preserve the health” of the fund.
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Households including at least one person with a high school diploma or GED can afford the typical mortgage payment in most large metro areas across the U.S., according to a new analysis by Zillow.
But soaring home values that have outpaced incomes have made down payments a barrier for many, particularly first-time home buyers.
Mortgage rates have dipped to multi-year lows in recent months, meaning monthly payments are relatively affordable for buyers who can secure a down payment. However, down payments are a challenge to afford for many as prices have grown faster than incomes over the past several years. An earlier Zillow study found that buyers need 1.5 years longer to save for a 20% down payment on the typical home than 30 years prior, and the difference is much more extreme in the most expensive metros – 13.3 years longer in San Jose, for example.
This effect is especially pronounced for first-time buyers who do not have the equity of an existing home to put towards a down payment on a new one. Zillow data shows that 46% of a typical down payment comes from savings for first-time buyers, compared with 35% for repeat buyersii.
“The influx of highly educated workers into already-expensive metros with stagnant or slow-growing inventory has made it difficult for those with less education and earning potential to enter those markets,” said Skylar Olsen, director of economic research at Zillow. “There can also be considerable variation within metros. While a bachelor’s degree may be enough to afford a mortgage on the typical home in the San Diego metro at large, it’s likely to be insufficient in pricey areas like La Jolla. And that’s only after scraping together a sizable down payment, which is a huge hurdle for most buyers.”
For households that secure a down payment, the median mortgage payments are affordable for those with a high school education in 36 of the 50 largest U.S. metros. The remaining 14 metros require earnings associated with at least a two-year associate’s degree.
The median income of a university degree holder is necessary to afford the median mortgage payment in the five most expensive West Coast metros. A bachelor’s degree is typically needed in San Diego and Seattle, while the typical income of someone with an advanced degree is required in San Jose, San Francisco and Los Angeles. The typical mortgage payment is affordable for those with associate’s degrees in Boston, New York, Sacramento, Washington, D.C., Denver, Portland, Riverside, Salt Lake City and Miami.
In only one metro, Oklahoma City, can those with less than a high school degree usually afford the typical mortgage payment. Households in Oklahoma City benefit from a combination of low housing costs – only three of the 50 largest metros have a lower median mortgage payment – and relatively high median incomes for households in which nobody has a high school diploma.
Median rent was 27.8% of the typical U.S. household income in Q1 2019. This is up slightly from the previous quarter and just below levels from a year earlier. Rent was most affordable for those in Pittsburgh, where the median rent is 21.4% of the typical household income. Los Angeles is the least affordable large metro for renters – 46.1% of the typical income is required to pay the median rent there.
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Last month, President Donald Trump signed a bill into law that allows the Department of Veterans Affairs to back loans that exceed the conforming loan limit, enabling VA homebuyers to borrow above the $484,350 limit set for most counties, without any down payment. A VA spokesperson clarified the rule and outlined other changes that will go into effect as a result of the bill.
As a rental property owner, you want to have control over your investment. While you’re free to buy property anywhere in the U.S., each state has its own set of landlord-tenant laws. While these laws generally favor tenants in many states, there are some states that are friendlier to landlords.