Solano Real Estate Scene: Jim Porter
Article By: Jim Porter – October 4, 2024
The CalHFA rate for a 30-year fixed conventional loan is 6% and the FHA version of this first-time homebuyer program that offers down payment assistance is 5.75% this week.
The government requires bankers and brokers to disclose the APR (annual percentage rate) whenever an interest rate is quoted, so heads up folks, the APR on the CalHFA conventional loan pencils out to around 6.55% based on a 753 FICO buyer at 97% loan-to-value and 6.71% for the FHA buyer at 96.5% loan-to-value.
Back in 1968, the Truth in Lending Act, or TILA, was passed to keep lending institutions honest, which ain’t a bad idea considering some of the shenanigans we have all seen coming from Wall Street over the years. TILA requires lenders to disclose APR.
I have been educating employees and consumers on what an APR is by simply explaining it this way. If you borrow $100,000 from someone on a one-year term and you pay them a 12% interest rate with no points, fees, PMI or closing costs, the APR would be 12%.
If this lender charged a 4% fee for the one-year loan on top of the 12% interest, the APR would be 16%, and if the lender gave the borrower a two-year term to pay off the loan, the APR would be 14%.
APR = the average cost of the loan over the term of the loan and the cost of the loan is of course the interest charged based on the loan amount, the fees charged at the time of the loan funding, and the PMI or FHA MIP charged up front and monthly.
Since the Fed rate cut, mortgage rates have risen a tiny bit but overall, mortgage rates are at a 24-month low. This means interest rates and APRs are now making first-time homebuyers jump off the fence, and we are finally seeing a better level of inventory here in the North Bay.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
