How the Increase in Area Median Income Empowers First-Time Home Buyers

In exciting news for high-cost areas, the area median income is set to increase in 2025, providing even more opportunities for first-time home buyers and those leveraging home loan programs with minimal down payments. Here’s how the changes will affect prospective buyers and what it means for the market.

Understanding the Changes

• The area median income for the Home Possible program, which is a 3% down payment initiative by Freddie Mac and Fannie Mae, will rise from $122,320 to $129,600 gross income annually.
• This increase allows buyers to qualify for more home, reduce interest rates, and make lower down payments of 3%, 5%, or 10%.

Benefits for First-Time Home Buyers

• First-time home buyer status is defined as not having owned a home in the last three years.
• The income cap for qualification is increasing from $183,400 to $194,400.
• This expansion means more individuals can qualify for better loan conditions, including lower loan-to-value price adjustments.

Calculating the Impact

• With the old income cap of $122,300: Monthly gross income is $10,191.
• Under new limits of $129,600: Monthly gross income is $10,800.
• Mortgage lenders typically permit using 50% of gross income for total debt; this example assumes a conservative 49%.
• Assume $1,000 for other debts, leaving more room in monthly calculations under new limits.

Loan Scenarios

• Old Scenario: With a 6.5% rate, loan amounts capped at approximately $631,984, with a purchase price of $671,446.
• New Scenario: Under new income limits, loan amounts elevate to $679,040 with a purchase price of $715,773, given 3% down at 6.5% interest.
• The difference is significant—$44,327 more purchasing power under new limits for only a 3% down payment.

High-Cost Area Adjustments

• Across the U.S., understanding whether you’re in a high-cost area is critical.
• Standard areas operate at 100% of area median income, high-cost regions at 120%, and for specific programs like Home Possible/Home Ready, it’s 80%.

A Boon for Realtors and Buyers Alike

• These changes, effective May 18th, mean more buyers will find options available to them, notably in metropolitan and high-demand areas.
• This provides an excellent opportunity for realtors in places like Fairfax, Arlington, and the broader DMV area.

Conclusion

This development is promising for real estate professionals and buyers, signifying expanded eligibility and more accessible homeownership. As the owner of First Meridian Mortgage, Kevin Recher is eager to assist you in navigating these changes. Feel free to reach out for more personalized advice.

Contact Information

For further assistance or questions about these changes, don’t hesitate to contact Kevin Recher at (703) 799-5626.

Here is a link to the Virginia, Maryland and DC county limits.

Th download a list of all counties 2025 AMI click here.  

Freddie Mac  page.

The Power of VA Home Loans: A Comprehensive Guide

As someone who has worked with countless veterans and active-duty members, I’ve always been an advocate for leveraging the benefits provided to those who have ser

ved our country. One of the most powerful resources available to eligible veterans, service members, and surviving spouses is the VA home loan. In this post, I’ll delve into why VA loans stand out among other types of loans, such as FHA and conventional loans, and how they can be advantageous for consumers, realtors, and lenders alike.

Understanding Eligibility and Benefits

First things first, let’s address eligibility. To qualify for a VA loan, you must be a veteran, an active-duty service member, or an eligible surviving spouse. Once you have this benefit, it does not expire. Whether you served 40 years ago or just returned to civilian life, as long as you don’t have an existing VA loan, you can apply for a new one.

Key Benefits:

1. Zero Down Payment: Unlike conventional loans, VA loans require no down payment, making it easier for veterans to purchase a home without the need to save a substantial amount of money.
2. No Mortgage Insurance (MI): VA loans do not require private mortgage insurance, which can save veterans hundreds of dollars each month.
3. Competitive Interest Rates: VA loans often come with lower interest rates compared to conventional loans, resulting in significant savings over the life of the loan.

How the VA Funding Fee Works

The VA guarantees 25% of the loan, which eliminates the need for MI. This guarantee is financed through the VA funding fee. For first-time use, the fee is 2.15% of the loan amount and increases slightly for subsequent uses. However, putting down 5% or 10% can reduce this fee. For veterans receiving VA disability benefits, this fee may be waived altogether.

Flexible Guidelines for a Smooth Process

VA loans offer more flexible income and credit guidelines compared to conventional loans, making it easier for veterans with lower credit scores to qualify. Additionally, the VA uses a residual income model, considering the money left over after expenses to ensure that veterans can comfortably afford their homes.

Addressing Common Misconceptions

Some real estate agents and buyers express concerns about VA appraisers. However, the VA’s Tidewater Initiative allows for additional comps to be submitted, which can challenge an initial low appraisal. These measures protect not only the veteran but also the sellers and buyers involved.

Conclusion: Why Choose a VA Loan?

In my career, I’ve never encountered a VA loan that was denied due to credit or income guidelines. The combination of no down payment, no MI, and competitive interest rates makes

the VA loan the best choice for those who have served. If you’re considering a VA loan or need help determining your eligibility, contact me, Kevin Retcher, at First Meridian Mortgage. I’m here to serve you just as you’ve served our nation, regardless of the state you’re in.

Let’s make the dream of homeownership a reality for our veterans.