Mortgage Options in 2018

Northern Wasatch Association of Realtors Advice

Home prices are rising in Northern Utah according to Utah Realtors. In Davis County, the median sales price rose 9 percent to $272,500 during the first 10 months of 2017. The trend was similar in Weber County with an increase of 11 percent to $205,000. Prices in Morgan County, where sales volumes are lower, remained flat at $390,000.

  • While home prices likely won’t rise as quickly next year, they will still be up about 4 percent statewide in 2018, according to CoreLogic.
  • While the gain is good for existing owners, it presents challenges for those who want to buy. With more expensive homes, buyers need to save more cash for down payments and qualify for larger loans. Higher prices also affect the type of mortgage financing available.
  • No matter your challenge, there are a variety of lending products available to address your unique circumstances. Let’s review some of your choices as well as changes for 2018.

FHA

  • The Federal Housing Administration insures FHA loans as a way to help buyers who otherwise might not qualify for a mortgage. They’re a popular choice for those with less-than-perfect credit because they allow credit scores as low as 500 (although some lenders may increase this requirement).
  • FHA loans are also helpful to those with limited cash, usually requiring only 3.5 percent down. Additionally, some borrowers may qualify for a down payment or closing cost loan that would further reduce the cash needed at closing.
  •  There are, however, limits to the amount you can finance. The government adjusts them each year and has recently announced the new maximum loan amounts for 2018. In Davis, Morgan, and Weber counties, the 2018 limits will remain at $389,850. Other limits throughout Utah will range from $294,515 to $679,650.
  • VA loans for veterans and USDA loans for those in rural areas are other government loan programs that may be good options for borrowers with those qualifications.

Conforming

  • A conforming loan is a popular mortgage choice. Local lenders will originate the loans and often sell them to Fannie Mae and Freddie Mac, government-sponsored organizations that purchase mortgages.
  • Generally, the Fannie Mae and Freddie Mac guidelines allow 3 percent down payments and a minimum credit score of 620. Keep in mind, however, that lenders may have more stringent requirements than the Fannie/Freddie minimums and may charge more for small down payments and low credit scores.
  • Like FHA, there are also limits to the amount financed. Fannie Mae and Freddie Mac recently announced the maximum loan will increase in 2018. In Weber, Davis and Morgan counties, the limit will increase from $424,100 to $453,100.
  • “House prices increased 6.8 percent, on average, between the third quarters of 2016 and 2017,” said the Federal Housing Finance Agency in a press release announcing the new limits. “Therefore, the baseline maximum conforming loan limit in 2018 will increase by the same percentage.”
  • While the government establishes a limit applicable to most areas of the country, it allows higher amounts for counties with more expensive housing. For example, the maximum loan amount is $600,300 in Salt Lake and Tooele counties and $679,650 in Summit County. These are the only counties in Utah that have limits higher than the standard $453,100.

 Jumbo

  • If you have financing needs beyond the Fannie/Freddie limits, you will need a jumbo mortgage. These loans typically have higher interest rates; however, the spread between conforming and jumbo rates has narrowed recently.
  • For jumbo loans, you need good credit (typically at least a 700 credit score), a high down payment (typically 10 to 20 percent) and not too much debt (typically not more than 43 percent of your income). Talk to several lenders to learn their specific requirements.
  • Even though home prices are rising, interest rates remain at low levels and there are are many financing options. Talk to a lender to find out more about your choices.
  • To learn about the houses available in your particular price range, talk to a local Realtor. Find a Northern Wasatch Realtor at NWAOR.com.

 

Sonya Smithing
2017 President, Northern Wasatch Association of REALTORS®