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Posted 07/21/2016

Low-Down Payment Mortgage Loans Boost U.S. Housing Starts

Single-Family Housing Starts continue to move higher nationwide

Housing Starts Helped By Low Down Payment Loans

Single-family housing starts climbed in June, and remain above year-ago levels.

As compared to last year, starts are up 13% percent on a seasonally-adjusted, annualized basis, reaching 778,000 units nationwide. Starts are also up four percent from the month prior.

A "started" home is one on which ground has been broken.

May starts are roughly flat from the month prior, and home builder confidence remains high with demand for homes outpacing supply. Housing starts have been fueled by rising rents, cheap mortgage rates, and an abundance of low- and no-downpayment mortgages.

The¬†80/10/10 piggyback loan¬†has been in high demand of late,¬†and buyers are finding the¬†Fannie Mae HomeReady‚ĄĘ¬†home loan to be a worthwhile alternative to FHA lending.

The math for "Should I rent or should I buy?" has shifted and this month's housing starts data reflects that.

It's an excellent time to shop for a home.

Click to see today's rates (Aug 27th, 2016)

"Single-Family" Housing Starts Matter Most

Each month, the U.S. Census Bureau and HUD co-publish the Housing Starts report.

Housing starts are broken in three categories, by property type.

  • 1-Unit: Single-family homes, including row homes and town homes
  • 2-4 Unit: Multi-unit, residential residences with two-to-four units total
  • 5+ Unit: Multi-unit, residential buildings with five or more units total

Structures with five or more units are more commonly known as "apartment buildings". Apartment buildings are characterized by a common basement, heating system, entrance, water supply and sewage disposal.

Each apartment unit is considered a "start". An apartment building with 150 planned units, therefore, is tallied as 150 housing starts.

The government reports that Single-Faily Housing Starts rose 13% last month from the year-ago period, and that apartment starts also rose ten percent.

Changes in apartment building construction, however, is of little importance to buyers like you and me.

This is because apartments are typically built by, and owned by, developers to use for rental housing. The majority of U.S. buyers don't operate in this market. Everyday buyers don't build or purchase entire apartment buildings -- we live in single-family homes.

Tracking single-family housing starts, then, can be a better way to gauge the U.S. new construction.

Single-family starts remain above their 6-month and 12-month average; and, suggest continued strength through 2016 and into 2017.

Click to see today's rates (Aug 27th, 2016)

Builders May Soon Raise Home Prices

With last month's housing starts data, the data follows an upward trend line. It's no wonder U.S. builders are optimistic for the future.

According to the National Association of Homebuilders, on a scale of 1-100, builder confidence read 59 this month.

Readings over 50 are significant because when homebuilder confidence is 50 or better, it suggests "good" conditions for selling new homes. The market has been "good" for 24 straight months.

New construction remains concentrated in southern states.

The South Region, which includes Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia, West Virginia, Alabama, Kentucky, Mississippi, Tennessee, Arkansas, Louisiana, Oklahoma, and Texas accounted for 54% of last month's U.S. single-family housing starts.

The Northeast Region, which includes Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont accounted for just 10 percent of single-family starts.

Click to see today's rates (Aug 27th, 2016)

Mortgage Loans For New Homes

The 2015 housing market was a good one. 2016 is proving to be even better.

Demand for homes is outpacing supply and mortgage rates have started the year in a downward spiral. Furthermore, nationwide, unadjusted home values have surpassed last decade's peak.

Multiple-offer situations are common and homes are selling quickly.

If you've been in the market for a home, no doubt you've noticed. It's a competitive market and putting your best foot forward is essential if you want to "get the house".

The good news is that mortgage approvals are getting simpler.

In addition to reducing their loan approval standards, mortgage lenders have recently lowered minimum credit score requirements, made concessions for self-employed income, and granted leniency on loans which "make sense".

Furthermore, there are more low- and no-down payment loans available than during any period this decade.

In addition to the¬†Conventional 97 program and HomeReady‚ĄĘ programs, which are backed by Fannie Mae and require just 3% down, demand for the FHA 96.5% LTV program is high, as are requests for "piggyback loans".

There are also the VA and USDA loan programs -- both of which allow 100% financing.

VA loans are available to eligible active-duty military personnel, veterans of the armed services, members of the national guard and reserves, and surviving spouses. They are optionally no money down and require no mortgage insurance.

USDA loans are also no money down, backed by the U.S. Department of Agriculture. USDA loans can be used in many rural and suburban areas nationwide.

USDA mortgage rates are typically the lowest of all government-backed loans, and mortgage insurance rates are minuscule compared to other low-downpayment programs.

With home prices expected to rise through the end of 2016, the availability of low- and no-downpayment mortgages will be a boon to U.S. buyers -- especially if current mortgage rates remain low.

What Are Today's Mortgage Rates?

The housing market appears to be growing and mortgage rates remain cheap. If you're planning to buy new construction, the best opportunities may be the ones you find now.

Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

Click to see today's rates (Aug 27th, 2016)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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2016 Conforming, FHA, & VA Loan Limits

Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)