Property Transfers: Government-backed loans for first-time homebuyers harder to secure
This article is the second in a three-part series examining the challenges for entry-level homebuyers.Part 2 focuses on loan availability.
With average home prices rising across the tri-county coastal Georgia region to between $316,300 and $365,250, according to real estate website Zillow, buyers in the housing market are facing home prices 8-9% above 2022 and 30-year interest rates between 6.75-7% – and that’s if their credit is rated excellent, 720 or above.
For many in the entry-level market, that home price may be out of reach, considering most first-time homebuyers would need to make at least $86,000 to not be cost-burdened where the monthly mortgage exceeds 33% of gross monthly income.
Federal Housing Administration (FHA) and Veterans Affairs (VA) loans have long-been designed to help entry-level homebuyers get into their first homes, said Alison Harris, leader of the Harris Home Team at Keller Williams Realty Coastal Area Partners. But those loans are getting harder to come by.
Part One: 'Mortgage-lockup effect' impacts availability of homes on the market
Across Bryan, Chatham and Effingham counties, FHA and VA loans are limited to no more than $498,257. FHAs require at least 3.5% down payment with up to 6% seller contribution, explained Harris, and they now come with the requirement to hold mortgage insurance (PMI) for the life of the loan.
"That didn't always used to be the case," said Michael Caputo, mortgage advisor with First Coast Mortgage.
PMI can add between .22% and 2.25% to the cost of a mortgage, depending upon the total loan amount and the buyers' credit score. That amount can add a lot over the life of a 30-year mortgage.
VA loans have no such requirement, but buys must have served in a branch of the military to even qualify. With Fort Stewart-Hunter Army Air Field in the region, many buyers use the VA loans because they offer 2.5-3% rates and can be used on more than one property.
USDA-backed loans for rural areas used to come into play more often in areas of Bryan and Effingham counties, said Caputo, but the sprawl driven by Hyundai and the Georgia Ports is turning those areas into subdivisions for single- and multi-family housing.
"FHA used to be my bread and butter," said Caputo. "and now it's really hard to get FHA loans accepted. I think a lot of it has to do with minimum property standards, and that why these [numbers] are going down, in addition to the regular home inspections that are going to be done by the home inspector, the appraiser on all these [FHA, VA, USDA] loans also has the ability to ask for repairs. So, you could get an appraisal that's good on value that is subject to the following being done. Then those items need to be negotiated, or pre-negotiated, into the contract, and that can be an additional hurdle."
With Savannah's stock of historic and holder homes, the list of items to repair could be long and costly. And over the last few years, all-cash offers with no contingencies have pushed the number of FHA loans issued lower on the scale, which means entry-level and first-time buyers have a harder time breaking into the market.
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This article originally appeared on Savannah Morning News: bryan chatham effingham county ga property transfers for May 7 2024
