Are you a first time home buyer curious about the 1% down payment option through Rocket Mortgage or United Wholesale Mortgage (UWM). What are the loan requirements for the 1 percent down payment mortgage? What credit score do you need for Rocket One Plus? What are the pros and cons of UWM vs Rocket Mortgage? In this video, we discuss the new 1% down payment options to help you become The Educated HomeBuyer.

✅ – Want to get connected with us or to a local expert in your market, please reach out at http://www.theeducatedhomebuyer.com/expert

Connect with me 👇 Jeb Smith (huntington beach Realtor/orange county real estate) DRE 01407449 Coldwell Banker Realty ➡I N S T A G R A M ➳ https://www.instagram.com/jebsmith ➡Y O U T U B E ➳https://www.youtube.com/c/JebSmith

Connect with me 👇 Josh Lewis (Huntington Beach Certified Mortgage Expert) DRE 01209148 Buywise Mortgage M:714-916-5727 E: josh@buywisemortgage.com ➡I N S T A G R A M ➳ https://www.instagram.com/borrowsmartjosh ➡Y O U T U B E ➳https://www.youtube.com/c/buywiseborrowsmart

📩 – info@theeducatedhomebuyer.com

For Show Notes, See Below 👇

[00:00:00] Jeb Smith, Huntington Beach Realtor: At the moment, there’s a lot of headlines floating around the internet, about 1% mortgages, and if I’m completely honest, I thought a lot of it was misinformation until I had the opportunity to speak with Josh and we’re going to talk about the 1% mortgage today in detail. Help answer all your questions. 

Honestly, when I first heard it, Josh, I thought, like I said, it was misinformation. You confirm that it’s actually something that is happening. But even then, I didn’t think the terms would be reasonable. And I was somewhat surprised to find out that they actually are.

So when you hear the 1% mortgage, is everyone doing it? Is it just some lenders? I think that’s a good place to start. 

[00:00:55] Josh Lewis, Expert Mortgage Broker: Let’s look at it. It is not a 1% down mortgage. It’s better than that. 

[00:01:00] Jeb Smith, Huntington Beach Realtor: What?

[00:01:00] Josh Lewis, Expert Mortgage Broker: It is you, the borrower putting 1% down, but it is the same 3% down Home Ready/Home Possible mortgage that we’ve had for a number of years.

There’s hidden in the details of what Fannie and Freddie allow is other people can make contributions towards your down payment. So in this instance, the lender, not all lenders, we’re gonna talk about two specifically, are the only ones in the country offering this. You can get it through multiple sources, but they’re all going back to either United Wholesale Mortgage or Rocket Mortgage.

And what they’re doing is, they’re putting in up to 2% for you. So depending on your purchase price, you’re getting a 3% down loan. You’re only putting 1% down. But in essence, Jeb, this is the same HomeReady Home Possible mortgage that has existed forever. It is awesome. Amazing. The best conventional loan one could ever hope to get.

And so the question you’re probably asking, cool, why doesn’t everyone get that? It has one major limitation that eliminates the majority of borrowers, especially in high cost states like California where we do most of our business is that you must be at 80% or less of the area median income.

And you ask what is an area median income, and how in the world would I know what that is? The cool thing is Fannie Mae has a tool we’re gonna link to it in the description here. You put in the address of the property. It’s not where you currently live. You can’t just put in a county. You put in the specific property and it comes back.

It’ll tell you what a hundred percent of the area median income is, and it does the calculation for you of 80% of the area median income. And if your qualifying income exceeds that, you are not eligible for a standard Home Ready/Home Possible and more importantly, you’re not eligible for either one of these 1% down programs.

[00:02:44] Jeb Smith, Huntington Beach Realtor: Got it. So you need income to be 80%. That’s obviously the key point there. But what are we talking about when it comes to credit scores? What kind of credit score do we need? Is there a debt to income requirement that we need to stay under? Because those are typically two things [00:03:00] that really eliminate a lot of people outside of say the income.

[00:03:04] Josh Lewis, Expert Mortgage Broker: So in general, what you are looking at is the automated underwriting system is going to give you the approval and it’s going to set the maximum debt to income ratio. In theory, that is 50%. For some borrowers it’s 45%, especially with only 3% down and especially lower credit scores. Specifically, you mentioned that credit score.

It’s going to be determined by the automated underwriting system. The guidelines say you can have a credit score as low as 620, standard Fannie/Freddie minimum credit score, but you are less likely to get that automated approval with a 620 credit score. So you’re already on the low end of the credit score.

If you’re at 80% of the area median income and you’re putting a minimum down. There’s a very good chance you have a higher debt to income ratio. So if you’re watching this, I don’t want you to hear, Hey, I’ve got a 622 credit score and I’ve got 1% sitting in the bank. I’m in. It really is a black box, it being the automated underwriting systems.

So your information has to go in there and the higher your credit score, the lower your DTI. The more money you have available, even if we’re not using it for your down payment, the more likely we’re going to be to get that automated approval. 

[00:04:11] Jeb Smith, Huntington Beach Realtor: Got it. Now, is this just for first time home buyers?

A lot of these low down payment, grant type programs or somebody’s willing to give you money are only for those people who haven’t owned a property in say, the last three years, is this any different? 

[00:04:24] Josh Lewis, Expert Mortgage Broker: It is, there’s a primary residence requirement. It is not limited only to first time buyers. They are trying to help people at 80% of the area of median income. So in practical purposes out there in the wild, are there a lot of people with low incomes that have 1, 2, 3, 4 rental properties? Not many, but they’re out there. Just not a whole lot of ’em. 

[00:04:43] Jeb Smith, Huntington Beach Realtor: And when I hear, this initial requirement, Josh, I immediately think Southern California, it’s not gonna work, right? Just the prices are way too high for someone with 80% of the area median income to, to even qualify for a property here, even if they met all of the other requirements. And it can be other states other than California, but California comes to mind because that’s where we sell real estate.

States like New York in any states that have high cost real estate can be a problem. But if you qualify for this, quite frankly it’s a good loan. It’s a good opportunity to get into home ownership. So let’s talk about the two different programs, Josh. Let’s start with I think the lesser of the two, in my opinion.

I think one is a little bit better option than the other. So let’s start with the lesser option, and that is the one from United Wholesale Mortgage. It’s the UWM conventional 1% down. 

[00:05:39] Josh Lewis, Expert Mortgage Broker: Yep. So the bigger limitation, there’s two limitations that make this less good than the OnePlus option from Rocket in that this program with United Wholesale will allow you to go to a higher loan amount. They don’t cap the loan amount, but they cap your credit. 

So they’re telling you they’ll give you 1% up to [00:06:00] $4,000. So anything over a $200,000 purchase price, you’re not getting their 2%. So if you’re buying a $500,000 property, Awesome. They will allow you to use this program, but they’re capping you at $4,000, which is less than 1%.

So you’re putting like 2.2% down and they’re coming up with 4,000. It’s still free money. It’s still beneficial. And one of the big benefits of HomeReady and Home Possible, the two of the big benefits are there’s no loan level price adjustments. We did an episode two, three weeks ago, Jeb, explaining the changes to loan level price adjustments.

If you are Home Ready or Home Possible eligible with these programs fall under that all LLPAs waived. So you are going to get a better interest rate to begin with, and you also qualify for reduced mortgage insurance. A standard 3% down requires 35% mortgage insurance coverage. With this, you only have to pay for 25% mortgage insurance coverage. 

And Jeb, that is the big difference between the program from Rocket and the program from UWM. Rocket is covering the mortgage insurance for you. It’s there, it is being paid. It is not being paid by you. UWM does have you paying the mortgage insurance.

So it’s a reduced coverage. If you have a really good score, it’s gonna be fairly minimal. But for lower credit score borrowers, it’s a pretty big difference. So what are those two limitations We’re looking at? You’re gonna get a maximum credit from them of $4,000. You’re going to have to pay monthly mortgage insurance. So it makes that debt to income ratio even tighter.

[00:07:31] Jeb Smith, Huntington Beach Realtor: Let’s use an example here. We laid out a couple of examples using this particular program. So let’s first start with the example of a $200,000 purchase price. So if you’re in an area of the country, That where you’re able to buy a home at $200,000, you meet the income requirement, you’re 80% less or less than the area median income.

You have a credit score of at least 620. Your debt to income ratio essentially falls under that 50% cap, if you will. Automated underwriting approves you. What does that look like as far as a down payment? Josh, what are you having to come up with? 

[00:08:03] Josh Lewis, Expert Mortgage Broker: The 3% on 200,000 is $6,000. You’re within the cap for United Wholesale.

They’re gonna give you $4,000 and you’re gonna pay $2,000. So a $6,000 total down payment, you’re gonna have $194,000 loan, but only $2000 of that is coming from you, $ 4,000 of that is coming from United Wholesale. And Jeb a small tangent here. For those of you that listen in California, even places like Florida. Anywhere where home prices are higher, you may say, this is stupid. You can’t buy a house for $200,000. 

We’re gonna go through an example here, and I looked at a couple of different markets. For those of us in high cost areas, it may be impossible to fathom, but there are parts of the country where you can get a nice home. For $200,000. Not a shack, not something beat up, not gross.

So we talk about the importance of home ownership. We talk about it maybe being more important than your geographic location. If you have never looked some night, grab your phone, pull out Redfin, pull out Zillow, and start looking at those flyover states and look at [00:09:00] the quality of home you can get for 150 to $250,000. 

[00:09:05] Jeb Smith, Huntington Beach Realtor: Now, Josh, I think it’s also important to note here when we talk about closing cost and or down payment, you have 1% down, you’ve got two grand, they’re giving you the other four. So essentially you’re coming in with, your $2,000 and you’re able to satisfy the down payment requirements.

But nowhere have we mentioned at the moment closing costs. And we’re not gonna get into detail here about closing costs. We’ve talked about it in other episodes, but, Is someone able to buy a house without having any other funds other than that $2,000? Or do they need money for closing costs? Can they get credits for that closing cost?

How does that piece work?

[00:09:40] Josh Lewis, Expert Mortgage Broker: You can get a lender credit. You can get a seller credit, and it can cover Any and all of those closing costs for you. There are limits on it. They couldn’t give you a $50,000 credit, but for the most part, unless you ended up in a really high closing cost state at that low purchase price, the allowable credits from sellers and or lender, and the lender’s not gonna give it to you outta the kindness of their heart.

These guys are legitimately giving you money out of the kindness of their heart or for good pr. But you will take a higher interest rate if you want an additional credit from the lender. So the more likely route in the current market, the way rate sheets stack up, is that you’re going to ask a seller for the credit.

So depending on the strength of your market, Talk to your realtor and see how realistic it is to get the seller to cover those closing costs. But in theory, a cooperative seller, a property that will appraise, seller can pay all your closing costs. You put 3% down, 2% of which is covered by the lender.

[00:10:32] Jeb Smith, Huntington Beach Realtor: Okay. And one more question before we talk about the Rocket program is, are you able to do this on investment property? Say I own a primary, you said I could buy another home. Can I buy a property that I’m gonna turn into an investment at some point in the future, maybe two to four units and do this type of thing?

[00:10:47] Josh Lewis, Expert Mortgage Broker: No multiple limitations here. So no two to four units. You can do condos, you can do PUDs. With UWM that has to go through Freddie Mac system, which I wouldn’t say 99 times out of a hundred, but 96, 97 times out of a hundred if DU, Fannie Mae’s system approves you, LPA Freddie Mac’s system will approve you.

But there are times when someone may only get approved through one versus the other. Especially when we’re talking lower credit scores, higher debt to income ratios like we are right now. And Jeb, we need to close the loop. Just we gave the $200,000 example where you’re maximizing the benefit from UWM.

Let’s say you buy a $600,000 house, which UWM will allow you to do. Rocket will not allow you to go over $350,000. UWM will let you go higher, $600,000, so their max that they’re gonna give you is $4,000. So you’re getting the same credit as the person who did the $200,000 purchase. The difference is, instead of you coming up with $2,000, you’re gonna come up with $14,000, which is 2.33%.

So it’s 600,000. 3% is $18,000, $14,000 from you, $4,000 cap from UWM. 

[00:11:50] Jeb Smith, Huntington Beach Realtor: So the way I look at this, if I were gonna buy a house and I was planning to put 3% down and use this program to start, and I met all the other requirements, there’s no world in which I wouldn’t go [00:12:00] see if I qualified for this, because they’re gonna give you $4,000.

So it may not be the full 2% if you’re buying a lesser property, but at the end of the day, $4,000 is $4,000. So if you have that possibility, if you’re already pre-approved or potentially looking at homes in that price point, definitely something to consider if you’re putting that minimal down payment down.

Now, Josh, you mentioned something just now about Rocket being different with regards to the max loan amount Instead of talking everything that Rocket allows, why don’t we just talk about the differences between UWM and Rocket, and let’s start with the loan amount. You mentioned a max of $350,000. 

[00:12:36] Josh Lewis, Expert Mortgage Broker: So UWM to my understanding, will only allow you to do the 3% down if you want or need to put anything more down, you cannot.

With Rocket One, they will allow you to put up to 4.99% down, so less than 5% down you will do this. Doesn’t change what they’re going to give you. They’re gonna do the same thing. They’re gonna give you 2% of that down payment require a 3% down payment. So one from you, two from them.

They have a maximum loan amount. It’s $350,000. So if you’re doing the math at home, if you’re buying a $300, $350,000 house, you don’t want to get capped out with the $4,000 from UWM. You would rather get the loan from Rocket, cuz at 300,000 they’re gonna give you six grand. At three 50 they’re gonna give you seven grand and you’re able to go to a higher price point with you still only coming in with the 1% down.

The bigger, better, more important thing is that in addition to covering that 2% for you, Rocket is also going to eat the cost of your mortgage insurance. So they’re gonna do lender paid mortgage insurance, so it still gets paid. It’s just they are also paying for that for you. So it’s going to make a very big difference.

And I would go so far, Jeb, we’re talking about. Borrowers at 80% or less of the area median income by definition, are going to be tight on their debt to income ratio. Eliminating that mortgage insurance is going to make a big difference, so I don’t even know if it’s a choice for most people as to which program they would be going with.

You may only qualify under Rocket One+ where you wouldn’t qualify under UWM’s program. 

[00:14:05] Jeb Smith, Huntington Beach Realtor: Now something I think is important to note many of you guys listening know that I’m no longer in the mortgage business, was in the mortgage business for 10 plus years, and now I just sell real estate. So come at you with an unbiased opinion with regards to these two programs.

But when you hear the word Rocket Mortgage, a lot of you think that you need to get online, type in Rocket Mortgage and call the phone number online in order to talk to somebody that can help with you with this particular program, and that is not the case. Brokers out there have access to typically one or two of, these lenders.

A lot of people that work with Rocket can’t work with UWM and vice versa. So if this sparks any interest at all, there’s a referral link in the description. Go to it. Let us refer you to a mortgage broker, somebody that is, not a kid in a call center that just gets, paid to type in income and numbers, if you will, and has no idea what they’re doing.

You’ll actually be referred to a professional, someone that can guide you [00:15:00] through the process, answer your questions like Josh and I are going into detail here. So just something important to note, a lot of people think that Rocket only does retail side business. That’s not true. They do wholesale business, which brokers have access to.

And with that, Josh I mentioned earlier, I think Rocket is the better of the two mortgages. The no mortgage insurance is huge. The fact that they go to, give you upwards of $7,000 towards the down payment is huge. Especially if you’re in an area where you can buy a home for $350,000 or less. 

That’s gonna be a big difference. And also with Rocket, something you haven’t mentioned yet that you’re going to get into, is that you can actually put a little bit more money down with Rocket if you were planning to do that. You could still put your full 3% down that you were going to do, and they’ll still give you the 2% upfront to make it, a better loan all the way around.

[00:15:50] Josh Lewis, Expert Mortgage Broker: We, we talk frequently, Jeb. There’s no such thing as free money. We get people asking all the time. What about down payment assistance? What about this program? What about that program? Very few assistance programs are actual grants. Most of them are a silent second, something you’re gonna repay. Or if it is true free money, you’re paying a much higher interest rate for it. So your payment is higher, you’re less likely to qualify. 

Both of these programs are legit true free money. So if you are at or below 80% of the area median income for where you are buying the property, you would be foolish to not go with one of these programs. And an important note, United Wholesale, they don’t have a direct retail division. You cannot go to them. You can only get to them through a broker. 

Rocket does all of the above. You can go through them through retail. But what I will say is not only do you likely get a more experienced, knowledgeable loan professional, if you go directly through a broker, it’s a not so secret that the terms that you will get getting a loan through a broker to go to Rocket versus through Rocket Direct are gonna be much, much better.

So you’ll get better terms and a better experience. A couple notes that I wanted to make here, Jeb. UWM, they estimate that 10% of the loans they do every month will meet these criteria, and the cost to them is gonna be up about $20 million per month. You and I hear that when we go, that’s astounding. That’s $240 million a year. Huge company. They make billions. The PR is good enough for them to strengthen and build the relationships with their brokers by helping them help more borrowers and giving them a tool that is wholesale specific, meaning only through a broker to go out and sell.

Rocket in their numbers they estimate that more than 90 million people can meet the income requirement. So about a quarter of the US population can meet the income requirements, meaning 80% or less of the area income. Doesn’t mean you’re also gonna be eligible for a loan, have enough income qualifying, but this is by all means, Jeb, a niche program.

But if you meet that niche, Take advantage of it. Take advantage of one or the other. Neither of them are bad. I agree with you that the Rocket program in this instance is better, which it’s surprising to me. Dan Gilbert, the owner of [00:18:00] Rocket and Matt Ishbia, the owner of UWM, are like in a death match.

They despise each other and generally they do not like letting one get a leg up on the other. So UWM came out with this first, Rocket came and topped it. It wouldn’t surprise me if UWM matched it or even improved it in the near term, but for right now I think we can all say that Rocket is the better program unless you are buying something well above $350,000 where it gets a little bit difficult to qualify.

[00:18:27] Jeb Smith, Huntington Beach Realtor: Yeah. And it would be harder to qualify, if you’re buying it. The max loan amount, I think is what, $726,200? With UWM, if you’re buying it that loan amount and you only make area 80% of the area median income, that’s gonna be an issue. Chances are you’re not gonna meet the income qualifications where interest rates are today.

But, we’ve said a lot of information here, Josh. Let’s recap it. What are we really talking about when we’re talking about this quote, unquote, 1% down mortgage? 

[00:18:53] Josh Lewis, Expert Mortgage Broker: You’re getting a 3% down mortgage. To qualify, you have to be at 80% or less of the area median income. You’re gonna put 1% down, and the lender is gonna give you up to 2%.

So if you cap at the UWM $4,000, you may have to come up with more. With UWM you’ll have mortgage insurance, but it’ll be reduced. With Rocket, you will have no mortgage insurance. So awesome program has to be owner occupied. Two to four units, even if you’re gonna live in one of those units, is not going to work.

I did not get the detail to see if UWM will allow a manufactured home. Rocket will allow a manufactured home. In that instance, they require 5% down. A lot of parts of the country, again, a manufactured home can be an awesome option. You own the land. Some of these newer manufactured homes are very nice and at a lower price point.

So those are the big things that I would be looking at. So you need to have a 620 credit score. You have to get an automated approval. So it’s not free money for anyone. It’s free money for people who are good candidates to be successful homeowners. 

[00:19:52] Jeb Smith, Huntington Beach Realtor: And something I want to note here before we dive into some examples of different areas of the country is that if you’re putting just 1% down, even though the lender’s giving you 2% down, you need to have a longer term time horizon.

You shouldn’t be thinking about buying a house, selling it in a year, two years, that sort of thing. And the reason for that is there’s a really good chance you’re gonna have little to no equity in the property for a couple of years. And it costs nearly five, six, 7% in some areas of the country to sell a home.

So if you’re only putting 3% down and home prices stay flat, don’t really appreciate, you haven’t really paid down the principle, you go to sell it. There’s a chance there that you owe more than you have equity in that home and you’re gonna actually have to pay money. So having a longer term time horizon is very important especially when you’re putting a minimal down, like 3%. 

On top of that, you wanna have money in the bank, you wanna be comfortable with the payment, job security, all of those things we talk about. So yes, 1% down mortgages are great, but also being in the right place in your life for home ownership is equally as important as anything we’ve said today. 

So Josh. That said, let’s [00:21:00] give the listeners some examples. Let’s start with Omaha, Nebraska. Looks like you can get a property for around $250,000, which essentially isn’t going to allow us to use the UWM program but would in this case, allow us to use the Rocket program. What does that look like? 

[00:21:16] Josh Lewis, Expert Mortgage Broker: It wouldn’t allow you to max out the UWM program. You can absolutely still use it. You’re just gonna get capped. You’re gonna have a 7,500 down payment, they’re gonna give you 4,000, so you’d have to come up with $3,500.

So both are options there. This is important, the most important thing about these examples. As I said before, that $250,000 house in Omaha, it wasn’t one house, I found many of them, but 16 to 1800 square foot, three, four bedroom, two bath house, clean, nice home that you would be happy to raise your family in.

[00:21:43] Jeb Smith, Huntington Beach Realtor: Buffet could be your neighbor. 

[00:21:44] Josh Lewis, Expert Mortgage Broker: Yeah. Warren Buffet could be your neighbor. He has a sausage McMuffin every morning for breakfast, 

[00:21:48] Jeb Smith, Huntington Beach Realtor: I believe a Pepsi, 

[00:21:49] Josh Lewis, Expert Mortgage Broker: I believe that is the secret to long life. 

[00:21:51] Jeb Smith, Huntington Beach Realtor: Not a Pepsi Coke, right? He’s a Coke guy. Yeah, he’s a Coke guy. Yeah, I flew in side note, flew into Omaha, Nebraska one time. I went to the Berkshire Hathaway annual meeting, the worst flight I’ve ever been on in my entire life. You’re in the middle of, country, just flatland and the wind blows like hell out there. That plane moved more side to side than I’ve ever had in my entire life. 

Was dead silent. Thought there was a chance I was gonna die. I’m not scared of flying. Side note, doesn’t really matter, but just thought it was interesting. 

 Area median income, Omaha, Nebraska, $95,100. Pretty good. 

[00:22:29] Josh Lewis, Expert Mortgage Broker: Pretty good, Jeb, I’m just gonna jump ahead and give you a sneak preview. When we get to Los Angeles, California, the media, a hundred percent of the area media income is 117,480.

So what are we talking $20,000 difference? Yeah. The home prices are 35% of what we have in California for entry level homes, but income is 80% of what we see. So if we take that down to 80%, $76,000 if you’re making less than $76,080 household qualifying income. 

I say qualifying income, that’s important. I don’t have to disclose all of your income on the loan application. If we have income that can be documented, verified that is under that, and it allows you to qualify. We can go that route. But with that, your max monthly income, $76,080 translates to $6340 a month at a 50% debt to income. No guarantee you can go that high, but that would be the high end.

You could have a $3170 housing payment if you had no other debt. So in this instance, that $250,000 house with 3% down, I ran these numbers at 6.875% as of today. You might be able to get better, could get worse over the next few weeks. We’ve been chopping back and forth, but your principal interest, taxes and insurance would be $1,966 a month.

So you could have a couple, $300 car payments and a credit card in there and still qualify if you’re at the high end of that area median income. If you’re making $60,000, you can probably still qualify and I will go back and say smaller homes, $200-$220,000 in Omaha. So in much of the Midwest, you are going to be in a market where you can take advantage [00:24:00] of one of these programs.

So if you are closer to us here in California, one of the things we’ve talked about is the central California market. Fresno, Visalia, Tulare, Bakersfield. 

[00:24:09] Jeb Smith, Huntington Beach Realtor: Now before you jump into that, Josh, you said qualifying income. Something I wanna verify cuz I have questions here. Qualifying income, typically husband and wife go on an application together, say both have jobs say both make combined more than the area median income. 

So for example, here in Southern California, that’s gonna be $97,900, 80% of the area median income. Say they make combined $150,000. You’re saying that you can leave one of them off and just use the other as long as that other one has enough income in order to qualify for themselves, but they can both go on the loan application.

[00:24:44] Josh Lewis, Expert Mortgage Broker: Yep. 

[00:24:44] Jeb Smith, Huntington Beach Realtor: Is that right? Okay. Yep. But what if the one income’s not enough? And the other borrower combined makes, total $150k, is that still an option? Can you only use part of their income? 

[00:24:56] Josh Lewis, Expert Mortgage Broker: No, you are outta luck. Any income that you have to use, you have to go with the underwriting guidelines for how you calculate that income.

All borrowers get added up, so if you don’t need the income, you can take the income off and not go through it. An example that we have right now, Jeb, you and I are closing one hopefully this morning with a client that the wife has a regular job and she also drives for Uber. It adds about a thousand dollars a month to her income.

A lot of people, this would push them over the top. So you take that away or don’t declare that income, use just the W2 income for both employers. You can still get in on this program. 

[00:25:28] Jeb Smith, Huntington Beach Realtor: Got it. Good stuff. So you were talking about Central California. Talk about Fresno. A hundred percent of the area median income is $72,900.

So 80% of that’s $58,320. Were you able to find property that would essentially meet the qualifications here in order to do this type of financing. 

[00:25:47] Josh Lewis, Expert Mortgage Broker: I found nice homes that you would be willing to live in just over $300,000. So we just reduced your area median income by a chunk, $18,000, and we increased the purchase price by about $60,000.

So at this instance, you absolutely wouldn’t really want to consider UWM because 3% down on a $310k is $9,300 bucks, and you’re only getting $4,000 from UWM. So from that perspective pushes you towards Rocket. The monthly max income is $4860, the max monthly payment at 50% if you could qualify that way as $2430. We can squeak this one in if you have no other debts. We got a total payment of $2361. 

So it definitely gets tighter. Much more difficult to do, but you can do that. So I think of this in terms of if you live in Los Angeles County and you’re like, I’m just priced out. I can’t own, we talk about this. Owning a home is really important. Especially if you have a job where you can work remotely, that whole central California, Fresno, Visalia, Tula, Bakersfield, you can get to areas that have more reasonably priced homes and possibly get in with a program like this.

Now, if you’re not willing or able to go that far, say you need to commute into Los Angeles every day for a job. Ran these numbers here for Lancaster, California. So [00:27:00] $465,000, we can get a decent house for. So you’re gonna say Rocket’s outta the game. Max loan amount, $350k max loan to value, 95.01. So yes, Rocket no longer an option here. 

So we’re really talking about UWM. We’re really talking about getting a $4,000 grant towards your closing. But in this situation Lancaster $117,480, a hundred percent of the area median income gives you $97,900. So, you can have household income of $8,158 bucks, maximum monthly payments of $4,079 at 50%. That mortgage on a $465k property, today’s rates would be about $3505, so we can squeak you in there if you have no other debts.

Now, just to make everyone chuckle I did search for Los Angeles County. I searched all of Los Angeles County. I found two condos that were under $300,000. Unfortunately, the reason why they were under that price point is they had a $900 a month HOA, so it’s probably more the equivalent of 350, $360,000 condo with a normal HOA.

So with that, you could just barely squeak it in. Again, same numbers. You can have a payment up to 4,079. The P I T I on, that’s about $3128. So in looking at those numbers, it’s possible, highly unlikely. There is literally a handful of condos that would qualify in Los Angeles County. Orange County is probably gonna be worse than that.

So if you are in a high cost area, you probably didn’t listen to this show cause it’s probably not worth even considering. But, 60, 70% of the country, entry level homes, this is an option for borrowers who have little debt and meet that 80% or less income requirement. 

[00:28:42] Jeb Smith, Huntington Beach Realtor: Yeah. You quoted Rocket Mortgage earlier, that 90 million people can meet the income requirement It’s a lot of people out there and a lot of ’em probably aren’t homeowners giving, again, the chance to increase home ownership. So is this something that’s going to last forever?

Is this a program that’s gonna be around, two, three years from now? Hard to say, right? We don’t know how much of this they’re going to do. Do they have a budget set up within their own system, their guidelines of what they’re willing to do? Josh? I don’t know the answer to that.

I’m thinking not at the moment, but I’m sure there’s somewhere in somebody in the backside going, we can only do so many of these before, it doesn’t make sense financially. It’ll be interesting nonetheless. 

[00:29:18] Josh Lewis, Expert Mortgage Broker: Absolutely. And it is truly out of either the kindness of their heart or the belief that the corporate goodwill will make them more money over the long haul.

Let’s make no mistake make no mistake about this though, Jeb. They are losing money on these loans. So it is free money and the lenders, as a result of giving you this free money, are losing money on these loans. So if you’re thinking about it, you’re at the right point in your life where home ownership makes sense and you qualify. It would be foolish to not take advantage of some free money when you can get it. 

[00:29:46] Jeb Smith, Huntington Beach Realtor: So with that said, if you need a lender anywhere in the country that can guide you through this process, whether it be UWM or Rocket, there’s a link in the description below. Click on it. We’re happy to refer you to somebody we know, and trust that can guide you through that process.

If you’re here in California, in the western [00:30:00] part of the United States, could be Josh himself, giving you a call and having that conversation. So you get to work with the expert directly, which is obviously a good place to start. As always, we appreciate you guys being here. We appreciate the continued support.

We appreciate you guys getting us to over a thousand subs on YouTube. If you’re not following us there, go check it out, but until next time, Adios 

[00:30:23] Josh Lewis, Expert Mortgage Broker: and Vaya con Dios.

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