Mortgage Loans

Mortgage Loans

FHA One-Time Close Construction Loan

John Thomas April 23, 2019 Tags: , , ,
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Is a FHA One Time Close Construction Loan right for you?

Two isn’t always better than one. Let me explain.

If you’re building your house from the ground up, you’ll most likely take a construction loan followed by a permanent loan. This scenario will require you to have 2 loans, which means you’ll have 2 start dates and 2 closing dates—which means you’ll pay for 2 separate closing costs!

An FHA one-time close construction loan, however, will allow you to have your home built and financed just under one loan. It’s simpler and more cost-efficient and you end up with a FHA Loan with a 30 year fixed rate when all is said and don Keep Reading...

Mortgage Rates Weekly Update [April 14 2019]

John Thomas April 14, 2019 Tags: ,
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Mortgage Rates Weekly Update for April 14, 2019

Mortgage Rates Update for April 14, 2019 by John R. Thomas with Primary Residential Mortgage, Inc. in Newark, Delaware. Get advice on Locking or Floating your Mortgage Rate to start the week as well as the latest housing and finance news updates. John Thomas is the Branch Manager, a Delaware Loan Officer and the author of the best selling book, Your Guide to Buying Your First Home in Delaware. Call 302-703-0727 for a Rate Quote or Apply Online for Rate Quote

Mortgage Rates moved higher last week as the stock market surged. If you look at the mortgage bond chart below, you can see mortgage bonds sold off on Friday and dropped below the 25 day moving average which will now at as a ceiling of resistance. The next floor of support is the 50 day moving average. We are recommending LOCKING your mortgage rate if closing in the next 30 days as mortgage bonds have still not found a floor of support. Keep Reading...

Newark Delaware Home Buyer Seminar February 16 2019

John Thomas January 20, 2019 Tags:
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Book Cover - FTHB - 2011

Newark Delaware First Time Home Buyer Seminar

There will be a Newark Delaware First Time Home Buyer Seminar on Saturday February 16, 2019 at 10:00 AM till Noon. The seminar will last about 2 hours and each participate will be able to receive a copy of their credit report. The home buyer seminar will cover all of the basics of buying a home in Delaware. The Newark Delaware First Time Home Buyer seminar will cover FHA loans, VA loans, USDA Rural Housing Loans, First Time Home Buyer Loan Programs and the FHA 203k Rehab loans.  We will also cover the Delaware Mortgage Credit Certificate Program which is also know as the Delaware first time home buyer tax credit which give you up to $2,000 a year as a federal tax credit for every year you have the mortgage loan.

Register Now!

Call 302-703-0727 or Register Online at

The Seminar is sponsored by The Neighborhood House so each participant will receive Delaware home buyer counseling credit toward the required HUD approved home buyer counseling required for Delaware First Time Home Buyer Programs such as Delaware State Housing Authority, New Castle County, City of Newark, City of Dover, and City of Wilmington.

Each participate will receive a Credit Scoring Handbook, Delaware Home Buying Handbook, A Household Budget Calculator Worksheet and an opportunity to meet with a certified mortgage planner to be Pre-Approved to buy a home at the seminar. You will also learn importance of credit in buying a home and learn valuable tips on how to improve your credit score.

Learn what programs are available to help with down payment and closing costs. The new loan limits for conventional and FHA will be covered as well as options for borrowing 100% financing to purchase a home in Delaware at the Delaware First Time Home Buyer Seminar.

The seminar is based on the best selling book, Your Guide to Buying Your First Home in Delaware written by John R. Thomas.

What will you learn at the Newark Delaware First Time Home Buyer Seminar?

You will also learn the following at the seminar:

Valuable Tips on How to Improve Your Credit Score
How to Establish Credit if You have None
How to Budget to Afford a New Home
How to Calculate How Much Your Qualify for
How to Get Pre-Approved for a Delaware Mortgage Loan
Learn what Mortgage Programs are available for Delaware First Time Home Buyers
Learn what programs are available to help with down payment and closing costs such as a Delaware Down Payment Grant
Learn what your Delaware Mortgage Lender should be doing for you
Learn what your Delaware Real Estate Attorney should be doing for you
Learn what your Delaware Real Estate Agent should be doing for you
Learn what your Delaware Home Inspector should be doing for you
How to find the right Realtor to help you find your new home
How to shop for your new home
How to make the offer and negotiate the best price and terms
and much more!!!

Where will the Newark Delaware First Time Home Buyer Seminar Be Held? Keep Reading...

What is Mortgage Insurance or PMI?

John Thomas December 29, 2018 Tags: ,
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Mortgage Insurance

What is Mortgage Insurance or PMI?

Mortgage Insurance is an insurance policy that protects lenders against a borrower defaulting on the mortgage loan for a portion of the loss incurred by the lender.  Mortgage Insurance is sometimes termed PMI which stands for Private Mortgage Insurance.  Mortgage lenders typically do not want to lend more than 80% of the value of a home as it is too risky long term.  Mortgage insurance is used to offset the risk to the lender and allows a borrower to put down less than 20% to purchase a home so it creates a win-win scenario for lender and borrower.  If you have questions or would like to get started on a mortgage pre-approval, call 302-703-0727 or you can APPLY ONLINE

When Do I Have to Pay Mortgage Insurance?

Mortgage Insurance is requirements are dependent on the type of mortgage loan that is being used.  The requirements are different for Conventional, FHA, VA, and USDA.   The rules for how much you pay and options for buying out the mortgage insurance also depend on the mortgage loan type.  Below is summary of mortgage insurance guidelines for each loan type:

FHA Loan MI Requirements

FHA Loans require mortgage insurance on all FHA loans regardless of the amount of down payment.   The mortgage insurance factor is the same no matter what the credit score of the borrower.  For FHA 30 year fixed rate loans with less than 5% down the mortgage insurance factor is 0.85%.  If you put 5% or more down on a 30 year fixed rate FHA loan then the mortgage insurance premium factor is only 0.8%.  The mortgage insurance is required for the life of the loan for FHA loans unless you put 10% or more down.  If you put 10% or more down then the mortgage insurance will drop off after 11 years.

FHA mortgage insurance also has a special advantage in that the monthly mortgage insurance payment is re-calculated every 12 payments so the mortgage insurance payment goes down every year.

FHA also requires the borrower to pay an upfront funding fee of 1.75% which can be financed into the loan or paid in full at closing.

VA Loan MI Requirements

VA Loans or Veteran Loans do NOT require mortgage insurance which is a huge benefit of a VA Loan.  Veterans can borrower 100% financing without paying any extra monthly toward mortgage insurance because the VA guarantees the loan on behalf of the veteran.  The VA only requires the veteran to pay a funding fee which they allow to be financed into the new loan.  The funding fee amount depends on whether the veteran is active duty or reserves and whether this is the first time use of a VA loan.  If veteran has VA disability then they would be exempt from paying the funding fee.

USDA Loan MI Requirements

USDA Rural Housing Loans require the borrower to pay a monthly mortgage insurance premium based on a factor of 0.3% and it is the same regardless of credit score.  The mortgage insurance is on for the life of the loan just like FHA Loans.  USDA also requires a upfront guarantee fee of 1% which can be financed into the loan.  USDA will allow 100% financing so the borrower needs 0% down payment.

Conventional Loan MI Requirements

Conventional Loans require mortgage insurance to be obtain from a private company hence why it is called private mortgage insurance or PMI for short.  Conventional loans are the only ones that provide risk based pricing for mortgage insurance. Risk based pricing means your credit scores affects how much you will pay for your private mortgage insurance.  The higher the credit score the cheaper the PMI and the lower the credit score, the more expensive the PMI.

Conventional loans do NOT charge any upfront funding fees or guarantee fees like the government insured loans.  The mortgage insurance is also cheaper if put more money down and no mortgage insurance is required if put down at least 20%.  The PMI will also drop off automatically when the loan balance reaches 78% of the original value or purchase price as long as it has been two years.

What Types of Mortgage Insurance Are Available?

There are three types of mortgage insurance that can be used when mortgage insurance is required:

  • Borrower Paid Monthly Mortgage Insurance (BPMI)
  • Lender Paid Monthly Mortgage Insurance (LPMI)
  • Single Premium Mortgage Insurance (SPMI)
  • Keep Reading...

    Understanding Your Debt to Income Ratio (DTI)

    John Thomas December 27, 2018 Tags: ,
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    Deb to Income Ratio

    Understanding your Debt to Income Ratio (DTI)

    Your Debt to Income Ratio is used by mortgage lenders to determine how much money you can borrower for the purchase or refinance of a home.  Your Debt to Income Ratio is abbreviated as DTI for short.  The DTI is a comparison of your gross monthly income to your monthly liability payments.  Mortgage Lenders use two Debt to Income ratios when determining if you qualify for a mortgage loan: Housing DTI and Total DTI.  If you have questions about qualifying for a mortgage loan or would like to get pre-approved, call 302-703-0727 or APPLY ONLINE.

    Your Housing Debt to Income Ratio

    Your housing Debt to Income Ratio is calculated by taking your gross monthly income and comparing it to your new mortgage payment of principle, interest, property taxes, homeowners insurance and mortgage insurance if applicable (PITI & MI).  Below is sample calculation:

    Gross Monthly Income = $5,000

    New Mortgage Payment of (PITI & MI) = $2,000

    Formula =  PITI / Gross Income  x 100%

    $2,000 / $5,000 = 0.4 x 100 = 40%

    In this example the housing payment is 40% of the gross monthly income so DTI = 40%

    Your Total Debt to Income Ratio

    Your Total Debt to Income Ratio is calculated by comparing your gross monthly income to your monthly housing payment as well as all the other monthly liabilities included on your credit report as well as any other obligations such as judgement payments, tax liens and/or child support or alimony.  Below is sample calculation:

    Gross Monthly Income – $5,000

    New Mortgage Payment of (PITI & MI) = $2,000

    Total Other Liabilities from Credit Report – $1,000

    Formula = (Housing Payment + Other Liabilities) / Gross Monthly Income x 100

    ($2,000 + $1,000) / $5,0000 = 0.60 x 100 = 60%

    In this example the total debt to income ratio is 60%.  This means that 60% of the gross monthly income is going to be spent on the monthly mortgage payment plus other required monthly payments from liabilities on the credit report.

    What is the Maximum Debt to Income Ratio to Qualify for a Mortgage?

    When determining the allowable debt to income ratio for qualifying for a mortgage there are several factors that determine what your ratios can be.  The following factors affect the maximum allowable DTI:

  • Loan Type
  • Credit Score
  • Automated Underwriting Approval
  • Down Payment
  • Cash Reserves
  • Down Payment Assistance Program
  • Keep Reading...

    Delaware FHA Loan Limits for 2019

    John Thomas December 22, 2018 Tags: ,
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    Delaware FHA Loan Limits

    Delaware FHA Loan Limits for 2019

    Delaware FHA Loan Limits for 2019 were raised in all three counties of Delaware effective January 1, 2019.    The Federal Housing Administration increased its mortgage loan limits by almost 7% for the new year, mirroring the increase in conventional loans.  The new base loan limit maximum was increased from $294,515 to $314,827 for a single unit home.  In some high-cost areas  of the country, the maximum loan limit was increased to $726,525.  The department of Housing and Urban Development (HUD) released Mortgagee Letter 2018-11 on December 14, 2018 which increased the loan limits for 2019 nationwide for all Forward Mortgage loans insured by FHA.  Call 302-703-0727 to apply for a Delaware FHA Loan or get started online at

    The FHA national low-cost area mortgage loan limits are set at 65 percent of the national conforming limit of $484,350 for a one unit property.  The new loan limits nationally are as follows:

    One Unit – $314,827

    Two Unit – $403,125

    Three Unit – $487,250

    Four Unit – $605,525

    What determines the FHA Loan Limits for each County?

    The Federal Housing Administration (FHA) calculates the mortgage loan limits based on the median home prices in accordance with the National Housing Act.  FHA’s single family mortgage loan limits for forward mortgages are set using Metropolitan Statistical Areas (MSA) and county areas.  FHA publishes updated limits effective for each calendar year.  FHA sets the maximum FHA Loan limits at or between the low-cost area and high-cost area limits based on the median home prices for the area.

    What are the New Delaware FHA Loan Limits for 2019?

    Delaware has three counties: New Castle County, Kent County, and Sussex County.  The maximum Delaware FHA loan limit is different in all three counties.  Below is chart showing the maximum loan limit in each county:

    Single Family FHA Loan Limits for 2019:

    New Castle County Delaware has a maximum FHA Loan limit of $402,500

    Kent County Delaware has a maximum FHA loan limit of $314,827

    Sussex County Delaware has a maximum FHA loan limit of $336,950

    The FHA Loan limits are the same for a standard Delaware FHA Loan as well as a Delaware FHA 203k Loan.  The FHA Reverse Mortgage Loan limits are different that than the forward mortgage limits.

    What are the FHA Loan Limits for High Cost Areas?

    The FHA High Cost Area Loan Limits are set at 150 percent of the national conforming loan limit of $484,350 for a one unit property.  Below are the limits for properties with 1-4 units:

    FHA Loan limit One Unit – $726,525

    FHA loan limit Two Unit – $930,300

    FHA Loan limit Three Unit – $1,124,475

    FHA Loan limit Four Unit – $1,397,400

    How Do You Apply for a Delaware FHA Loan?

    You can apply for a Delaware FHA Loan by calling 302-703-0727 or you can APPLY ONLINE with the John Thomas Team with Primary Residential Mortgage.


    Cost of Waiting to Purchase a Home

    John Thomas December 3, 2018 Tags:
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    Cost of Waiting

    Cost of Waiting to Purchase a Home

    If you are thinking of waiting to purchase a home, think again!  There is a definite cost of waiting to purchase a home.  Home ownership has significant financial benefits but there is still a significant number of renters and people living with family that are delaying investing in one of the biggest sources of long term wealth.  With mortgage interest rates and home prices expected to continue to increase, waiting to purchase a home is definitely going to cost more money and even more than most would think.  If you are interested in getting started right away on getting pre-approved for a mortgage, call us at 302-703-0727 or APPLY ONLINE

    How Much is the Cost of Waiting to Purchase a Home?

    In order to calculate how much the cost of waiting is to purchase a home, we need to look at an example.  Below is an example of someone who could theoretically purchase a home today using a FHA loan for the following information:

    Purchase Price – $225,000

    Loan Type – FHA 30 Year Fixed

    Required Down Payment – 3.5% = $7,875

    Interest Rate – 5.0%  (APR – 6.09%)

    Annual Appreciation Rate – 2.31% project for 1st year

    If they wait just 6 months there is a cost of waiting of $4,166 between the increase in mortgage payment and home price appreciation of the home.  The chart below demonstrates the cost of waiting to purchase for 6 months, 1 year, 2 years, and 3 years based on an annual appreciation rate for New Castle County, Delaware.

    You can clearly see that waiting 3 years could cost you $31,533 between increased mortgage payment and lost appreciation on the home.  Waiting even longer only costs you more and more each year that you wait. So stop renting and start owning today.  If you need a plan, then sign up for the next Home Buyer Seminar

    Whose Mortgage Do You Want to Pay?

    The real question is not whether you want to make a mortgage payment or not, it is Whose mortgage payment do you want to make, yours or your landlord’s mortgage payment?  There is another cost to waiting to purchase the home, it is the amount of rent you are paying until your purchase the home which is essentially how many checks do you want to write toward your landlord’s mortgage before you pay your own mortgage.  Lets assume you are currently renting a home for $1,500 per month in Rent.  If you wait 6 months to purchase a home, you will have spent $9000 on rent that didn’t go toward your own mortgage payment or your own equity on your home.  The table below shows you what it costs you to wait in the rent you pay each year:

    Renting for five years costs you a total of $95,466!!  You have nothing to show for this as you don’t own anything, you received no asset appreciation, no tax deductions, basically nothing to show for spending almost $100,000.

    What Would Be My Total Cost of Waiting Over 3 Years?

    If we continue to use our example above of a $200,000 purchase in New Castle County Delaware with a FHA loan, we can show everything that it costs you if you wait.  The first tabled showed us there is a cost of $35,912 in lost appreciation and increased mortgage rate.  If we add the money spent on rent over three years from the 2nd table above that is $55,542 spent on rent instead of your own mortgage payment.  If you were to consider that if you were a first time home buyer and were eligible for the first time home buyer tax credit which would provide $2,000 a year as a federal tax credit then over three years there is a $6,000 tax credit benefit that is lost.  There is an initial cost to enroll of about $2,000 so essentially losing $4,000 of tax credit.  If we add them all up below you can see the total cost to wait for just 3 years:

    Lost Appreciation & Amortization – $31,533

    Money Lost on Rent – $55,542

    Lost Tax Credit – $4,000

    Total Cost of Waiting 3 Years – $91,075

    Cost of Waiting – Lost Rate of Return on Your Money

    If you wait to invest in purchasing a home you will lose out on the rate of return (ROI) that the money could be returning.  When you put as little as 3.5% down plus closing costs on a home you can see below that your rate of return can be enormous just over a 5 year period.  Your appreciation minus your closing costs shows that after paying back your closing costs in appreciation, you are still ahead $33,235 after 5 years which is a rate of return of 422%!

    Don’t Wait Get Pre-approved for a Mortgage Today and Start Shopping!

    Take action and start building long term wealth by investing in your future.  Call the John Thomas Team with Primary Residential Mortgage at 302-703-0727 to speak to one of our licensed team members who can get you started on a mortgage pre-approval.  You can also get started online at