Published 9:03 pm, Saturday, December 2, 2017
The Permian Basin Board of Realtors recently released its updated housing data. Among the data is the year-to-date average median price for a home: $254,300.
According to the Bureau of Labor Statistics’ 2016 wage data, its most recent, Midlanders have an annual mean wage of $53,190. Is that enough money to qualify for a mortgage at the median home price?
The Reporter-Telegram reached out to online lending exchange LendingTree, which since 1996 has connected borrowers with mortgage lenders, to evaluate the scenario.
Chief Economist Tendayi Kapfidze assumed the following for a typical Midland resident seeking a standard conforming mortgage:
— A $254,300 home price.
— A 20 percent down payment, or $50,860.
— $800 per month in other debt obligations, including a $400 average auto loan payment, $200 credit card payment and $200 student loan payment.
— A credit score above 680.
— Mortgage payments — including taxes, insurance, association fees and private mortgage insurance — no greater than 28 percent of monthly gross income.
— Mortgage payments and other debt obligations combined not exceeding monthly gross income.
“Throw all of that into the soup, and you come around to an income of between $55,000 and $65,000. Let’s call it above $60,000 to be on the safe side,” Kapfidze said. “That’s what a standardized loan would like look in the marketplace.”
Based on the BLS data, then, the typical Midlander doesn’t earn enough money to qualify for a conforming mortgage. However, there are other options.
Standard conforming loans, which go through Fannie Mae or Freddie Mac, have the best interest rates for high-quality borrowers and require a 20 percent down payment, Kapfidze said, adding that meeting the down payment is often the greatest obstacle for borrowers.
For borrowers who want to use “an accessible product” such as through the Federal Housing Administration, a 3 percent down payment is required, which My Community Federal Credit Union offered the Reporter-Telegram as a scenario.
For MCFCU, a borrower without debt and a good credit score would have to earn $50,000 minimum in order to qualify for a loan with a 3 percent down payment, or $7,629.
Kapfidze said that FHA loans have a large government guarantee behind them. “They’ll get a loan backed by the FHA, which goes through a different government agency called Ginnie Mae. If you go through Ginnie Mae, you have much lower down payment requirements.”
Other aspects of an FHA mortgage are paying a mortgage insurance premium up front for many years, possibly for the entire length of the mortgage, according to a LendingTree explainer. The premium supports the mortgage insurance program that makes FHA loans possible. Also, FHA mortgages require the homebuyer or co-buyer to occupy the property.
Bottom line: For the average Midlander who wants to buy a median-priced home, a standard conforming mortgage might be more difficult to obtain because of income, higher down payment requirement and other factors; however, an FHA loan is more feasible to qualify for because of the lower down payment, but these loans come with their own requirements such as paying insurance premiums up front.
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