The Virginian-Pilot, September 30 - THANKS TO FACTORS like student debt and tougher rules for homebuying in a post-housing bubble economy, millennials have struggled mightily to buy their first homes.
I have seen it with my millennial clients time and again. Sometimes the smallest blemish on someone’s financial record is the reason they can’t qualify for a home.
Fortunately, the Virginia Housing Development Authority has recognized the downward trend and taken steps to make it easier for first-time homebuyers to obtain a VHDA mortgage. On Sept. 1, the VHDA made several announcements that should delight any 20- or 30-something who is tired of renting.
First, VHDA lowered the minimum credit score on its conventional loan program from 660 to 640. The decision means more people may be able to qualify. The benefit of a conventional loan is that the mortgage insurance may fall off when you reach 20 percent equity in the property. Note: The credit score reduction to 640 is only on the VHDA FNMA Reduced MI (mortgage insurance) program.
In addition, VHDA increased its maximum household limit to $83,200 for a home with two or fewer people and $97,000 for three or more people (dollar amounts for the Norfolk-Va Beach-Newport News area). The change will again help more people qualify and also signals that our economy is improving.
Who qualifies for a VHDA loan? The program is designed for first-time homebuyers who meet the income and credit requirements. The updates show the state is serious about helping young people buy their first homes. Note that the FNMA Reduced MI & FNMA No MI do not require you to be a first-time homebuyer. You can already own other properties.
The VHDA changes are part of a wider shift in the mortgage industry to help more people qualify. In July, Fannie Mae announced plans to lessen its debt-to-income restrictions. Fannie Mae raised its DTI ceiling from the current 45 percent to 50 percent.
The DTI change does not impact VHDA homebuyers but does play a factor in other loan programs.
Even though the rules have loosened, it’s still important to be mindful of your financial activity. The best course of action is to pay off collections and judgments as well as save each month for a down payment and reserves.
I also encourage my clients to create a monthly budget to understand where they spend their money and how they can cut back (e.g., a large part of your budget is from eating out).
A monthly budget, paying off debts and benefiting from the new mortgage rules could help you make homebuying a reality this fall or in 2018.
Shikma Rubin is a loan officer at Tidewater Home Funding in Chesapeake (NMLS #1114873). She specializes in lending for the millennial generation. Sign up today for Rubin’s free webinar, “First-Time Homebuyer Crash Course,” at shikmarubin.com/webinar. You can reach her at email@example.com or 757-490-4726.