Since 2020, residential real estate has been a hot commodity with stratospheric appreciation driven by record-low interest rates and a lack of inventory. The high inflation and interest rate hikes that followed brought some markets back to Earth. There are many desirable areas of the country where real estate values have remained stubbornly high and are unlikely to correct below conforming limits.

The Federal Housing Finance Agency (FHFA) meets annually to evaluate the market and establish revised loan limits as needed. Even with increased limits, many buyers are still priced out of a conforming loan. Non-QM Jumbo and Super Jumbo loans are excellent options for transactions that exceed conforming limits. These loans also come with the benefit of higher loan amounts that can exceed 4 million dollars. Another benefit, particularly for self-employed, makes it possible to qualify with limited documentation such as 12- to 24-month bank statements only.

Freddie Mac has introduced super-conforming mortgages, which are designed to accommodate higher maximum loan limits for properties located in designated high-cost areas. These enhanced loan limits, as determined by the Federal Housing Finance Agency (FHFA), aim to provide lenders with essential liquidity in the nation’s most expensive regions. This initiative also seeks to reduce mortgage financing costs for borrowers in these high-cost areas.

The maximum loan amounts for super-conforming mortgages vary by county and property type:

• SFR/Condo: $1,089,300
• 2-Unit Property: $1,394,775
• 3-Unit Property: $1,685,850
• 4-Unit Property: $2,095,200

Super-conforming mortgages typically offer the same terms and features as conforming mortgages, including competitive interest rates, fixed-rate options, and down payments of 5 to 10% of the home’s purchase price. As with any home loan, borrowers must meet the lender’s eligibility criteria, including credit score, debt-to-income ratio, and other factors. It should also be noted that while this may help some, Non-QM is still the best option in areas where the average sale price exceeds super-conforming limits.

Related Reading:
Conforming Mortgage Loan Limits vs Jumbo and Super Jumbo Loan Limits
Do I Need a 20% Down Payment for a Jumbo Loan?
Why Non-QM Super Jumbo Loans are Better Than Super-Conforming Mortgages

Learn more about: Jumbo and Super Jumbo Loans

The post What is a Super-Conforming Mortgage? first appeared on MortgageInsider.org.

A major benefit of using gift funds for a mortgage is the ability to reduce the loan amount and, consequently, the monthly mortgage payments. By increasing the down payment supplemented by gift funds, buyers can lower their loan-to-value (LTV) ratio, which may also help secure more favorable interest rates and loan terms. This can result in significant savings over the life of the loan. The loan officer should be able to educate their borrowers about the lending guidelines as it pertains to the use of gift funds. Lenders typically require a detailed gift letter from the donor stating that the money is a gift and not a loan that must be repaid. The gift letter often includes the donor’s name, address, relationship to the borrower, and the amount of the gift, however, it will be important to obtain what is required in the letter from the lender early in the process.

While gift funds can provide critical assistance, borrowers should be mindful of the potential tax implications for the donor. The IRS allows individuals to gift a certain amount per year without incurring a gift tax, but if the amount exceeds this limit, the donor may need to file a gift tax return. Both the donor and the recipient should consult with a tax professional to fully understand the financial implications. Overall, gift funds can be an excellent way to support homebuyers in achieving their goal of homeownership, providing the necessary boost to overcome financial hurdles while ensuring that all parties are well-informed and compliant with relevant regulations.

If you are fortunate enough to be gifted financial assistance towards your down payment, it is advised to consult your loan officer so you know all of the requirements as they relate to these funds. It would also be prudent to get the gift letter at the same time to minimize potential delays in the lending process.

Related Reading:

Do I Need a 20% Down Payment for a Jumbo Loan?
The Top 5 Things To Consider Before Shopping For A Home.
Top 5 Ways To Effectively Save For Your Dream Home.

Want to learn more? Talk to a lender: Click here

The post Use Gift Funds For Your Down Payment first appeared on MortgageInsider.org.

Early mobile home in a Delaware trailer park

Mobile Homes

Mobile homes gained popularity in the early to mid-1900s as a practical option for people who needed to relocate for work while still providing a home for their families. Originally mobile homes resembled trailers or campers, complete with wheels and exposed tongues for towing.

The National Mobile Home Construction and Safety Act of 1974 and the HUD Manufactured Home Construction and Safety Standards released in 1976 set in place rules for mobile home production that required massive changes in building practices which all but killed the mobile home business as it was known up to that point.

New Manufactured Home being rolled into position

Manufactured Homes

Manufactured homes are predominantly built in a factory setting and once complete, the various parts are transported by truck to the home site for final assembly. Manufactured homes are sold in 3 sizes: Single, double, and triple-wide. Following the Housing Act of 1980, the terminology for all types of movable and/or factory-built dwellings changed to “manufactured homes” in federal law and literature.

While most manufactured homes remain stationary where assembled, it is possible to relocate them if they are constructed on a pier and beam foundation which makes them easier to load and move with minimal stress to the structure.

Example of a pier and beam foundation

Modular Homes

Modular homes are built in large, prefabricated sections in a factory, then transported and pieced together at the home site. While similar to manufactured homes in quality and build process, modular homes are engineered to adhere to state and local building codes. Modular homes are typically anchored to a foundation like a traditional stick-built home and come at a higher price due to added considerations for building code compliance.

A section of a modular home being lowered into place.

Mortgage Lending

For most banks mobile and manufactured homes are perceived as personal property rather than real estate. Even with the manufacturing standards and HUD codes established in 1976, financing options are limited. In addition to construction quality, resale value, and whether the home is on personally owned or rented/leased land are considered as factors that dictate financing. If the land is owned by the owner of the mobile/manufactured home, the bank may also want to know if the property is anchored to a foundation. For mobile and manufactured homes, government-backed loan options like FHA, USDA, and VA are available.

Although modular homes are considered manufactured, they’re constructed to a higher standard set by state and local building code guidelines. The modular home and the land it’s built on and anchored to are sold together like traditional stick-built homes which makes them the most viable financing option for a more diverse group of lenders. While traditional government-backed lending options are available, modular homes have the added potential to qualify for Non-QM (Non-Qualified) loans. Non-QM makes it possible for investors (DSCR), self-employed (1099, bank statements only, CPA Prepared P&L), foreign nationals, ITIN/DACA, Cannabis business owners, and more to qualify for mortgages when conventional loans are not an option.

The post Mobile, Manufactured, and Modular Homes. How Do Lenders View Them? first appeared on MortgageInsider.org.