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FHA Home Loans Explained by Raleigh Mortgage Broker Kevin Martini

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Are you a homebuyer looking to buy your first house in the Raleigh, NC area?

If so, then you may have heard about FHA Home Loans and the potential benefits of them. But what exactly are FHA Home Loans and how do they work? As an experienced mortgage broker in the Raleigh area for more than 15 years, this article has been curated to answer all your questions about this popular loan program.

In this article, I will share a glimpse of what you need to know about FHA loans including who can apply for one and some of their advantages both financially and long-term. I truly believe, armed with knowledge on FHA Home Loans from my helpful explanations, you’ll be able to make educated decisions that could potentially save you thousands of dollars over time and help you create generational wealth with the proper mortgage strategy.

What is a FHA Home Loan?

FHA Home Loans are a type of mortgage loan that is insured by the Federal Housing Administration (FHA). This government-backed insurance is designed to help qualified borrowers get into a home easier and with less money down. FHA loans do not require a high credit score and offers a lower down payment requirement than more traditional mortgage loans, making them an ideal choice for first-time homebuyers and repeat homebuyers too!

FHA loans are also incredibly flexible, as they can be used to purchase a wide variety of properties from single-family homes to townhomes and much more.

Advantages of FHA Home Loan with Kevin Martini

In terms of advantages that come with choosing FHA Home Loans, the most notable one is their low down payment option.

With FHA Home Loans, borrowers only need to put down 3.5% of the total purchase price as a down payment. This amount is significantly lower than what is typically required for more traditional mortgage loans and can be attained with a variety of financial sources such as gifts from family or funds from your local housing agency.

Another advantage of FHA Home Loans is that they are assumable, meaning that if you eventually decide to sell your home, a qualified buyer can assume the balance of the loan without having to go through the entire approval process again. This makes it easier for buyers and sellers alike, especially in today’s highly competitive housing market.

Things to know about the FHA Home Loan

It’s important to note, however, that FHA Home Loans do come with certain restrictions and requirements. The most notable of these is the Mortgage Insurance Premium (MIP). All FHA Home Loans require borrowers to pay an annual MIP in order to keep their loan in good standing. This does add an additional cost on top of the loan itself, but it’s important to remember that the MIP is what allows borrowers with lower credit scores and higher debt-to-income ratios to qualify for a loan in the first place.

Although there is no income limit with FHA Home Loans, the borrower must still demonstrate an ability to repay the loan. This means that having a steady job and verifiable income are important for obtaining approval.

Additionally, the property must be appraised by an FHA-Additionally, there is a loan limit in place which varies depending on the particular county and/or area of the country. In Wake County and Raleigh, NC, the loan limit for a one-family with a FHA Home Loan in 2023 is $502,550.

As you can see, there are a few things to consider when it comes to FHA Home Loans. Myself and the entire Martini Mortgage Group can help you navigate the process, so don’t hesitate to get in touch if you have any questions or would like to start the application process. Together we can find a solution that’s best for you and get you into your dream home as quickly and easily as possible.

The Kevin Martini Bottom Line

Now that you know more about FHA Home Loans and their potential benefits, it’s time to start your mortgage journey! If you’re ready to take the next step, contact me today so we can discuss your options and help you find the perfect home loan for your unique situation. With my trusted advice and expertise in the Raleigh mortgage market, I’m confident that you’ll be able to make an informed decision on which loan program is right for you.

Raleigh Mortgage Broker Shares Creative Mortgage Strategy for Raleigh Homebuyers | Martini Mortgage Group

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For perspective, basically a year ago, Raleigh mortgage rates started with a 3 and now they start with a 7. The last time Raleigh mortgage rates were at this level was in Spring 2002 and that was 20-years ago! Many experts predict, Raleigh mortgage rates will starts with an 8 sooner than we will see home loan rates that starts with a 5.

The Fed’s past, and likely future, tightening actions are engineered to decrease demand in order to reduce inflation. The Fed’s action are working as it relates to the housing and mortgage markets market.

The Free Martini Mortgage Group at Gold Star Mortgage Buydown Calculator

Increasing Raleigh mortgage rates are presenting some challenges and opportunities not just to first-time homebuyers but also to repeat homebuyers too! 

Raleigh Homebuyer Opportunity

Raleigh mortgage rates are not the only thing going up, rents are too! Sure, we are seeing a deceleration of appreciation and it is possible to see a month-over-month decline of home values however annual home values are not forecasted to decline since there remains a supply and demand imbalance with real estate that could take a decade to resolve.

In this market, buyers are finding unprecedented homeownership opportunities.

Logan Martini | Raleigh Mortgage Broker with Martini Mortgage Group

Raleigh Homebuyer Challenge

It’s just a fact! The sharp upward movement in home loan rates is making home buying more challenging. Affordability and buying power is impacted in the current environment. With elevated home loan rates impact home affordability. When home loan rates move upwards by 1%, buying power is reduced by 10%.

Kevin Martini | Raleigh Mortgage Broker with Martini Mortgage Group

Buydown Home Loan Programs | a Martini Mortgage Group creative strategy to help Raleigh homebuyers to leap over the challenges and take advantage of the Raleigh real estate opportunity to become a homeowners.

What is the Martini Mortgage Group buydown loan program (a.k.a. Seller-Paid Buydown)?

The Martini Mortgage Group Buydown Program offered by Logan Martini and Kevin Martini is where where the seller pays a fee at the closing to reduce the interest rate on the buyer’s mortgage temporarily. This results in temporarily lowering the buyer’s monthly cost and making the home more affordable for a homebuyer today.

A buydown reduces the homebuyer’s interest rate and monthly cost during the first few years(s) of homeownership, making the home more affordable for homebuyers. It has a much greater impact on the homebuyer’s monthly payment than reducing the list price of the home.

The Martini Mortgage Group, a Raleigh mortgage lender, Buydown Program has three options (i.e. 1-0 Buydown, 2-1 Buydown & 3-2-1 Buydown).

1-0 Buydown

Seller pays a fee at closing (the fee must be within the Interested Parties Contribution based on the loan the homebuyer is securing) to reduce the interest rate on the Raleigh homebuyer’s mortgage by 1% in year 1.

an example of the 1-0 buydown Program by Martini Mortgage Group, a Raleigh mortgage lender

For illustration ONLY: if homebuyer purchased $400,000 home and put 20% down with a 30-year fixed rate of 7%, they would have a P&I payment of $2,129. However, if the homebuyer requested (or the seller offered) at list price (e.g. $400,000) the Martini Mortgage Group 1-0 Buydown Program, the rate would be reduced by 1% for the first year (i.e. 6% in this example for illustration ONLY). The homebuyer would save $2,520 of P&I during the first year and that is a savings of $210 a month to the homebuyer.

2-1 Buydown

Seller pays a fee at closing (the fee must be within the Interested Parties Contribution based on the loan the homebuyer is securing) reduce the interest rates on the buyer’s mortgage by 2% in year 1 and 1% in year 2.

an example of the 2-1 buydown Program by Martini Mortgage Group, a Raleigh mortgage lender

For illustration ONLY: if homebuyer purchased $400,000 home and put 20% down with a 30-year fixed rate of 7%, they would have a P&I payment of $2,129. However, if the homebuyer requested (or the seller offered) at list price (e.g. $400,000) the Martini Mortgage Group 2-1 Buydown Program, the interest rate would be reduced by 2% for the first year (i.e. 5% in this example for illustration ONLY).

During the first year of the 2-1 Martini Mortgage Group Buydown Program, the homebuyer would save $4,932 of P&I. That is a savings of $411 a month to the homebuyer during the first year.

During the second year of the 2-1 Martini Mortgage Group Buydown Program, the homebuyer would save $2,520 of P&I. That is a savings of $210 a month to the homebuyer during the second year.

3-2-1 Buydown

Seller pays a fee at closing (the fee must be within the Interested Parties Contribution based on the loan the homebuyer is securing) reduce the interest rates on the Raleigh homebuyer’s mortgage by 3% in year 1, 2% in year 2 and 1% in year 3.

an example of the 3-2-1 buydown Program by Martini Mortgage Group, a Raleigh mortgage lender

For illustration ONLY: if homebuyer purchased $400,000 home and put 20% down with a 30-year fixed rate of 7%, they would have a P&I payment of $2,129. However, if the homebuyer requested (or the seller offered) at list price (e.g. $400,000) the Martini Mortgage Group 3-2-1 Buydown Program, the rate would be reduced by 3% for the first year (i.e. 4% in this example for illustration ONLY).

During the first year of the 3-2-1 Martini Mortgage Group Buydown Program, the homebuyer would save $7,212 of P&I. That is a savings of $601 a month to the homebuyer during the first year.

During the second year of the 3-2-1 Martini Mortgage Group Buydown Program, the homebuyer would save $4,932 of P&I. That is a savings of $411 a month to the homebuyer during the second year.

During the third year of the 3-2-1 Martini Mortgage Group Buydown Program, the homebuyer would save $2,520 of P&I. That is a savings of $210 a month to the homebuyer during the third year.

Raleigh Homebuyers Consider Martini Mortgage Group Buydown Home Loan Program A Quasi Asset

At time of sale or refinance, the unused balance of the buydown is credited to the customer.

Is the Martini Buydown Program the Best Mortgage Loan Program if securing a home loan in Raleigh, North Carolina for a first-time or repeat homebuyer?

It depends! Sadly no mortgage company website can determine the clients best loan options. Obviously payments are more affordable temporarily not permanently with a buydown home loan program so, a customer needs to consider the length of time they will be in the home loan to determine the true benefit.

Since many industry experts and Fannie Mae are predicting a conventional interest rates will start with a 4 in late 2023 or early 2024, it is likely the loan program a customer gets today they will likely be refinancing in 12- to 18 months.

I have been in the financial services since the late 80’s and exclusively in the mortgage industry since 2006 in Raleigh, North Carolina. I have yet to meet two clients that have the same financial needs.

A home loan solution for a home purchase may be different than one that is for a refinance. Perhaps a FHA home loan is the proper home loan financing solution for a customer to buy a home with but a conventional is the proper lending solution to when refinancing.

Whether buying a home in Raleigh, NC or refinancing a mortgage, a customer needs to understand it is a process not an event to secure the proper home loan financing solution. The process does not need to be painful, it should be free and educational while providing the customer with price and cost clarity with certainty.

Kevin Martini | Raleigh Mortgage Broker with Martini Mortgage Group

Advantages AND disadvantages of Buydown loan options

With anything, when there are advantages, there are likely disadvantages and this sentiment is true with buydowns. Things to consider are: the prevailing rate, the amount of the loan, the amount of interest saved, how loan you are expecting to be in the loan and your future income.

Advantages of Buydown loan options
  • a temporary reduction of interest rate provides payment assistance to Raleigh homebuyers
  • the potential opportunity to purchase a home in Raleigh, North Carolina less than list price
  • the ability for a first time or repeat homebuyer to ease into a payment
disadvantages of Buydown loan options
  • once the temporary reduction of interest rate period is over, there is no more payment assistance
  • if thoughts of refinance do not materialize or income does not increase one could struggle the absence of payment assistance

Get trusted advice from a local expert that some call the best mortgage guys in Raleigh, NC. The Martini Mortgage Group offers local home loan programs such as Conventional Loans, FHA Loans, Jumbo Loans and USDA Loans to name a few. To contact loan officer Logan Martini or loan officer Kevin Martini for a financial review simply call (919)238-4934 or stop by the office since the Martini Mortgage Group is local and is located in downtown Raleigh, NC at 507 N Blount St, Raleigh, NC 27604.

Martini Mortgage Group Buydown Loan Program Can Be Combined with the Martini Mortgage Group ‘No Contract Lock’

The No Contract Lock (a.k.a. Lock & Shop) is where a clients can lock a loan program for a Conventional Loan, FHA Loan or VA loan for up to 90-days at no charge with a FREE float down option.

Future homeowners can shop for their next home worry-free in Raleigh, NC knowing their interest rate is protected for 90-days. For added purchase worry-free protection, if the interest rate rises their loan rate is protected. Plus, if the loan program interest rate drops, as a mortgage lender, we offer a free float-down option. This is a lending industry first.

Logan Martini | Raleigh Mortgage Broker with Martini Mortgage Group

There are many lenders in Raleigh but many believe the best mortgage company in the industry is the Martini Mortgage Group

See our online reviews on the service we offer and why a top rated in the lending programs and services we offer but also many believe we are the best mortgage company in Raleigh, North Carolina.

Raleigh Mortgage Broker Logan Martini Shares How Raleigh Homebuyers and Raleigh Sellers Benefit From a 2-1 Buydown | Martini Mortgage Group, a Raleigh mortgage lender

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What is a Buydown?

A buydown (a.k.a. ‘Seller-Paid Buydown‘ or a ‘Temporary Buydown’)  is where the seller pays a fee at the closing to reduce the interest rate on the homebuyer’s mortgage temporarily. This results in temporarily lowering the buyer’s monthly payment and making the home more affordable for a homebuyer today.

What is a 2-1 Buydown?

A 2-1 Buydown is when a seller pays a fee at closing (the fee must be within the Interested Parties Contribution based on the loan the homebuyer is securing) reducing the interest rate on the buyer’s mortgage by 2% in year 1 and 1% in year 2.

How does a Temporary Buydown work?

At the time of closing, the seller will fund a custodial escrow account on behalf of the new homeowner. The borrower will have a reduced monthly payment, and the difference in interest rates comes out of the custodial escrow account.

If at the time of sale or refinance, there is a remaining balance in the custodial escrow account, the unused balance will be credited to the borrower.

Advantages of a Buydown for a Raleigh Homebuyer

A buydown reduces the buyer’s mortgage interest rate and monthly payment during the first few year(s) of homeownership, making the home more affordable for homebuyers. Buydowns have a much greater impact on the homebuyer’s monthly payment than reducing the list price of the home.

Advantages of a Buydown for a Raleigh Home Seller

A buydown could be a great negotiating tool because a greater percentage of homes listed for sale in today’s market are seeing price reductions. Not only does a buydown make a home more affordable to a wider range of buyers who may have otherwise been priced out of the market, it also tends to cost less than a price reduction.

A seller offering to pay for a buydown could provide a competitive advantage vs. other homes listed for sale in today’s changing market. This is because rising Raleigh interest rates could create significantly an affordability challenge for many potential buyers. 

As an added benefit, a buydown could also save a seller the aggravation and financial loss of having to significantly reduce your list price in order to compete with other homes that may be listed for a lower price.

In today’s market both seller and buyers need to evaluate the best approach.

Logan Martini | Raleigh Mortgage Broker & Certified Mortgage Advisor
real estate podcast on seller paid buydowns by raleigh mortgage lender kevin martini

A 2-1 Buydown Scenario

For illustration ONLY: if a homebuyer purchased $400,000 home and put 20% down with a 30-year fixed rate of 7%, they would have a P&I payment of $2,129. However, if the homebuyer requested (or the seller offered) at the list price (e.g. $400,000) the Martini Mortgage Group 2-1 Buydown Program, the rate would be reduced by 2% for the first year (i.e. 5% in this example for illustration ONLY). The rate would be reduced by 1% for the second year. The homebuyer would save $4,932 of P&I during the first year and that is a savings of $411 a month to the homebuyer. In the second year, the homebuyer would save $2,520 a year and that is a savings of $210 a month to the homebuyer.

Is a 2-1 Buydown The ONLY Buydown Option?

No, the Martini Mortgage Group, a Raleigh mortgage lender, Buydown Program has three options (i.e. 1-0 Buydown, 2-1 Buydown & 3-2-1 Buydown). Let’s connect so you can get trusted advice from a local expert that some call the best mortgage guys in Raleigh, NC. The Martini Mortgage Group offers local home loan programs such as Conventional Loans, FHA Loans, Jumbo Loans, and USDA Loans to name a few.

To contact loan officer Logan Martini for a financial review simply call (919)238-4934 or stop by the office since the Martini Mortgage Group is local and is located in downtown Raleigh, NC at 507 N Blount St, Raleigh, NC 27604.