Every November, the Federal Housing Finance Agency (FHFA) announces new conforming loan limits for the upcoming year. For homebuyers and real estate agents, understanding these limits is crucial for navigating the homebuying process and making informed financial decisions. Whether you’re purchasing your first home or helping clients find the perfect property, conforming loan limits offer a roadmap for affordable financing.

  • Conforming loan limits are the maximum amounts Fannie Mae and Freddie Mac will back, updated annually by the FHFA to reflect housing market trends.
  • New for 2025: The baseline limit is $806,500, with a high-cost area limit of $1,209,750, now available for use.
  • Higher limits mean more borrowers qualify for competitive mortgage rates without needing jumbo loans.
  • High-cost areas like Hawaii, Alaska, and parts of California and others have elevated limits to match their unique housing markets.
  • Understanding these limits helps homebuyers and agents navigate financing options and streamline the homebuying process.

What Are Conforming Loan Limits?

The Role of the Federal Housing Finance Agency (FHFA)

When you get a mortgage on a home, there’s a limit to how much you can borrow. On an individual level, this limit is influenced by your creditworthiness and how much you can afford to spend each month (credit score, and Debt-to-income (DTI) ratios). However, at the industry level, lenders are also limited by how much they can lend if they want their loans to conform to the standards set forth by the Federal Housing Finance Agency (FHFA).

Conventional loans that meet these standards are called conforming loans, and their maximum amounts—known as conforming loan limits—are set annually by the FHFA. These limits represent the maximum loan amounts that Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) at the heart of the U.S. housing finance system, are willing to securitize. By adhering to these limits, lenders operate within safe and standardized boundaries.

Staying within conforming loan limits provides significant advantages. For homebuyers, it means access to loans backed by Fannie Mae and Freddie Mac, which typically come with more competitive interest rates compared to non-conforming or jumbo loans. For real estate agents, understanding these limits is crucial for offering clients accurate guidance and helping them navigate financing options effectively.

   Related Topic: Jumbo Loans

How Are Conforming Loan Limits Determined?

The Role of the Federal Housing Finance Agency (FHFA)

The FHFA plays a pivotal role in setting conforming loan limits. Established under the Housing and Economic Recovery Act (HERA) of 2008, the FHFA reviews these limits annually to reflect changes in the U.S. housing market. Adjustments typically take effect in January, but the limits are announced every November, giving lenders and borrowers time to prepare.

The baseline conforming loan limit is determined based on the average U.S. home price. For high-cost areas, the FHFA allows higher limits to accommodate local housing market variations.

The FHFA House Price Index Report

The FHFA House Price Index (HPI) Report plays a crucial role in determining whether conforming loan limits should be adjusted, as it tracks changes in home prices nationwide. While these limits can rise to reflect increasing home values, they cannot decrease, even if prices drop. This adjustment process ensures more borrowers can access affordable financing options, keeping homeownership within reach for many.

Related Topic: Prevent Annoying Credit Offers before starting the mortgage process – Opt out at www.optoutprescreen.com

The Impact of Conforming Loan Limits on Homebuyers

1. Access to Credit

Increased conforming loan limits expand credit availability, allowing more homebuyers to qualify for loans within the GSEs’ parameters. For first-time homebuyers, this can mean the difference between qualifying for their dream home or needing to settle for less.

2. Competitive Mortgage Rates

Conforming loans backed by Fannie Mae and Freddie Mac often come with lower interest rates compared to jumbo loans. Over the life of a 30-year mortgage, even a slight reduction in the interest rate can save tens of thousands of dollars.

3. Real Estate Agent Guidance

Real estate professionals rely on conforming loan limits to streamline the homebuying process. Agents can confidently advise clients on which homes fall within their financial reach based on current loan limits.

Historical and Current Conforming Loan Limits

Examining past loan limits provides valuable insights into trends in home prices and housing affordability.

Year

Baseline conforming loan limits

High-cost area loan limits
2021 $548,250 $822,375
2022 $647,200 $970,800
2023 $726,200 $1,089,300
2024 $766,550 $1,149,825
2025 $806,500 $1,209,750

High-cost areas, including Alaska, Hawaii, Guam, and the U.S. Virgin Islands, have unique limits due to their elevated property values. If you’re considering buying in one of these regions, understanding these thresholds is essential.

What Makes High-Cost Areas Unique?

Approximately 100-200 counties across the U.S. are classified as high-cost areas. These regions experience elevated home prices due to demand, geography, or local market trends. The higher conforming loan limits for these areas make homeownership more accessible.

For instance, in Hawaii or California’s Bay Area, where median home prices often exceed $1 million, the increased loan limits provide flexibility for borrowers without requiring them to pursue riskier jumbo loans.

When Are 2025 Loan Limits Available?

Good news for homebuyers: the new 2025 conforming loan limits are already available. The baseline limit of $806,500 and the high-cost area limit of $1,209,750 can be used immediately, even before the new year.

This proactive approach by lenders ensures borrowers can take advantage of the higher limits to secure financing sooner rather than later.

Reach out to learn how conforming loan limits affect homebuying or refinancing for you!

Why Understanding Conforming Loan Limits Matters

For homebuyers and real estate agents alike, understanding conforming loan limits is more than just knowing a number. These limits:

  • Provide clarity on borrowing potential.
  • Help identify properties within budget.
  • Facilitate access to better mortgage terms and lower interest rates.

Whether you’re purchasing in a high-cost area or staying within the baseline limits, these thresholds offer a foundation for smart financial decisions.

Ready to take advantage of today’s conforming loan limits? Getting pre-approved is the key to understanding which loan options—whether conventional, FHA, VA, USDA, or even Jumbo—are best for you. Let’s talk about your goals and map out the next step toward your dream home!

 

Frequently Asked Questions

The concept of Conforming Loan Limits began in 1970 with the Emergency Home Finance Act, which set the first limit at $33,000 for loans purchased by Fannie Mae and Freddie Mac. This act also introduced higher limits for high-cost areas such as Alaska, Hawaii, and Guam, and was later expanded to include the U.S. Virgin Islands.

Congress periodically raised these limits, tying them to housing price changes starting in 1980. The Housing and Community Development Act that year also introduced higher limits for multi-unit properties. By 1992, the term “conforming loan limit” was formally established.

In 2008, the Housing and Economic Recovery Act (HERA) granted the Federal Housing Finance Agency (FHFA) authority to adjust the limits annually based on changes in the national housing price index. These adjustments ensure the CLL reflects market conditions, with separate limits set for one- to four-unit properties.

No, VA loan limits are no longer tied to FHFA Conforming Loan Limits. Until January 1, 2020, VA loan limits matched the FHFA limits. However, the Blue Water Navy Vietnam Veterans Act of 2019 removed this restriction. As of January 1, 2020, veterans can obtain VA-backed home loans with no down payment, regardless of loan amount, in all areas. For more details, visit the VA’s Blue Water Navy Act page.
Learn More About VA Loans.

No, FHA loans are not directly limited by FHFA Conforming Loan Limits but are influenced by them. FHA loan limits are determined based on median house prices in accordance with the National Housing Act. These limits fall between the low-cost area limit, set at 65% of the national conforming loan limit, and the high-cost area limit, set at 150% of the national conforming loan limit. For more details, refer to the applicable FHA Mortgagee Letter.

The USDA’s Rural Housing Services (RHS) has its own loan limits and requirements that vary depending on the program. For instance, the Single Family Housing Guaranteed Loan Program is for properties located in rural areas and has eligibility criteria based on factors like household size, income (below 115% of the area median), owner occupancy, and borrower immigration status. On the other hand, the Single Family Housing Direct Home Loan Program sets loan limits at no more than 80% of the local HUD 203(b) loan limit values. 
Learn more about USDA Loans

Ready to see what you can afford? Contact us today to discuss your home-buying goals and take your first step toward homeownership!

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Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. The pre-approval may be issued before or after a home is found. A pre-approval is an initial verification that the buyer has the income and assets to afford a home up to a certain amount. This means we have pulled credit, collected documents, verified assets, submitted the file to processing and underwriting, ordered verification of rent and employment, completed an analysis of credit, debt ratio and assets, and issued the pre-approval. The pre-approval is contingent upon no changes to financials and property approval/appraisal. *Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales price cannot exceed appraised value. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan. Offers may vary and are subject to change at any time without notice. Interest rates are subject to change daily and without notice. LTV’s can be as high as 96.5% for FHA loans. FHA minimum FICO score required. Fixed rate loans only. W2 transcript option not permitted. For USDA loans, 100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable. *Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales price cannot exceed appraised value.

More than 21 million Veterans and service members live in the U.S., yet only about 6% have taken advantage of a VA home loan in the past five years. This percentage could be significantly higher if more Veterans understood the full scope of benefits this program offers.

Many Veterans and their families either aren’t aware of these advantages, believe the process is too complex, or haven’t worked with a lender knowledgeable about VA loans. Let’s clear the air and explore why a VA loan is one of the best mortgage options available.

  • Zero Down Payment: VA loans let eligible Veterans, active-duty service members, and some surviving spouses buy a home without needing a down payment.
  • Lower Costs: No private mortgage insurance (PMI) and often lower interest rates make VA loans more affordable than many other loan types.
  • Flexible Eligibility: You can reuse your VA loan benefit and even refinance with VA loan options like Streamline or Cash-Out refinancing.
  • Wide Property Options: Buy single-family homes, VA-approved condos, multi-unit properties (up to four units), or even manufactured homes (with land).
  • Exclusive Benefits: Protections like no loan limits (with full entitlement), seller-paid closing costs, and financial counseling if you face payment difficulties make VA loans uniquely supportive.

1. No Down Payment Required & No Mortgage Insurance

One of the standout features of a VA loan is the option to purchase a home with $0 down. This is a game-changer for many Veterans who may struggle to save enough for a down payment, especially with rising home prices.

For comparison, most other mortgage options require a down payment of at least 3.5% to 5%, translating to $8,750–$12,500 on a $250,000 home. With a VA loan, that upfront cost disappears, allowing Veterans to enter homeownership sooner.

Additionally, VA loans eliminate the need for private mortgage insurance (PMI). For other loans, PMI typically adds $100–$200 per month to your mortgage payment if your down payment is less than 20%. This means VA loans save Veterans hundreds of dollars monthly.

Pro Tip: The VA funding fee replaces PMI and can be rolled into the loan amount, so you won’t need to pay it upfront.

 

2. VA Funding Fee Exemptions for Disabled Veterans

If you have a service-related disability rating of at least 10%, you’re exempt from the VA funding fee. This can save thousands of dollars upfront and makes the VA loan even more affordable.

For Veterans who aren’t exempt, the VA funding fee is typically financed into the loan, allowing you to avoid an out-of-pocket expense at closing. The fee varies based on your service history and loan type, ranging from 0.5% to 3.6%.

Quick Fact: Veterans receiving VA disability compensation automatically qualify for a funding fee exemption.


3. The VA Loan Benefit Never Expires

One of the lesser-known benefits of a VA home loan is its reusability. Veterans can use this benefit multiple times throughout their lifetime, provided they meet certain requirements.

Here’s how:

  • Selling your home: If you sell a home purchased with a VA loan and pay off the loan in full, your entitlement is restored.
  • One-time restoration: If you’ve paid off your VA loan but still own the home, you may be eligible for a one-time restoration of your entitlement.

Even Veterans who served decades ago can still use their VA loan benefit. Eligibility is based on service duration and time period, so it’s worth checking your status.

To verify your eligibility: Obtain your DD Form 214 and work with a VA-approved lender or access the VA’s eBenefits portal.


4. Surviving Spouses Are Eligible

Unremarried spouses of deceased service members may also qualify for a VA loan. This benefit offers them financial support during a challenging time.

Eligibility applies if the service member:

  • Died in the line of duty.
  • Passed away due to a service-related disability.
  • Was missing in action or a prisoner of war for at least 90 days.

Surviving spouses are also exempt from the VA funding fee, providing additional savings.

Related Topic: Prevent Annoying Credit Offers before starting the mortgage process – Opt out at www.optoutprescreen.com

5. VA Home Loan Interest Rates Are Typically Lower

VA loans often feature interest rates about 0.25% lower than conventional loans, saving you money over the life of the loan. These competitive rates are possible because the VA guarantees the loan, reducing the lender’s risk.

Even Veterans with less-than-perfect credit scores may qualify for these favorable VA loan rates, making homeownership more accessible.

Did You Know? VA loans also boast some of the lowest foreclosure rates, a testament to Veterans’ commitment to homeownership.

6. Flexible Credit and Bankruptcy Guidelines

VA loans are more forgiving than conventional loans when it comes to credit requirements. There’s no minimum credit score required by the VA, though individual lenders may have their own criteria.

Even Veterans with a past bankruptcy or foreclosure can qualify, as long as they’ve reestablished credit for two years. This flexibility ensures that financial setbacks don’t prevent Veterans from achieving homeownership.

Important Note: If a previous foreclosure involved a VA loan, the remaining amount owed must be repaid to restore eligibility.

7. Wide Variety of VA Loan Options

The VA loan program isn’t just for purchasing a home. Veterans can choose from a variety of options tailored to their needs:

 Types of VA Loans

  1. VA Home Purchase Loan: For buying a primary residence with no down payment.
  2. VA Cash-Out Refinance: Tap into your home equity for expenses like home improvements or tuition.
  3. VA Streamline Refinance (IRRRL): Lower your interest rate quickly without an appraisal or extensive documentation.
  4. VA Renovation Loan: Combine the cost of a home purchase with necessary repairs or upgrades.
  5. Native American Direct Loan (NADL): For Native American Veterans purchasing or improving homes on federal trust land.

VA loans are more forgiving than conventional loans when it comes to credit requirements. There’s no minimum credit score required by the VA, though individual lenders may have their own criteria.

Even Veterans with a past bankruptcy or foreclosure can qualify, as long as they’ve reestablished credit for two years. This flexibility ensures that financial setbacks don’t prevent Veterans from achieving homeownership.

 

8. VA Loans Are Available from Private Lenders

While the VA backs these loans, they’re issued by private lenders, such as banks, credit unions, and mortgage companies. This allows Veterans to enjoy competitive terms and the convenience of working with a local lender.

Quick Tip: The VA guarantee ensures lenders will be repaid, enabling them to offer better rates and terms to Veterans.

 

9. Buy Condos, Multi-Unit Homes, and More with a VA Loan

VA loans can be used to purchase a variety of properties, including:

  • Single-family homes.
  • Multi-unit properties (up to four units).
  • Condominiums approved by the VA.

Condos are particularly attractive for first-time homebuyers, offering affordability and access to desirable locations.

Search for VA-approved condos: Use the VA’s online condo search tool to explore approved communities.

 

The Bottom Line:

Should I get pre-approved for a VA Loan?

VA loans offer a unique combination of affordability, flexibility, and financial protections, making them one of the most valuable benefits available to those who have served our country. With no down payment, competitive interest rates, and no PMI, they help Veterans and their families achieve homeownership without the traditional financial barriers. Beyond the cost savings, VA loans offer peace of mind through borrower-friendly terms, such as flexible property options and protections for those facing financial hardship. Whether you’re purchasing your first home, refinancing, or upgrading to meet your family’s needs, VA loans are a powerful tool to help you build a stable and secure future. If you’re eligible, it’s worth exploring how a VA loan can make your homeownership dreams a reality.

Ready to make the most of your VA loan benefits? Getting preapproved is the first step toward unlocking the advantages of this incredible program. Reach out to us today to start your journey to homeownership with expert guidance and a smooth, stress-free process. Let’s get you one step closer to your dream home!

 

Frequently Asked VA Loans

A VA loan is a mortgage program created by the U.S. Department of Veterans Affairs to help Veterans, active-duty service members, and certain surviving spouses buy or refinance a home. Eligibility typically requires meeting one of the following conditions:

  • Serving at least 90 consecutive days during wartime.
  • Serving at least 181 consecutive days during peacetime.
  • Completing six years of service in the National Guard or Reserves.
  • Being the un-remarried surviving spouse of a service member who died in the line of duty or as a result of a service-connected disability.

Your lender can help confirm eligibility by obtaining your VA Certificate of Eligibility (COE).

No, one of the biggest benefits of a VA loan is the option to buy a home with no down payment, making homeownership more accessible to Veterans who may not have significant savings.

The VA funding fee is a one-time payment that helps keep the VA loan program running without requiring taxpayer funding. This fee is based on your loan amount, type of loan, and whether it’s your first time using your VA loan benefit.

For example:

  • First-time use with no down payment: 2.3% of the loan amount.
  • Subsequent use with no down payment: 3.6%.

If you have a service-related disability, you may be exempt from paying this fee. Additionally, the funding fee can be rolled into the loan amount instead of being paid upfront. – Source: VA.gov

Yes, VA loans offer several refinancing options:

  • VA Streamline Refinance (IRRRL): Helps lower your interest rate or monthly payment with minimal paperwork and no appraisal required.
  • VA Cash-Out Refinance: Lets you tap into your home equity to pay for expenses or refinance a non-VA loan into a VA loan.

Absolutely! The VA loan benefit is reusable as long as you meet the eligibility requirements and pay off any previous VA loan. You can also restore your benefit if you sell your home and pay off the loan completely.

No, VA loans are available to eligible Veterans and service members, whether they’re buying their first home or their fifth. There’s no limit to how many times you can use your VA loan benefit, provided you still qualify.

VA loans are intended for primary residences, meaning the home you plan to live in full-time. You cannot use a VA loan to purchase a vacation home or investment property.

VA loans can be used to buy a variety of property types, including:

  • Single-family homes.
  • Condos (must be in a VA-approved community).
  • Multi-unit properties (up to four units, as long as you live in one of them).
  • Manufactured homes (with land, and subject to lender approval).

The VA does not set a specific credit score requirement, but most lenders do. Typically, you’ll need a credit score of at least 580-620 to qualify. However, VA loans are more flexible with credit standards compared to conventional loans, making them accessible to borrowers with lower scores.

The VA provides financial counseling to borrowers who are struggling with payments. Additionally, because VA loans tend to have lower foreclosure rates, lenders may be more willing to work with you to find a solution, such as loan modification or repayment plans.

If you have full VA entitlement, there are no loan limits, meaning you can borrow as much as a lender approves without a down payment. However, lenders will still evaluate your income, credit, and debt-to-income ratio to determine how much they’re willing to lend.

Yes, VA loans allow sellers to contribute to the buyer’s closing costs, up to 4% of the loan amount. This can include paying off debt to help the buyer qualify or covering prepaid expenses like property taxes and homeowners insurance.

Yes, VA loans come with a built-in Escape Clause that protects buyers. If the home’s appraised value is lower than the purchase price, you can back out of the deal without losing your earnest money deposit.

 

Ready to see what you can afford? Contact us today to discuss your home-buying goals and take your first step toward financial freedom.

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Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. The pre-approval may be issued before or after a home is found. A pre-approval is an initial verification that the buyer has the income and assets to afford a home up to a certain amount. This means we have pulled credit, collected documents, verified assets, submitted the file to processing and underwriting, ordered verification of rent and employment, completed an analysis of credit, debt ratio and assets, and issued the pre-approval. The pre-approval is contingent upon no changes to financials and property approval/appraisal. *Veterans Affairs loans require a funding fee, which is based on various loan characteristics. Sales price cannot exceed appraised value. Refinancing an existing loan may result in the total finance charges being higher over the life of the loan. Offers may vary and are subject to change at any time without notice. Interest rates are subject to change daily and without notice. *On an Interest Rate Reduction Refinance Loan (IRRRL) the Veterans Affairs does not require an appraisal, but NFM Lending may require a drive-by-appraisal. Income documentation is not required, but source of income must be verified. **Purchases only, must have Automatic Underwriting System (AUS) approval. No cash-out under 600. †Sales price cannot exceed appraised value. ††In a purchase transaction, reasonable closing costs may be paid by the seller, and the program is available with no points depending on credit profile, collateral, and current mortgage history.

Buying a home is an exciting milestone, but understanding how much house you can afford is essential before diving into the market. Determining the right monthly payment goes beyond just your salary—factors like debt, credit score, available down payment, and current mortgage rates all play a role in shaping your budget. In this article, we’ll help you assess affordability, including tips for using a Home Affordability Calculator to estimate your target range within your monthly budget. With these insights and our mortgage resources, you’ll be ready to confidently start your journey to financial security and generational wealth.

  • Use our Home Affordability Calculator: Start with a home affordability calculator, considering factors like income, debts, and down payment to estimate a realistic home-buying budget.
  • Debt-to-Income (DTI) Ratio & 28/36% Rule: Aim to keep housing costs below 28% of gross income and total debts under 36%. Lower DTI ratios may help secure better loan terms.
  • Plan for Upfront Costs: Budget for down payments, closing costs, and inspections, plus explore down payment assistance and gift funds if available.
  • Consider Additional Costs: Monthly expenses like property taxes, utilities, insurance, maintenance, and repair costs are important for realistic budgeting.
  • Impact of Mortgage Rates and Credit Score: Higher mortgage rates and lower credit scores can significantly increase monthly payments, so improving credit can improve affordability.
  • Focus on Personal Timing: Decide based on your personal financial stability, future plans, and readiness to plant roots—not just market conditions.

Home Affordability Calculator: Start by Crunching the Numbers

A home affordability calculator is a quick and helpful tool to get started. With just a few details—income, debts, and down payment—this snapshot can be a great starting point to identify a realistic target for your home-buying journey.

Click to check out our Home Affordability Mortgage Calculator

When calculating your own numbers, be sure to factor in:

Gross Income: Your annual salary before taxes.

Your gross income is the foundation of how much home you can comfortably afford. Include all earnings before taxes, bonuses, freelance income, retirement payouts, etc.

Debts: Monthly Payment Obligations

Debts like credit cards, car loans, child support or student loans are all factors in how much home you can comfortably afford.

Down Payment: Upfront Investment

Your down payment can lower your loan amount, and therefore your monthly mortgage. Higher down payments may also lead to better loan terms like interest rate.

With our calculator, you can play with different scenarios to see what factors affect your homebuying power.  From there, we can discuss the details and work together to the right loan from different programs and options available to you!

 

How Much Home Can I Afford with My Salary?

Calculating your budget doesn’t only involve monthly payments; it’s about choosing a payment level that fits comfortably in combination with your lifestyle. Every person’s life is completely different, and so are their finances. Are you single? Do you have a family? Divorced? Are you retired? Do you have a lot of debt? No debt? You get the point!

Here’s an example:

Say you earn $100,000 annually, or $8,333 per month before taxes and deductions. Based on the 28% rule, a reasonable full monthly mortgage payment could be $2,333 (including mortgage, insurance, and taxes). You’ll need to consider other financial goals to ensure you’re not overextending yourself and can continue saving.

Mortgage Affordability: Your Debt-to-Income Ratio and the 28/36% Rule

Lenders use your debt-to-income (DTI) ratio to assess your ability to handle monthly mortgage payments. Actual loan guidelines (criteria of who qualifies for each type of loan) may allow for more debt, as high as 50% in some cases. A good rule of thumb for affordability is the 28/36% rule: housing costs should ideally be no more than 28% of your gross monthly income, while your total monthly debts—including housing—should stay below 36%.

For Example: If your monthly income is $4,500, a comfortable housing payment target would be $1,260 (28% of $4,500). Adding in other monthly debts, your total should ideally remain below $1,620 (36% of $4,500) to give you breathing room for savings, unexpected expenses, and daily needs.

 

Calculating your DTI Ratio:

  1. Add up all monthly debt payments (housing, car loans, child support, credit cards).
  2. Divide by your gross monthly income.
      • Total Monthly Debt: $1,635
      • Gross Monthly Income: $4,000
      • DTI: $1,635 ÷ $4,000 = 41%

Reducing debt, like eliminating a credit card payment, can lower your DTI, helping your monthly mortgage payment more comfortable, and also making you less of a risk to lenders which can offer you better loan terms.

Pro Tip: Connect with one of our loan officers early in the home-buying process to ensure you understand the full scope of buying a home. From pre-qualification and pre-approval to budgeting and credit tips, our team is here to help.

What if I’m Self-Employed, Work on Commission, or am Retired?

If an affordability calculator feels too rigid, or if your income varies, reach out to us for personalized advice. We’ll go over your budget, review your loan options, and answer any questions so you’re fully confident before you buy.

 

7 Important Factors to Calculate Home Affordability

 

1. How does my monthly budget affect my mortgage payments?

Your DTI ratio is a good gauge, but only part of the equation, as it only considers true “debt” and only your gross income (pre-tax).
Other things you should consider in your budgeting decisions are your true monthly obligations and recurring costs, along with your Net income after taxes, insurance, and retirement savings are deducted.

Consider Budget Items Like:

  • Childcare Costs
  • Utilities: gas, water/sewer, trash, internet/cable
  • Groceries
  • Transportation
  • Health Insurance/Medical Expenses
  • Savings and Investments
  • Entertainment
  • Personal Care
Home Affordability Mortgage Payment Monthly Payment Home Loan Affordability

Pro Tip: If you’re struggling to outline your true budget, reach out! We love helping to set our customers up for success, building a good foundation from the ground, up!

2. Upfront Costs When Buying a Home – Saving for the Down Payment

After understanding what your monthly budget can accommodate, now you can see what room there is in your budget to save for the upfront costs of buying a home. Here’s a breakdown:

  • Down Payment: Generally 3-20% of the home’s price, though some loans offer zero down payment options. If your down payment is below 20%, you may need to budget for private mortgage insurance (PMI).
  • Closing Costs: Typically 2-6% of the loan amount. Closing costs cover title fees, appraisals, legal fees, prepaid taxes, and other fees. For a $400,000 loan, closing costs might be between $8,000 and $24,000.
  • Inspection and Appraisal Fees: Expect to pay around $300-$1,000 separately for a home inspection and appraisal, depending on local rates.

Tip: Come up with a larger down payment:

The more you can contribute upfront, the less you need to borrow. Your down payment doesn’t all have to come from your own savings, either. If you have a family member or close friend who can afford to, they might give you a gift to add to your down payment. They will need to sign a letter stating that the money is a true gift — not a loan that you’ll need to pay back.

Closing costs are based on the loan amount rather than the whole home. So the larger the down payment, the less closing costs you pay!

Pro Tip: Down payment assistance is also a helpful tool that most people don’t know they qualify for! – learn more about down payment assistance

3. Be Prepared for Property Taxes

Property taxes vary based on location and property value. Some states charge no property tax at all, while others can have very high property taxes.
For instance, single-family home taxes in New Jersey averaged $9,527, while in West Virginia, the average was $928 (2022 US Census Data). Keep these in mind as they impact your monthly payment.

Tip: Lower Property Taxes by Considering Other Locations

You might have your heart set on a certain neighborhood or a certain city, but flexibility is key. If you can cast a wider net, you will open yourself up to places where property taxes, and even home prices are lower.

4. Budget for Ongoing Repair and Maintenance Costs

Homeownership means taking care of your property’s upkeep. If you’re considering a fixer-upper, research the probably and leave room for unexpected costs, as these can add up quickly. Even new homes require upkeep both inside and out.

5. Shop Around for Homeowners Insurance

Insurance is essential to protect your investment, and premiums vary based on location, coverage, and risk factors. They are especially high in states prone to natural disasters, like Florida and California. Get multiple quotes to find the best rate as this is the one area you can control in your monthly payment.

6. How Do Current Mortgage Rates Impact Affordability?

Interest rates are determined by many different factors, but the effect they have on your monthly mortgage payment is simple. The higher your interest rate, the higher your monthly payment. For instance, a 30-year $600,000 mortgage would be $3,220 at a 5% rate, but would increase to $4,402 at 8%.

Tip: Talk with us about today’s rates and how they affect your monthly budget.

7. How Does Credit Score Impact Affordability?

Your credit score is the foundation of your finances, and it plays a critical role in determining your mortgage rate. For example, let’s say you have a credit score of 750, considered in the “very good” range by FICO. That will put you in the running for a better rate than, say, a lower credit score of 580, which is at the top of the “poor” credit range. To find out your score, check your credit report at one of the big three agencies: Equifax, Experian and TransUnion.

Tip: How to Improve Your Credit Score

Boosting your credit score is a great way to put yourself in a position for the lowest mortgage rate possible. ALWAYS make your payments on time and in full every month. Pay down your credit cards and avoid applying for any additional accounts as you prepare to apply for a mortgage.

Related Topic: Prevent Annoying Credit Offers before starting the mortgage process – Opt out at www.optoutprescreen.com

 

The Bottom Line:

Should I Buy a Home Now or Wait?

Home prices have been on a rollercoaster ride in recent years and are still very high, as are mortgage rates. It’s enough to make you wonder whether now is even a good time to buy a house. It’s important to focus on your personal situation rather than thinking about the overall real estate market. Is your credit score in great shape, and is your overall debt load manageable? Do you have enough savings that a down payment won’t drain your bank account to zero? If your personal finances are in excellent condition, a lender will likely be able to give you the best deal possible on your interest rate.

It’s not just about money, though. Think about what’s on the horizon for you. Are you comfortable planting roots for the foreseeable future? The longer you can stay in a home, the easier it is to justify the expenses of closing costs and moving all your belongings — and the more equity you’ll be able to build.

With careful planning and the right support, homeownership can be a powerful step toward building financial security. Reach out today to discuss your options, learn about our loan programs, and take the first step toward making your dream home a reality.

 

Frequently Asked Questions About Home Affordability

Let’s say you earn $75,000 each year, which is $8,333 per month before taxes and deductions. By using the 28 percent rule, your full mortgage payments should add up to no more than 28 percent of $8,333, or $1,750 per month (including mortgage, insurance, and taxes). – This is assuming no other debts and doesn’t consider your other monthly obligations and budget.

Federal Housing Agency (FHA) mortgages are available to homebuyers with credit scores of 500 or more and can help you get into a home with less money down. If your credit score is below 580, you’ll need to put down 10 percent of the purchase price. If your score is 580 or higher, you could put down as little as 3.5 percent. There are limits on FHA loans, though. In most areas in 2024, an FHA loan cannot exceed $498,257  for a single-family home. In higher-priced areas, the number can go as high as $1,149,825. You’ll also need to factor in how mortgage insurance premiums (MIP) — required on all FHA loans — will impact your payments.

Eligible active duty or retired service members, or their spouses, might qualify for down payment–free mortgages from the U.S. Department of Veterans Affairs. These loans have competitive mortgage rates, and they don’t require PMI, even if you put less than 20 percent down. Plus, there is no limit on the amount you can borrow if you’re a first-time homebuyer with full entitlement. You’ll need to also consider how the VA funding fee will add to the cost of your loan.

Loans backed by the United States Department of Agriculture (USDA) require no down payment, and there is no limit on the purchase price. However, these loans are geared toward buyers who fit the low- or moderate-income classification, and the home you buy must be within a USDA-approved rural area.

 

Ready to see what you can afford? Contact us today to discuss your home-buying goals and take your first step toward financial freedom.

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Refinancing an existing loan may result in the total finance charges being higher over the life of the loan.

Refinancing your home may seem like a big decision, but it’s essentially swapping your current mortgage for a new one—potentially with better terms, a lower interest rate, or a different loan balance. When you refinance, your lender will pay off the old mortgage and issue a new one. But why refinance? If you’re curious about how the mortgage refinance process works or wondering how it might benefit you, we’re here to walk you through every step.

  • Refinancing Basics: Refinancing replaces your current mortgage with a new one, potentially offering better terms, a lower interest rate, or cash from your home’s equity.

  • Reasons to Refinance: Common reasons include lowering your interest rate, removing mortgage insurance, or accessing cash for large expenses through a cash-out refinance.

  • Choosing the Right Lender: Select a lender who listens to your financial goals, educates you, and helps you choose the best mortgage refinance option for your needs.

  • Closing Costs Matter: Refinancing involves closing costs of 3-6% of the loan principal. Talk to your loan officer to determine how long it will take to recover those costs (your break-even point), and if you can roll them into your loan.

  • Walking Through the Refinance Process: We walk through every step, starting with gathering documents, submitting your application, and through what your closing appointment will be like.

When to Consider Refinancing Your Mortgage

There are several scenarios where refinancing can be a smart financial move:

  1. Rate and Term Refinance

Goal: Refinancing gives you the option to shorten the term to pay off your loan faster and potentially secure a lower interest rate. Alternatively, you can extend your loan term, spreading out payments over a longer period and lowering your monthly costs.

  1. Remove Mortgage Insurance

Goal: If you have an FHA loan, you’re required to pay a mortgage insurance premium (MIP) for the life of the loan. Many homeowners refinance to a conventional loan once they reach 20% equity, allowing them to drop the insurance and lower your monthly expenses.

  1. Cash-Out Refinance

Goal: A cash-out refinance lets you tap into your home’s equity by refinancing for a higher loan balance and taking the difference in cash. This is a great way to access funds for large expenses like home renovations, education, or consolidating high-interest debt.

Knowing when to refinance is key to maximizing your savings. Tools like a Mortgage Refinance Savings Calculator can help you determine whether a refinance is right for you.

 

Starting the Mortgage Refinance Process

1. Choose the Right Mortgage Lender

The first step to refinancing is finding a mortgage refinance lender you trust. They will walk you through different mortgage refinance options and help you choose the one that aligns with your financial goals.

Choose a lender who listens, asks about your goals, educates, and communicates clearly.

When is it Worth it to Refinance?

A good rule of thumb is to consider refinancing if you can lower your interest rate by at least 1%. For instance, if you currently have a 7% rate and find that you could refinance at 6%, it’s likely worth running the numbers with your lender. Beyond that, your lender can help you calculate the total savings and how long it will take to break even on the cost of refinancing.

 

Closing Costs

Understanding Closing Costs When Refinancing

You might ask, “Is it worth it to refinance my mortgage?” One key factor is closing costs, which are typically 3-6% of the new loan principal. You’ll want to make sure the financial benefits of refinancing outweigh these costs. Your lender can help calculate your break-even point—how long it will take to recoup the cost of refinancing through the savings generated by your lower monthly payments.

Refinance Break-Even Point closing cost calculation
TIP: If you’re planning to move before you reach your break-even point, refinancing might not make sense financially. However, if you plan to stay in your home long-term, refinancing can yield substantial savings.

How to Pay for Refinancing Closing Costs

You can either roll closing costs into your loan or pay them upfront at closing. Talk with your loan officer to decide which option works best for your situation. Some homeowners prefer to pay upfront to avoid increasing their loan balance, while others like the flexibility of rolling the costs into the loan to avoid out-of-pocket expenses.

 

Steps in the Mortgage Refinance Process

Now that we’ve covered the basics, let’s dive into the key steps you can expect when going through the mortgage refinance process:

2. Gather Documentation

Before filling out a mortgage refinance application, you’ll need to gather essential documents. Every situation is unique, but you’ll likely need the following:

  • Government-issued ID and Social Security number
  • Recent pay stubs
  • W-2s from the past two years
  • Federal tax returns
  • Proof of additional income (if applicable)
  • Mortgage statements, credit card statements, and other debts
  • Retirement and investment account statements
  • Homeowners insurance policy
Your documents may be needed again in the processing phase, so keeping them on hand in the beginning and throughout your loan process can save you time and headaches.

3. Submit Your Refinance Application

Once you’ve gathered all your documents, it’s time to submit your application. This step involves sharing details about your financial situation, such as your assets, liabilities, and property information.

Our online application process is safe, secure, and easy to complete right from your smartphone or computer.

After submitting your application, your credit will be checked to give your loan officer a complete picture of your finances. Within three business days, you’ll receive a Loan Estimate (LE), which breaks down your estimated closing costs and the terms of your new loan. Be sure to review it carefully and notify your loan officer immediately if you spot any errors—like a misspelled name or incorrect address.

4. Processing

During this stage, your loan processor verifies your financial details. This includes checking your income, assets, and credit score. They may request additional documents to clarify or confirm information, so keeping your documents organized can help speed up the process. The processor will also open an escrow account and may order an appraisal to determine your home’s current market value.

Appraisal

An appraisal is typically required during a refinance to ensure the new loan amount does not exceed the home’s value. Some loans, such as FHA Streamline Refinance and VA IRRRL, may waive the appraisal requirement, but for cash-out refinance, it’s usually necessary.

5. Underwriting

The underwriting process reviews all the information you’ve provided. The underwriter might grant:

underwriting approval, green checkmark

Direct approval: Your loan is approved with no further action needed, and you can proceed to closing.

caution, conditional approval

Conditional approval: You’ll need to provide additional documents or clarification before receiving full approval.

red x, underwriting denial

Denial:
What happens if your refinance application is denied? In rare cases, your loan could be denied due to credit history, insufficient income, or other factors. If this happens, the underwriter will explain the reasons, and you can work with your lender to explore alternatives.

6. Review Your Closing Disclosure

Three days before your closing date, you’ll receive a Closing Disclosure (CD) outlining the final details of your loan, including the closing costs. Compare it with the Loan Estimate you received earlier and carefully review the terms. If anything seems off, don’t hesitate to ask your loan officer for clarification.

Closing and Final Steps

7. Closing Day

On closing day, you’ll meet with a title company representative, and possibly your loan officer to finalize your loan. Bring a state-issued photo ID and any remaining funds needed to cover closing costs (if not rolled into the loan). After signing the documents, the loan funds will be distributed. If you’re refinancing to take out cash, you’ll typically receive your funds a few days after closing.

8. First Monthly Payment

Depending on the closing date, you may be able to skip one or two mortgage payments. After that, your regular monthly payments will begin. 

If you’re interested in how to pay off your mortgage quicker, here are a few ways you can do that.

 

Wrapping it Up


We hope this guide has provided clarity on the mortgage refinance process. Whether you’re aiming to reduce your monthly payments, access your home’s equity through a cash-out refinance, or eliminate mortgage insurance, refinancing can offer significant financial benefits. With the right approach, you can save money and achieve your long-term financial goals.

When you’re ready to explore your refinancing options, feel free to reach out to us. We look forward to helping you navigate the process and find the best solution for your needs!

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Refinancing an existing loan may result in the total finance charges being higher over the life of the loan.

LINTHICUM, MD, September 30, 2024 — NFM Lending is pleased to announce the opening of a new branch led by Branch Managers Greg Bork and Kevin Holmes. The new branch will focus on expanding NFM Lending’s flexible and powerful lending platform to better serve community families with exceptional customer service. NFM Lending offers Conventional, FHA, VA, USDA, Jumbo, and many other home loan options to fit every borrower’s needs.

“I am thrilled to announce my return to NFM Lending as Branch Manager for our Towson, Maryland location,” said Holmes, who previously worked for NFM in 2010. “I want to extend my heartfelt thanks to the NFM transition team for their support during this journey. I am excited to be back as part of the NFM family and look forward to growing our business together!”

The branch’s goal is to continue to provide the same commitment and dedication to borrowers, ranging from first-time homebuyers to seasoned buyers looking for their next home, a second home, or investment properties.

“Kevin and I met at NFM,” noted Bork, a 20-year mortgage veteran. “As we’ve watched them grow and thrive, the idea of coming back has always been on our mind due to their outstanding leadership. I can honestly say that I feel like we are back home where we belong.”

 

Bork and Holmes are currently seeking qualified Mortgage Loan Originators for full and part-time positions.

For more information, please contact:

Greg Bork Branch Manager NMLS# 34928 410-474-1427 [email protected]

Kevin Holmes Branch Manager NMLS# 193246 717-676-8733 [email protected]

 

About NFM Lending

NFM Lending is a national mortgage lending company currently licensed in 49 states and the District of Columbia. The company was founded in Baltimore, Maryland in 1998. NFM Lending and its family of companies includes Main Street Home Loans, Bluprint Home Loans, Elevate Home Loans, and Element

Home Loans. They attribute their success in the mortgage industry to their steadfast commitment to customers and the community. For more information about NFM Lending, visit www.nfmlending.com, like our Facebook page, or follow us on Instagram.

LINTHICUM, MD, September 23, 2024 — NFM Lending is excited to announce that Managing Director Greg Sher will be a featured speaker at the inaugural HousingWire IMB Summit, scheduled for October 1, 2024, at the George W. Bush Library in Dallas, TX. This landmark event will bring together mortgage banking executives, leaders, and rising stars at a crucial time for the mortgage industry.

Sher will deliver an insightful presentation on leveraging social media to gain followers and clients, ultimately boosting a mortgage company’s bottom line. With over 4 million impressions on LinkedIn in the past 12 months, Sher will explore the pros and cons of building a substantial social media presence. His session promises to offer valuable strategies for mortgage professionals aiming to expand their digital reach and engage more effectively with their audience.

Beyond his expertise in social media, Sher is a passionate advocate for collaboration within the mortgage industry. He believes that mortgage companies should work together for the benefit of home buyers rather than competing against each other. His collaborative approach aims to foster a more unified industry that better serves consumers.

The HousingWire IMB Summit will be enlightening, allowing attendees to learn from industry experts and network with peers. NFM Lending is honored to have Sher represent the company and share his knowledge at this significant gathering. For more information about the HousingWire IMB Summit, please visit events.housingwire.com/IMB-summit/agenda.

About NFM Lending: NFM Lending is a national mortgage lending company currently licensed in 49 states in the U.S. The company was founded in 1998 and has since grown to include more than 1,000 employees. NFM Lending is dedicated to streamlining the home loan process and providing exceptional customer service.

As we begin a new school year, we want to recognize all that our educators do for our community. Teachers are the cornerstone of our communities. They shape future generations and deserve a chance to become permanent members of their communities through homeownership. Almost everyone can think of one or two teachers who have impacted their lives, no matter how old they get, so thank you!

Whether you’re a first-time homebuyer or looking for an investment property, there are loan programs and resources to help teachers and educators succeed in purchasing a home.

  • Conventional Loans: Flexible loan options with low down payments and competitive rates for teachers.
  • FHA Loans: Ideal for teachers with lower credit scores, offering low down payments and more lenient requirements.
  • NFM Flex: A special FHA loan with an added down payment assistance benefit. Great for first-time homebuyers!
  • VA Loans: No down payment or PMI required for veteran teachers, with lower interest rates and flexible use.
  • USDA Loans: Perfect for teachers in rural areas, offering no down payment and fixed interest rates.
  • Special Programs: Options like Teacher Next Door and down payment assistance make homeownership more affordable for educators.

 

Conventional Loans for Teachers

One of the most common types of mortgages available is the conventional home loan.

What Are Conventional Loans?

Conventional loans are privately backed and are not insured by the government, unlike FHA, USDA, or VA loans. They are the most common mortgage type in the U.S. and often have favorable terms for teachers, such as competitive interest rates and a low 3% down payment option.

How Do Conventional Loans Differ from Government-Backed Loans?

Conventional loans do not have the same strict criteria as government-backed loans but they generally require higher credit scores; typically 620 or above. While government-backed loans like FHA and VA often come with more limitations on the property, conventional loans offer a bit more freedom. For example, teachers can use a conventional loan to purchase a second home, rental property, or investment property.

Another key difference is that conventional loans don’t require upfront funding fees, a significant cost-saving compared to loans like FHA and VA loans. However, if you do not make a 20% down payment, you may be required to pay for Private Mortgage Insurance (PMI) until you reach 20% equity in the home.

Advantages of Conventional Loans for Teachers

  • Flexibility: Conventional loans can be used to purchase a primary residence, second home, or rental property.
  • More Options: Conventional loans are available as fixed-rate, adjustable-rate, conforming, Jumbo loans and non-qualifying mortgages.
  • Higher Loan Limits: Compared to government-backed loans, conventional loans often have higher loan limits, allowing teachers to purchase homes in more expensive areas.
  • Low Down Payment Options: Some conventional loans require as little as 3% down, making homeownership accessible to those without large savings.

Considerations of Conventional Loans

  • Higher Credit Score Requirements: Conventional loans typically require a credit score of 620 or higher, while government-backed loans often allow for lower scores.
  • PMI: Unless you make a 20% down payment, you’ll be required to pay for private mortgage insurance, adding to your monthly payments.

 

FHA Loans for Teachers

FHA loans are a great option for teachers who may not have perfect credit or a large down payment. They are designed to make homeownership more accessible to first-time homebuyers, but they are also available to anyone who meets the eligibility criteria.

What is an FHA Loan?

An FHA loan is government-backed and insured by the Federal Housing Administration (FHA). While the FHA does not lend money directly, it guarantees the loan, which encourages private lenders to offer more favorable terms to buyers. FHA loans allow for smaller down payments, sometimes as low as 3.5%, and more lenient credit requirements.

Advantages of FHA Loans for Teachers

  • Low Down Payment Option: FHA loans typically require a down payment of only 3.5%, which is low, like the other down payment options on his list.
  • Flexible Credit Requirements: FHA loans are designed for borrowers with lower credit scores, allowing teachers to qualify even if their credit score is as low as 580 (500 for special circumstances).
  • Assumable Loans: FHA loans can be transferred to a new buyer, which can be a huge advantage if interest rates have risen since the original loan was taken out. This allows you to sell your home and offer a lower interest rate to the buyer.

Considerations of FHA Loans

  • Upfront and Ongoing Mortgage Insurance: FHA loans come with an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount, and an annual mortgage insurance premium (MIP) that is paid over the life of the loan.
  • Property Restrictions: FHA loans require the home to meet certain safety and livability standards, which may limit the properties you can buy.

 

NFM Flex Loan for Teachers

Our NFM Flex loan is an FHA loan but with some of the added benefits of a down payment assistance program!

Benefits of NFM Flex for Teachers

  • Zero Down Payment: Plus, additional financing towards down payment and closing costs
  • Down Payment and Closing Cost Assistance in the form of a 2nd lien
    • 5% financing on first lien
    • 5% financing on 2nd lien covers the down payment with an extra 1.5% to go towards closing costs
  • No Income Cap: Like FHA loans, there is no maximum income limit to qualify
  • Credit Score: FHA minimum FICO score 660 required
  • Flexibility on Property Type: Can be used on single-family homes, condos, townhomes, manufactured homes & duplexes

 

VA Loans for Teachers

For teachers who have served in the military or are currently serving, the VA loan program offers one of the best mortgage options available.

What Is a VA Loan?

VA loans are government-backed by the Department of Veterans Affairs (VA) and offer significant benefits to veterans, active-duty service members, and surviving spouses. The VA guarantees a portion of the loan, allowing lenders to offer better terms with no down payment or private mortgage insurance requirements. There are a few myths surrounding VA loans, but the many advantages of this loan eclipse them all:

Benefits of VA Loans for Teachers

  • No Down Payment: VA loans do not require a down payment, which can save thousands of dollars upfront.
  • No PMI: Unlike conventional and FHA loans, VA loans do not require private mortgage insurance, reducing monthly payments.
  • Lower Interest Rates: VA loans typically offer lower interest rates than conventional loans, which can save teachers thousands of dollars over the life of the loan.
  • Lifetime Benefit: You can use your VA loan benefit multiple times throughout your life, making it a flexible and long-term advantage.

If you want to know the eligibility requirements for the VA loan guarantee, based on your service history, the agency has a very useful chart that explains it.

 

USDA Loans for Teachers

If you’re a teacher working in a rural area, a USDA loan might be a perfect fit. USDA loans are designed to help people in rural communities become homeowners and offer excellent terms for low- to moderate-income buyers.

What Is a USDA Loan?

USDA loans are government-backed by the U.S. Department of Agriculture (USDA) and are intended for people purchasing homes in rural areas. These loans offer zero down payment options, low interest rates, and long repayment terms, making them a great option for teachers living or working in rural communities.

Advantages of USDA Loans for Teachers

  • No Down Payment: USDA loans do not require a down payment, making them a great option for teachers who have not been able to save a large sum of money.
  • Fixed Interest Rates: USDA loans have fixed interest rates, so you’ll always know what your monthly payments will be.
  • Flexible Credit Requirements: There is no minimum credit score required for USDA loans, though most lenders prefer scores of 640 or higher.
  • Assumable Loans: Like FHA and VA loans, USDA loans are assumable, allowing a new buyer to take over your mortgage if interest rates rise.

Reach out to learn more about income eligibility limits for USDA properties!

 

Special Programs for Teachers

In addition to conventional, FHA, VA, and USDA loans, there are also numerous special programs designed specifically for teachers to help with down payments, closing costs, and credit challenges.

Down Payment Assistance Programs

Many local counties and states offer special down payment and closing cost assistance programs for teachers and citizens in general. These programs vary by location but often provide grants, forgivable loans, or low-interest second mortgages to help cover the down payment and closing costs.

We have several down payment assistance programs available in-house; reach out to learn more!

Teacher Next Door

The Teacher Next Door program is one of the most well-known homebuying programs for teachers. It offers grants, down payment assistance, and other benefits to make homeownership more affordable.

  • Grants: Teachers can receive up to $8,000 in homebuying grants through this program.
  • Down Payment Assistance: The program offers up to $10,000 in down payment assistance.
  • Additional Perks: Teachers also get access to preferred interest rates, appraisal credits, and more.

Teachers aren’t the only ones who benefit from this program; nurses, law enforcement officers, firefighters, EMTs, and government employees can also secure discounts, grants, and support with Teacher Next Door. 

Fresh Start Credit Repair Program

For teachers with credit challenges, the Fresh Start Credit Repair Program through Teacher Next Door provides free consultations and one-on-one assistance to improve credit scores, helping educators qualify for better mortgage terms.

Good Neighbor Next Door

HUD’s Good Neighbor Next Door program offers significant discounts on homes in designated revitalization areas. Teachers who commit to living in these areas for three years can receive a discount of up to 50% on the home’s purchase price!

Tips for Teachers Saving for a Down Payment

Even with assistance programs, saving for a down payment can be a challenge. Here are some tips to help you get started:

  1. Set a Budget: Review your monthly expenses and identify areas where you can cut back to save more for your down payment.
  2. Automate Your Savings: Set up automatic transfers to a dedicated savings account so that a portion of your income is saved without you having to think about it. High Yield Savings Accounts are great for this.
  3. Take Advantage of Side Income: Consider tutoring, teaching summer school, or other part-time opportunities during school breaks to increase your income and save for a down payment.

 

Final Thoughts

There are a variety of mortgage options and special programs available to teachers. Whether you’re a first-time homebuyer or an experienced homeowner. From conventional loans to government-backed programs like FHA, VA, and USDA, there is a loan option to fit almost every financial situation. Additionally, specialized programs like Teacher Next Door and Good Neighbor Next Door provide grants and discounts to make homeownership even more affordable for educators.

Take advantage of the resources available to you. Do your research, and don’t hesitate to reach out to a mortgage specialist who understands the needs of teachers. Homeownership is an achievable goal, and with the right loan program and guidance, you can find the perfect home to call your own.

Reach out with any questions, or to get started on your homebuying journey!

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Please consult with the Loan Originator to discuss your options and to receive specific DPA information. You will need to apply for a first mortgage loan with NFM, Inc. in conjunction with any down payment assistance program. All information contained herein is subject to change at any time. A training class might be required. All DPA programs require to apply for a 1st and 2nd mortgage. Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs.

Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. 

LINTHICUM, MD, September 5, 2024 — NFM Lending is proud to announce that Managing Director Greg Sher has been named a winner of HousingWire’s prestigious 2024 Vanguard Award. This accolade recognizes the most outstanding, forward-thinking leaders in the mortgage and real estate industries who have led their organizations to greatness while overcoming the challenges the housing economy has faced over recent years.

HousingWire’s 2024 Vanguards were carefully selected by the publication’s selection committee for their vital contributions to their companies and their dynamic influence in transforming the mortgage and real estate sectors. These 100 honorees have demonstrated exceptional leadership by driving innovation, setting strategic direction, and steering their organizations toward monumental achievements.

In addition to his role as a high-ranking executive at NFM Lending, the country’s 14th-largest retail lender, Greg Sher has made significant strides in the industry through his innovative initiatives. Notably, he helped launch the Creator Collective, a group of loan industry influencers dedicated to producing content that empowers and educates potential homebuyers. The Creator Collective crafts insightful narratives, offers expert advice, and uses creativity to demystify the home-buying process. This initiative has been instrumental in increasing financial literacy and making it more accessible to a broader audience, mainly Gen Z buyers, a burgeoning set of prospective homebuyers.

“We are incredibly proud of Greg’s achievements and his recognition as a HousingWire Vanguard,” said David SIlverman, Founder and CEO of NFM Lending. “His visionary leadership and commitment to innovation have not only propelled NFM Lending to new heights but have also significantly impacted the industry as a whole. Greg’s work with the Creator Collective exemplifies his dedication to empowering and educating future generations of homebuyers.”

In addition to the Creator Collective, Sher launched NFM TV almost a decade ago, a production company dedicated to mortgage and housing industry news. More recently he started his One-on-One podcast where he interviews top leaders and influencers in the real estate and mortgage industries.

The HousingWire Vanguards award is a testament to Greg Sher’s exceptional leadership and his unwavering commitment to excellence in the mortgage and real estate industries. NFM Lending congratulates Greg on this well-deserved honor and looks forward to his continued contributions to the company and the industry. The full list of honorees can be found here.

About NFM Lending: NFM Lending is a national mortgage lending company currently licensed in 49 states in the U.S. The company was founded in 1998 and has since grown to include more than 1,000 employees. NFM Lending is dedicated to streamlining the home loan process and providing exceptional customer service.

Why These Agreements Matter in Today’s Real Estate World

When you’re in the market for a new home, understanding your relationship with your real estate agent is essential. One of the key elements of this relationship is the Exclusive Buyer-Broker Agreement. This legally binding contract sets the expectations for both you and your agent. As of August 17, 2024, new federal legal requirements have made these agreements mandatory for all real estate agents who use the MLS (Multiple Listing Service). So, what does this mean for you as a homebuyer?

Whether you’re buying your first home or your fifth, this agreement offers clarity, protection, and peace of mind in an otherwise complex process. Let’s break down what you need to know—so you feel confident and empowered as you step into the world of real estate.

  • Buyer-Broker Agreement: A legally binding contract that ensures your real estate agent is fully committed to representing your best interests.
  • Transparency & Protection: The agreement outlines responsibilities, clarifies expectations, compensation, and ensures your agent works in your best interest.
  • New Legal Requirements: As of August 17, 2024, signing this agreement is mandatory before viewing homes, and buyer’s agent commissions must be negotiated upfront to sign.
  • Benefits for Homebuyers: Provides clarity, access to resources, and legal protection during your homebuying journey.
  • Work with Your Lender Early: Involving your lender early helps you understand financing options, including how to cover your agent’s commission if necessary.
  • Options for Paying Agent Commissions: Explore alternatives like seller concessions, adjusting the sales price, or using cash reserves if the seller won’t cover the fees.

What is a Buyer-Broker Agreement?

Whatever you want to call it, an Exclusive Buyer-Broker Agreement, Buyer Representation Agreement, Buyer Agency Agreement, or Buyer Agent Agreement, etc., they’re all the same. At its core, a Buyer-Broker Agreement is a legally binding contract between you (the buyer) and your real estate agent. Think of it as a mutual promise—a commitment that they will represent you, free from conflicts of interest, with your best interests at heart, and in return, you agree to work exclusively with them. It’s all about clarity.

What’s Changed with the NAR Settlement?

As of August 17, 2024, due to an antitrust lawsuit, the National Association of Realtors (NAR) was a part of, federal law now mandates that an Exclusive Buyer-Broker Agreement must be signed before an agent shows any property. Previously, this wasn’t required in every state, but now it’s standard practice nationwide.

One of the significant changes is that your agent’s commission may no longer be paid by the seller’s agent. Instead, you’ll negotiate with the seller to cover your agent’s fee, which could affect your overall offer and negotiations. Additionally, listings on the Multiple Listing Service (MLS) no longer display the buyer’s agent’s compensation, so your agent will need to gather this information for you directly from the listing agent.

While this might sound like an extra layer of complexity, it’s designed to ensure transparency and fairness in the real estate process—so you always know who is working for you and how they’re being compensated.

Why Should I Sign A Buyer-Broker Agreement?

In today’s real estate landscape, transparency is crucial. With a Buyer-Broker Agreement, both you and your agent are on the same page regarding responsibilities and expectations. It can be comforting to know that your agent isn’t just opening doors—they’re actively protecting your interests, making sure you don’t overpay, miss important timelines or details, or fall into common traps during the homebuying process.

But there’s more. Many agents are self-employed and rely solely on commissions for their income. By signing this agreement, you’re ensuring that your agent is compensated for their hard work and dedication. After all, you want an agent who is as committed to helping you succeed as you are to finding the perfect home.

You might hear the terms “real estate agent” and “real estate broker” used interchangeably—but they’re not quite the same thing. Your real estate agent is the one who helps you view homes and works directly with you during the buying process. A real estate broker, on the other hand, has more advanced education and licensing. They often oversee multiple agents and manage real estate offices.

In some cases, your agent might also be a broker. If not, they work for one. Either way, rest assured that both are there to ensure your homebuying journey goes smoothly.

Why Work with a Real Estate Agent?

  • Contracts and Support: Agents assist with disclosures, contracts, and deadlines in today’s regulated environment, guiding you through every step to reduce stress and provide peace of mind.
  • Market Expertise: A real estate agent offers deep local market knowledge, helping you find the best properties and advising on fair market prices.
  • Objectivity: Agents offer an unbiased perspective, helping you meet your goals within budget and avoid emotional attachments when buying or selling.
  • Time-Saving: With MLS access and industry connections, your agent quickly identifies properties that fit your needs, saving you countless hours.
  • Negotiation Skills: Your agent negotiates to get you the best deal, whether it’s lowering the price or securing favorable contract terms.

Your agent is a key player in your real estate transaction, alongside your lender. We’re here to guide you in making one of the biggest financial decisions of your life.

Call today! We’re happy to discuss how we can support you!

Key Elements of a Buyer’s Agent Agreement

When you sign a Buyer’s Agent Agreement, it will typically include the following key components:

Term Length: The agreement will specify how long you’ll be working exclusively with your agent. It could be for one home showing, 30 days, 90 days, six months, or another timeframe that fits your needs. You can always sign another one if you’d like. This ensures that both you and your agent are fully committed for the duration of the homebuying process.

Termination Rights: No one likes the idea of “breaking up,” but if things aren’t working out, the agreement will spell out how either party can end the relationship. Make sure you understand the conditions under which the agreement can be terminated, such as notice periods or potential compensation owed to the agent.

Exclusivity: By signing this agreement, you’re agreeing to work solely with your agent or their brokerage. If that sounds daunting, don’t worry—it’s all about ensuring your agent can focus on giving you the best service possible. 

Compensation: Traditionally, the seller pays both agents’ commissions. However, that’s not guaranteed, and you may need to negotiate or contribute toward your agent’s commission if the seller doesn’t cover it. Your lender can help you understand financing options for this. More on that later.

Property Specifications: This section lays out what you’re looking for in a home—such as price range, neighborhood, and type of property. It’s a way to ensure your agent knows exactly what you need and keeps their searches within your criteria.

Agent Duties: Your agreement will outline your agent’s responsibilities—from finding and showing homes to handling offers, negotiating, and following through until closing. This is where you set the tone for communication and what you expect from each other.

Pro TIP: Let’s look into down payment assistance programs to help with your financing!
Whether you are the one needing to pay agent fees, or not, we can search for opportunities for you to save money!

Benefits of an Exclusive Buyer-Broker Agreement for Homebuyers

At first you might wonder why you should sign this agreement. Isn’t it just another formality? It’s much more than that—it’s a crucial step to ensure that you and your real estate agent are aligned. Here’s why it benefits you:

  1. Clarity and Transparency: From the beginning of your relationship, the agreement outlines what services your agent will provide, so you know exactly what to expect.
  2. Your Interests Come First: Your agent is legally bound to act in your best interests—whether that means negotiating better terms or ensuring you don’t overlook any potential issues during your homebuying process.
  3. Protection: Both you and your agent are protected under the agreement. This means that if any legal issues arise, the terms of the contract will help clarify each party’s responsibilities.

Work With Your Lender Early!

But here’s the good news: you don’t have to figure this out alone. Your lender is a key player in helping you understand all your financing options, even before you sign the Exclusive Buyer-Broker Agreement. By working with your lender early in the process, you can get a clearer picture of how your financing could work—including how your agent’s commission might be covered.

Paying Your Real Estate Agent: What Are the Options?

We know that paying your agent’s commission can feel like one more possible daunting cost in an already expensive process. When you’re juggling earnest money deposits, down payments, and closing costs, the idea of covering one more fee might add another layer of stress—especially with a challenging housing market.

For many buyers, the ideal scenario is having the seller pay your agent’s commission. This can be a major relief. Depending on the market and the specific property, seller concessions—or contributions from other interested parties like builders, agents, or lenders—could cover your agent’s fees, leaving you with fewer out-of-pocket expenses.

What Happens if the Seller Refuses to Pay Buyer’s Agent Commission?

Don’t worry, you’ve got options. If you do need to cover agent commissions, don’t panic—your lender can help you explore options for managing this expense.

Five Options to Handle Buyer’s Agent Fees:

  1. Seller Concessions: This is the ideal scenario where the seller agrees to cover your agent’s commission.
  2. Increase the Sales Price: You can raise the home’s purchase price and ask the seller to pay your agent. Your appraisal will need to support the higher price.
  3. Adjust Your Down Payment: Lower your down payment and use some of the funds to pay your agent’s commission.
  4. Use Cash Reserves: If possible, you can pay your agent directly from your savings.
  5. A Combination: Sometimes, the best option is a mix of the above—work with your lender to find a solution that works for your finances.

It’s important to have open discussions with your agent and lender to fully understand these options and decide what works best for you.

Your lender also plays a crucial role in building confidence with the seller’s agent. Throughout the homebuying process, your lender should be in close contact with the seller’s listing agent, making sure they know that you’re a serious and qualified buyer. This can go a long way in reassuring the seller that by accepting your offer, they’re choosing a buyer who’s financially stable and ready to close. When your financing is solid and your lender is advocating for you, sellers may be more inclined to assist with agent fees or other concessions to seal the deal.

Final Thoughts: The Value of a Good Homebuying Team

When it comes down to it, a great buyer’s agent does far more than open doors. They’re your advocate, your expert, and your negotiator—someone who is there to help you make one of the biggest financial decisions of your life.

By signing an Exclusive Buyer-Broker Agreement, you’re ensuring that your agent is just as invested in your success as you are. You’re establishing trust, clarifying expectations, and ensuring that your interests are represented every step of the way.

Ultimately, the goal is to work together with your agent, lender, and other key players to make sure you’re set up for success—both financially and emotionally—as you navigate the homebuying journey.

Reach out with any questions, or to get started on your homebuying journey!

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Please consult with the Loan Originator to discuss your options and to receive specific DPA information. You will need to apply for a first mortgage loan with NFM, Inc. in conjunction with any down payment assistance program. All information contained herein is subject to change at any time. A training class might be required. All DPA programs require to apply for a 1st and 2nd mortgage. Equal Housing Lender. Make sure you understand the features associated with the loan program you choose, and that it meets your unique financial needs. Subject to Debt-to-Income and Underwriting requirements. This is not a credit decision or a commitment to lend. Eligibility is subject to completion of an application and verification of home ownership, occupancy, title, income, employment, credit, home value, collateral, and underwriting requirements. Not all programs are available in all areas. Offers may vary and are subject to change at any time without notice. 

Understanding the Influence of School Districts on Property Values and Home-Buying Decisions

When you set out to buy a home, a myriad of factors will run through your mind as you create your must-have list. Your list will probably include neighborhood, size, location, and amenities. Among these, the quality of the local school district often plays a pivotal role in determining property values. This aspect isn’t just important for families with children; it also influences home values for individuals, investors, and couples without kids. Understanding how school districts shape property values can provide you with valuable insights, helping you make more informed and strategic real estate decisions.

  • Higher Property Values: Homes in high-performing school districts often see greater appreciation and higher values.
  • Increased Demand: Strong school districts attract more buyers, leading to faster sales and higher prices.
  • Neighborhood Appeal: Good school districts enhance neighborhood stability and desirability, boosting property values.
  • Higher Property Taxes: Homes in top-performing districts usually have higher property taxes, contributing to increased school funding and property values. The inverse is also true and can perpetuate educational and financial inequality.
  • Market Resilience: Properties in top school districts are generally more stable and retain value better during economic downturns.

Start Your Search with Home Location

In real estate, the principle of “location, location, location” is frequently emphasized as the primary factor influencing property value. Within this concept, the quality of the local school district is a crucial component in determining home values. This relationship is more than academic; it has practical implications for anyone considering a home purchase.

For families with children or those planning to start a family, the quality of nearby public schools is a major priority. A well-regarded school district can provide not only educational advantages but also a strong sense of community and stability. Even for buyers without children, the attractiveness of a high-performing school district may not be immediately apparent, but these districts often lead to increased property values, enhanced neighborhood appeal, and strong resale potential.

importance of home location in relation to school district

Whether you are a young family, an empty nester, or a first-time homebuyer, understanding how school districts impact property values can aid in making strategic, informed real estate decisions. Here, we explore the key ways school districts influence home valuation.

Four Ways School Districts Impact Property Value

1. Property Value Appreciation:

The impact of school districts on property values is most evident through property appreciation. Often, there is a direct correlation between the performance of local schools and the value of nearby homes. High-quality school districts tend to be associated with increased home values due to heightened demand and perceptions of community stability and prosperity.

For instance, a study reported by The New York Times revealed that a 5% improvement in school test scores can lead to a 2.5% increase in home values. Similarly, the National Bureau of Economic Research found that every additional $1 spent on public schools results in a $20 increase in home values. This data underscores the financial benefits of investing in quality education, benefiting both schools and local homeowners.

While standardized test scores are just one aspect of a school’s performance, they provide accessible information for narrowing down your home search. Homes in reputable school districts generally experience higher demand, quicker sales, and increased prices.

2. Increased Housing Demand:

High-performing school districts generate significant demand for homes. Research from the National Association of REALTORS® (NAR) indicates that 30% of buyers aged 33-42—likely to have young children—consider “quality of the school district” as a top factor when selecting a neighborhood.

Homes in desirable school districts often receive more online views and sell faster compared to properties in less favored areas. Realtor.com reports that homes in high-performing school districts sell eight days faster than those in other regions. This heightened demand can drive up property values, as buyers are eager to make competitive offers on homes in these sought-after districts.

Even buyers without children may find homes in strong school districts attractive due to the associated stability and potential for long-term value appreciation, further boosting property values.

3. Neighborhood Stability

The reputation of a school district can significantly influence the perceived stability and appeal of a neighborhood. Schools with strong academic performance and positive community engagement often create a “halo effect” that extends to the surrounding area.

This perception of stability and prosperity can enhance property values. Homes in neighborhoods with highly regarded schools are often viewed as more desirable due to the associated benefits, such as higher incomes, better resources, and lower crime rates. Although this is more of a perceived effect than a direct cause-and-effect relationship, it can still powerfully impact property values.

Appraisers consider both objective and subjective factors when determining a home’s value. As properties in desirable school districts generally achieve higher sales prices, this can influence appraisals and future property values in the area.

4. Impact of Property Taxes

While public schools may seem “free” to attend due to the absence of upfront costs or monthly fees, they are funded through local, state, and federal taxes, with local property taxes playing a substantial role. Homes in high-performing school districts often have higher property taxes, which are used to support and enhance the schools, creating a cycle of increased performance and higher property values.

In contrast, the funding disparities between affluent and less wealthy school districts can perpetuate educational inequality, affecting low-income students and contributing to a cycle of poverty. Additionally, the NAR found that home prices in high-performing suburban school districts were 49% higher than the national median and 77% more expensive than those in lower-ranked districts.

Many states have stepped in to help compensate for this imbalance locally, but it’s still important to understand how local property taxes fund public schools and the broader socioeconomic impacts concerning your own home research.

School Districts Matter, whether you have children or not

What Else Matters?

  • Resilience During Market Volatility:

    Homes in high-performing school districts tend to exhibit greater resilience during market downturns. An experiment by BiggerPockets, a real estate investor, found that properties in districts with high school ratings (4-5 stars) experienced less severe value declines during recessions compared to homes in less desirable districts (1-3 stars). This resilience is attributed to the sustained demand for homes in strong school districts, which can help maintain or even increase property values during economic uncertainties.

    For sellers, this means that homes in reputable school districts can be a safer investment during volatile market conditions, potentially achieving higher prices and quicker sales.

  • Proximity to Private Schools:

    The presence of private schools can also influence property values. While private schools are not funded through public taxes, their proximity can enhance the appeal of a neighborhood. Homes near prestigious private schools often command higher prices, as buyers are willing to pay a premium for the convenience and prestige associated with these institutions.

    The presence of both public and private educational institutions can make an area more attractive to potential buyers, driving up property values.

  • Finding the Right Fit:

    Ask ten different families and you’ll get ten different answers on what makes a school “good”. For some, traditional metrics such as test scores and graduation rates are sufficient, while others may seek a school that offers a specific cultural or emotional fit for their children.

    If you’re looking for a school district that aligns with your family’s specific needs rather than just a highly ranked school, consider exploring resources like Niche.com’s blog post “Beyond Test Scores, What Really Makes a “Good” School?” for additional questions to help you find the right school.

School Districts Matter, Whether You Have Kids or Not!

The impact of school districts on property values is substantial and multifaceted. Regardless of whether you have children, evaluating the quality of local schools can be a strategic component of your home-buying or real-estate-investing process. The benefits of purchasing in a high-performing school district extend beyond educational outcomes, affecting property values, demand, neighborhood stability, and property taxes.

Homes in strong school districts generally appreciate faster, attract higher demand, and offer greater long-term value. Understanding these dynamics can aid in making a well-informed real estate decision. Collaborating with a local real estate agent can provide further insights and help evaluate the best options based on your unique needs and goals. By factoring in the quality of local schools, you can make a more comprehensive decision that benefits you now and in the future.

Let’s get you pre-approved in your favorite school district, today!

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