Poconos Real Estate Blog

Higher Down Payment Requirements For Vacation Home Mortgages

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Breaking Mortgage Financing News!

The minimum down-payment required for second homes or investment properties is now 20% of the purchase price. The reason for this is that PMI (Private Mortgage Insurance) is no longer available for 2nd / vacation homes, or for properties purchased for investment purposes. This information was given to me by Andy Williams of Abacus Regional Mortgage 610.837.1616, who has checked with 5 major PMI companies to find one that offers the insurance to lenders, to no avail.

This is breaking news...remember, you heard it first here on The Poconos Real Estate Blog! I have tried to locate some websites to link to about this, but have not found anything useful. As more information becomes available on this change, I will post it. And if you know anything about it, please share what you know in the comments!

What Is PMI?

Private Mortgage Insurance premiums, commonly referred to in the real estate business as PMI, are a mandatory part of mortgage payments for loans made with less than 20% down, and insures the lender against default. The idea behind it is that the less money that borrowers put in to a transaction via their down payment, the more likely they are to default on their mortgage payments. So PMI is there to alleviate the risk and allow these lower down payment loans to occur.

Since summer homes and investment properties are not 'owner occupied' or 'primary residences', the risk to a lender is even that much greater, as borrowers are more likely to default on a mortgage that is not their main home. Combine this with low personal investment on the lower down payment loans, and it makes for just too much risk for the PMI companies to take on.

Another bit of credit tightening as a result of the recent mortgage foreclosure problem....

FHA Mortgage Loans Keeping the Dream Alive

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Wishing For a House?

No, you don't need perfect credit and a 20% down payment to buy a house. Despite what you may hear, there are still loan programs available for people with minor credit blemishes and lower balances in their down-payment piggy bank. I've heard rumors of some conventional mortgage programs being available, but I know for sure that FHA offers a solid option for first time home buyers and others who need an affordable inroad to home ownership. FHA loans offer competitive rate, too...these are not those nasty sub prime loans we've all heard way too much about lately.

Dreams Come True-You Can Own Your Own Home

If you have a good job history, documented income, plan to live in the house, and a debt load that still allows you to comfortably pay a mortgage payment, consider FHA financing. Credit history requirements, as I said, are a bit more flexible and this kind of mortgage requires only 3.5% down.

(Renters Note: This is about as much as it would cost you in up-front costs associated with renting a home. Consider the benefit of investing this money in your own home!)

Closing costs, which include title insurance and other expenses over and above the down payment, can be offset with a seller contribution of up to 6% of the sale price. This is often enough to cover all of these expenses.

Please note that this information is provided as an overview of the program and is not an offer of financing. Your individual circumstances as provided on your mortgage application will determine your qualification for an FHA loan.

How Much Can You Borrow?

Requirements for these mortgages change fairly often, even more so recently as the government tries to stimulate the housing market through various means, so it is important to have up-to-date information on down payment requirements and mortgage loan limits for FHA financing to avoid pain and aggravation as you proceed in pursuing your home ownership dream.

Every county in the country has its own FHA loan limit, based on some strange formula involving area classification, median sale price and the phase of the moon. Monroe County, which is the Pocono county closest to New Jersey and the Route 80 corridor, has a low-ish limit compared to other areas and even compared to neighboring counties. Keep this in mind as you contemplate your purchase.

You can find out what the 2009 FHA mortgage loan limit is in any area in the country here, or check out this handy-dandy list of 2009 Pocono Mountain area, single-family home, FHA loan limits:

Monroe County: $271,050
Carbon County: $305,900
Pike County: $625,500
Wayne County: $271,050

For information on lenders who participate in FHA loan programs and other facets of your Pocono home buying experience, don't hesitate to contact me through this website, via email info@lisasanderson.com, or by phone 570.421.8950 ext 394.

Related Reading

Refinancing a Sub Prime Mortgage

Happy Home Buyers Did Homework First!

I Love the F Word

Happy Homeowner Tip: Track Mortgage Amortization & Pre-Payment Effects

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The 'Principle': Every Little Bit Counts

Despite the news these days, I am pretty certain that there are a few people out there who are current on their mortgage, plan to stay that way, and continue to manage their financial lives with some degree of responsibility. Actually, I talk to people like you every day in person, on the phone and online.

Some of my friends over at Pocono Commuter Club recently discussed online mortgage calculators and we found a few that look pretty helpful. These are not plain-old versions that help a potential home buyer determine monthly payments based on a certain sale price and interest rate, but rather these are a little more sophisticated as they allow you to enter extra payments and calculate how this affects your payoff date and interest paid.

You see, people who know how to manage their money realize that even a small extra payment on your mortgage now and then can save you lots of money and time off the life of your loan, and increase your equity faster. And a homeowner with equity is happy indeed!

Calculate Your Savings of Money & Time

So, if you make regular extra principle payments on your mortgage, or even just throw a few extra bucks in whenever you can, check these mortgage calculators out. Or, if you are wondering if it is even worthwhile to go to the trouble of making an extra payment or two a year (it is!), enter your information and see how beneficial it is to pre-pay on your mortgage loan. Even if you aren't now or don't plan on prepaying your loan, you may want to generate an amortization schedule to keep track of where you stand.

All you need to know is your loan term (30 year, 15 year, etc), interest rate, amount borrowed (loan amount) and the dates you want to work with. For example, if you want to track your principle and interest payments over the life of your mortgage, use the original figures and dates from when you obtained the loan. If you want to start from now, you can do that too...just check your monthly statement for what you owe and go from there.

Handy Mortgage Calculating Tools

This calculator looks like it would be the most flexible and easy to use for most circumstances. If you like to compare and make your own choice, try this one or this one.

Please note: I do not recommend you use any of these sites to apply for a new loan, refinance, etc. You will see lots of links and offers on some of the pages but do not be tempted. Best practice (especially in today's rocky lending environment) when shopping for a mortgage is to get recommendations of local lenders from your friendly real estate agent or some other trusted source. Feel free to call 570.421.8950 ext. 394 or email me info@lisasanderson.com to discuss your needs and get a customized recommendation based on your situation. 

Buying in the Poconos - Real Estate Links

• Communities & Developments Not all areas are link-able. Email me for info on specific areas you are looking at.
• Is the Time Right to Invest in Real Estate? Chicken Little vs. PollyAnna
• Are you being ripped off by your mortgage lender? Read: The Good Faith Estimate (part1)
• Pocono Mountains Maps & Transportation Info  is a good starting point for those thinking of commuting from Monroe County. Also check out my Transportation Page.
• Looking for a local real estate agent? Be sure to ask for references!

Finding the Perfect Home ... or Husband

Face it, finding the perfect house is tough. Even with all of the choices out there today, it can be hard to find the one that is 'just right.' My famous line to buyers is this: Finding the perfect house is kind of like a woman looking for the perfect husband...if you could take a little piece of each one and put it all together then, voila, perfection.

But let's be realistic, honey...that ain't happenin' !

So what is today's cultivated woman to do? Lower her standards? Never!

My advice is, figure out what faults you can live with and then TRAIN HIM.  ( =) c'mon guys, stay with me here)

Finding the perfect house can be approached in the same way. Find that one that has the best combination of must-have features and lack of fatal flaws, and then fix it to your liking.

Better still, save your cash and finance the alterations!

Enter the FHA 203(k) Streamlined Mortgage.

This  program has been around for a couple of years but has been very under-utilized. Recent changes in the loan limits, guidelines and processes for FHA loans in general have made it a much more desirable program, especially in today's lending environment. What makes the Streamlined(k) mortgage so special is its ability to facilitate 'simple' repairs or improvements to a home...up to $35,000 worth.

Eligible improvements include some of the most common home repair issues we encounter here in the Poconos like:

•  Repair/Replacement of roofs, gutters and downspouts
•  Repair/Replacement of flooring, kitchens & appliances
•  Painting, both exterior and interior
• Septic system and/or well repair or replacement
•  Repair/replace/add exterior decks
•   Basement finishing and remodeling, which does not involve structural repairs

Other improvements which could be financed include:

• Basement waterproofing
• Window and door replacements and exterior wall re-siding
• Weatherization, including storm windows and doors, insulation, weather stripping, etc
•   Accessibility improvements for persons with disabilities
•   Lead-based paint stabilization or abatement of lead-based paint hazards

Basically the rule of thumb is, as long as there are no structural changes or proposals that require engineering or architect reports, they are probably finance-able under this program. Simply providing bids, estimates or projected invoices is all the additional documentation required for this loan. An appraisal will be done to ensure the as-fixed value of the property, and the program allows up to six months after closing to complete the work.

There ya have it, the solution to your house-hunting dilemma...it's easier than teaching your husband to put his socks in to the hamper!

For more information on the FHA Streamlined(k), please contact Bill Cullen at Hometown Security Mortgage (570)424.1289.