Keeping your nose to the grindstone, using credit wisely and responsibly and paying your bills on time every month have their rewards, no matter how much or how little money you make.

One reward is how much easier it is to realize your piece of the American Dream – the opportunity to purchase your own home. A bonus for the low-income earner is a government-backed loan with no down payment.

The United States Department of Agriculture (USDA) Rural Development Single Family Housing programs may just be the best option for low-income folks with good credit and a steady job to buy a house.

Two types of loans for homebuyers

The two most popular USDA home loan programs are the Homeownership Direct Loan Program and the Guaranteed Loan.

Both of these programs aim to help low-to-moderate-income people purchase homes in rural areas. Both have no down payment requirement.

The key differences between the direct loan and the guaranteed loan are as follows:

• Direct loans are intended for low and very-low income purchasers that have been unable to obtain a conventional or FHA loan. Guaranteed loans are intended for those with moderate incomes.

• Income levels for guaranteed loan borrowers are capped at 115 percent of the area’s median income, while those for direct loan borrowers are capped at 80 percent.

• The guaranteed loan is made by a conventional lender but guaranteed by the government. The U.S. government acts as the lender for the direct loan

• Direct loan applicants with inadequate incomes may use a co-signer. This is not possible with the guaranteed loan.

Guaranteed Loan Benefits

Remember, the guaranteed loan is for the moderate-income borrower. It is much like the FHA loan in that the government gives the lender a guarantee of repayment in the event the borrower defaults on the loan.

The biggest difference between the USDA loans and FHA is that USDA requires no down payment. Here are some basic benefits of the guaranteed loan:

• No down payment required and 100 percent financing available.

• Certain repairs and closing costs may be rolled into the loan up to the appraised value of the home.

• The upfront guarantee fee may be rolled into the loan amount above the appraised value.

• The loan can be used to purchase existing or newly constructed homes and planned unit developments. Some condos are eligible.

• Interest rates are fixed and the loan has no prepayment penalties.

• Non-traditional credit histories may be considered.

• Down payment assistance programs, seller concessions, gifts and grants from city and county housing development programs may be considered.

Direct Loan Benefits

This is the loan for you if you are low income but have decent credit and a steady job. You will borrow for the home directly from the U.S. government. Here are just a handful of the benefits of the USDA Direct Loan program:

• No down payment required.

• Payment assistance is available that may reduce the monthly payment.

• Some closing costs may be included in the loan.

• No private mortgage insurance required.

Eligibility

To use either loan, the borrower must be purchasing a home in a rural area. The USDA defines “rural” as any town with a population of “25,000 or less that is not adjacent to a large city or that is not part of a continuous urban area.”

The home must be “modest” in size. The average USDA home is 1,200 square feet. Homes with swimming pools are ineligible. The loan cannot be used to purchase income producing property, furniture or other personal property, an existing manufactured home or for a home with non-essential buildings and land.

To determine if a particular property is eligible, visit the USDA Rural Development Property Eligibility website.

For a borrower to be eligible for the USDA Guaranteed or Direct Loan program you must:

• Be a U.S. citizen or be admitted as a permanent resident.

• Be unable to secure a comparable loan without a government guarantee.      

• Not currently own a home within commute distance of the home you are buying.

• Have a dependable income.

• Have a credit history that proves you meet your financial obligations on time.

• Occupy the home as your primary residence.

• Direct loan applicants must prove that they do not currently own safe and sanitary housing.  

• Direct loan applicants must be very low income (income that is between 50 and 80 percent of the area’s AMI). Guaranteed loan applicants must be moderate income, making 80 to 115 percent of AMI.               

An easy way to determine your income eligibility is by visiting the USDA Single Family Housing Income Eligibility website.

Will this be the year you buy a brand-new home? Don’t be discouraged by news reports claiming that “U.S. home building fell,” or “housing starts dropped.”

The scary-sounding numbers are due to a drop in multi-family home building, not single-family.

In fact, the single-family home construction market across the country is set to be just fine, with a surge in new building permits late this summer.

Moving into a newly-built home is a lot like the first time you sit behind the wheel of a new car, but on steroids. No stinky smells from whatever it was the previous occupant was cooking, no greasy range hood and walls, no dinged-up baseboards – everything is new and pristine.

While these aspects may make you starry-eyed, there’s reality to contend with as well. Today we share with you some things to watch for when taking on the purchase of a brand-new home.

The builder’s real estate agent

When you drive up to the new home community you’ll notice quickly how you’re directed first to the builder’s office before you get to the model homes. That guy or gal sitting in the office isn’t a receptionist, but the builder’s real estate agent.

She or he will show you a map of the buildable lots available, talk to you about the community’s amenities and, naturally, the homes, before sending you on your way to view the models.

If you fall in love with one, which is every builder’s goal, you’ll want to get the purchase process underway quickly.

Hey, I don’t blame you, this is exciting stuff! And, what better and easier way to do it than to allow the builder’s agent to get the ball rolling?

Ok, that’s the third time I’ve said it: “the builder’s real estate agent.” Sure, legally this agent can represent both you and the builder, but is it a wise move?

Think about this: if it were legal, would you use your about-to-be former spouse’s attorney in your divorce proceedings? Why do you suppose that isn’t common practice?

Here’s why: it is almost impossible for the builder’s agent to protect both the builder’s interests and yours in the same transaction.

Since the seller pays for the buyers’ real estate agent at closing, it only makes sense that you have your own agent who will look out for nobody else but you.

Avoid this problem by letting the builder’s agent know, upfront, that you have an agent.

The builder’s lender

Hey, this is a one-stop shop, right? Of course!

Home builders understand that they need to hook the buyer when he or she is most excited so they offer all the services one might need to get the process started. This includes an “in-house” or “preferred” lender.

Now, unlike using the builder’s agent, there’s nothing wrong with using his or her lender, as long as you’ve shopped around and know that you’re getting a good deal.

Never feel that you have to use this lender, however, because you don’t.

The builder

Check out the builder’s reputation if you aren’t familiar with him or her. Start with the Better Business Bureau and then scour the city’s public records for lawsuits against the builder.

Buying a newly constructed home in Billings is a lot more involved than buying an existing home, but the end result is well-worth the steps it takes to get there.

There was a time when real estate agents could confidently tell their clients that one of the biggest advantages of owning a home on a golf course is that the verdant view would be permanent.

Today, many owners face a view of brown, dead fairways, vandalized buildings and uncertainty about what may pop up when the land is sold.

Chalk it up to the busyness of Americans. The lengthy game of golf has declined in popularity, leaving course owners to deal with the consequences.

Or, blame the oversupply of golf courses and the waning of Tiger-mania (among other reasons), as  John Eidukot at GolfOperatorMagazine.com does.

Whatever the reasons, “More than 200 courses closed in 2017, while about 15 opened,” according to Newser.com editors, quoting National Golf Foundation figures.

We are frequently asked if golf course homes are worth more than those not similarly located, if golf course homes are a good investment and about the pros and cons of golf course living.

Here’s what we know, the good and the bad.

The future of golf

It’s not all doom and gloom for the $84 billion-dollar golf industry. Nearly 40 percent of Americans (107 million, to be more precise) either played read about or watched golf in 2018, according to the National Golf Foundation’s 2019 Golf Industry Report.

The report also found that participation has stabilized. Gone are the crazy statistics of drop-out golfers. In fact, last year, participation rates climbed. The report credits this growth, in part, to “popular off-course forms of the game such as Topgolf, Drive Shack and indoor simulators.”

Since our children are our future, there is encouraging news in the number of young golfers taking up the sport.

“There were 2.5 million junior golfers last year [2018]” the report claims and “an estimated 2.6 million beginners (those who played on a golf course for the first time) in 2018, which is near record levels and marks the fifth straight year with over 2 million newcomers.”

It appears that it’s far too soon to call time-of-death for the game of golf and, by extension, the American golf course.

5 tips to consider if you’ve been thinking about buying a home in a golf course community

1. While living across the street from the fairways offers a homeowner additional privacy (no neighbor in front), it also provides a bird’s-eye-view to golfers – especially those wandering through your yard to retrieve balls.

Choose your location within the golf community carefully. Homes along the right side, nearest to the tee box, are statistically at higher risk for wandering golfers searching for errant balls and the damage those balls can cause.

One golfer/golf course homeowner we spoke with suggested playing the course to help you determine if the home you have your eye on is ideally located.

2. While we stress the importance to all homebuyers interested in purchasing a home in a managed community to read the HOA documents thoroughly, it’s even more critical when considering a home on a golf course.

Is netting prohibited? Are there rules against entering the course from your property?

3. While golf participation is stabilizing, and fewer courses are closing, keep in mind that it’s still a buyers’ market in this real estate niche. You are in the drivers’ seat, by and large, in negotiations.

4. No, you don’t need to be a golfer to enjoy golf course living. In fact, it’s estimated that only about a quarter of residents who live on or near courses play the game. They purchased the home to enjoy the scenic view, the enjoyment of not having a neighbor’s home facing theirs and the peaceful evenings.

5. Even if you do play, you may want to restrict your search for a golf course home for sale to communities that offer other amenities as well, such as walking paths or a swimming pool.

Thinking of selling your golf course home?

Realtor.com analyzed listings of homes for sale in 273 U.S. counties. They found that those listings that included the word “golf” took, on average, 75 days to sell.

These homes eventually sold for 14 percent more than the median sale price for the area and nearly 30 percent more than the nationwide median home price.

Of course, all real estate is local and markets change so the “mileage” here in our area may vary. Feel free to reach out to us for a complimentary, no-obligation determination of your home’s likely market value.

 

Sometimes (not often enough, in our opinion) money falls into our laps. Tax returns, bonus checks, gifts and an inheritance are just a few ways that we can come into a chunk of money suddenly.

If you’ve been saving for a down payment on a home, the windfall will go a long way toward getting you closer to home ownership. But, “sudden” money comes with a catch.

Lenders like things seasoned

Lenders become skeptical when money suddenly appears, seemingly out of nowhere. Your lender will want a paper trail of every last cent you have and expect to have in the near future.

And, the lender will ask about your down payment funds – how much you have and where it’s being kept.

They are especially wary of borrowers who have taken out another loan to get those funds. It makes the borrower more of a risk and it may also put the other lender in first place should you default on your mortgage.

Even if your down payment windfall came from a legitimate source (a big bonus at work, a tax refund, etc.) the lender will most likely ask for “seasoned” funds instead.

What are seasoned funds?

Funds are considered “seasoned” if they have been in your account for a specified amount of time. Many lenders insist on a 60-day seasoning period, some want to see that money in an account for 90 or more days. Then, there are some who require only a 30-day period.

Find out from your lender how seasoned your funds must be and don’t start the loan process until that amount of time has elapsed.

You’ll need to “source” that money as well

Where did you get the money? Be prepared to not only answer the question, but prove the source of the funds as well.

Again, lenders want to ensure that you aren’t using a short-term loan or some other source that may put the loan at risk.

If the money wasn’t saved from your income (which is easy to prove), you’ll need to offer proof that, yes, Aunt Martha died and you inherited her savings.

Taking money from an investment account to use for your down payment or closing costs?

“If you withdraw cash from an investment or retirement account (like a 401k or an IRA) that has certain restrictions on withdrawals, the underwriter will likely ask to see the terms of the withdrawal in writing,” according to Brandon Cornett at QualifiedMortgage.org.

Gift funds get extra scrutiny

For money to be considered a gift, the giver must have no expectation of being repaid.

The lender will source the gift, determining who gave it to you. Most lenders require that all gift funds must come from family members.

Gift funds get a bit trickier if you’ll be using an FHA-backed loan. Borrowers with low credit scores (typically between 580 and 619) will need to ensure that at least 3.5 percent of the down payment is their own money – it can’t come in the form of a gift.

If you will be putting down 20 percent as a down payment, regardless of your score, often the entire down payment can be sourced from a gift (ask your lender about its policies).

You’ll need a letter from the person gifting you the money, addressed to the lender. It should include the giver’s name, address and phone number, their relationship to you, the amount of the gift and the date on which it was given.

The letter should clearly state that the money was given as a gift and there is no expectation of repayment.

You’ll be asked for documentation from the lender for almost every aspect of your financial life, including a certain number of bank statements. TIP: Include ALL pages of your statements, including those that are blank.

We aren’t accountants or mortgage brokers, so we urge you to consult with a professional should you have any questions about obtaining a mortgage.

 

Whether you’re entertaining notions of buying or selling a home, you’re no doubt keeping up with housing news. And, what you’re seeing may concern you.

Doom and gloomers, naysayers and, curiously, even some experts are claiming that they are worried about the housing market.

The fact is, the real estate market is the one bright spot in the economy right now, and there are three reasons we can say this with confidence:

• Pending home sales
• Mortgage rates
• Consumer confidence

Let’s take these one-at-a-time and break it down for you.

Pending home sales

When a homebuyer signs an agreement to purchase, the home moves from an actively for-sale status to a pending status. It is sold, pending the outcome of the contract’s details. At any rate, it is no longer on the market.

“U.S. pending home sales are at their highest level since the middle of 2017,” according to Neil Dutta, former senior economist at Bank of America-Merrill Lynch for the U.S. and Canada.

Pending home sales are a “leading indicator” of the health of the housing market, Dutta says in an article at BusinessInsider.com.

Pending sales are up in all regions across the country.

On a side note, despite what you’ll read in the news about the slowing of new-home sales, they have increased 15 percent so far this year as well.

Mortgage rates

Mortgage applications for home purchases have increased roughly 15 percent from last year. This is proof-positive that a decrease in mortgage rates is most definitely stimulating the market.

Especially when one crunches the numbers, it’s easy to see that buying a home when rates drop may just beat the cost of renting. Plus, you’ll accumulate wealth in the process of owning the home.

“Let’s say you considered buying a $300,000 home on a 30-year mortgage in the fall, but held off,” explains Gretchen Frazee, deputy digital editor for PBS NewsHour.

“If you were to buy the same house now, the interest rate drop could decrease your monthly payments by $160 per month and save more than $60,000 over the life of the loan,” she concludes.

Consumer confidence

Consumer confidence is measured by a number of governmental offices and universities. The University of Michigan, for instance, recently released its August consumer confidence poll which showed consumer sentiment, overall, declining.

Keep in mind when you read news about consumer confidence that it is a measurement of confidence in the economy as a whole.

Fannie Mae publishes the Home Purchase Sentiment Index which focuses solely on consumer confidence in the housing market. That is the measurement to watch when you’re keeping tabs on the real estate market as a consumer.

“According to the Conference Board, buying intentions for new homes have exploded to levels not seen since before the financial crisis,” claims Dutta. And, he is correct.

So, while journalists and other non-real estate professionals spread doom and gloom about the housing market, as you can see by Fannie Mae’s graph, consumers are feeling the opposite.

What about the predicted recession?

The U.S. economy, or “business cycle” includes four phases:

• Expansion
• Peak
• Recession
• Trough

Our economy’s “natural state” is expansion, where we experience robust sales, consistent wage growth, increasing GDP and low unemployment rates.

Many economists are saying we’ve reached the peak of the current economic cycle which typically lasts 10 years, so we’re long overdue for a recession.

Don’t allow recession talk to frighten you out of realizing your real estate plans, whether that means buying or selling a home.

Especially if you hope to sell this year or next, you’ll be happy to know that in all but one recession in recent history, homes actually sold for more than they did before the downturn in the economy.

None of the top economists who are predicting an oncoming recession blame it on the housing market (which played a large part in the 2008-2010 recession), so it should survive, relatively unscathed.

It’s important to keep in mind that, right now, the market is in the process of normalizing, coming down from the heady sellers’ market of the past few years.

Take a deep breath, ignore the doomsayers and continue on with your real estate plans.

As a homebuyer, unless you are buying direct from the owner, you’ll not negotiate with the seller of the home you have your eye on.

That’s your real estate agent’s job. But he or she negotiates on your behalf. So, when we talk about buyer negotiations with sellers, we’re referring to indirect negotiations through your agent, as middle-person.

Unless you’re an attorney, a salesperson or in another occupation that requires negotiating skills, we think it’s safe to say that it’s not something you do on a regular basis.

If done correctly, negotiation requires subtlety and the ability and willingness to find a win-win for all parties.

Certain negotiating tactics can railroad a real estate deal, instantly. Let’s take a look at some of these to help you avoid losing out on that home you want.

Using the home inspection as a negotiation excuse

The one blanket statement that we feel safe in making to all homebuyers is that they must get the home professionally inspected. Yes, even recently-built homes.

After the inspection, the inspector will issue a report, listing all of the problems or potential problems he or she found during a visual inspection of the home.

Some of the problems may be significant but most are not. If you find the report somewhat acceptable, but would like a few items repaired or replaced, we will reopen negotiations with the seller.

This is where some homebuyers become unreasonable, using nit-picking in an attempt to drive down the price of the home.

Keep in mind that, unless the home was listed for sale “as-is,” homeowners are only obligated to remedy defects that your lender or insurer will require (typically those of a health and safety nature), those specifically named in the purchase contract and those required by law.

The seller is not required to adjust the price instead of making repairs. And, most sellers won’t even consider replacing or repairing defects that can be remedied easily and inexpensively.

Everything, however, is negotiable and your choices in the deal include:

• Asking the seller to make the repairs
• Asking the seller to decrease the price of the home to compensate for the cost of repairs
• Walk away from the deal

The homeowner’s choices include saying yes or no to the first two, coming up with a list of what he or she is willing to deal on, or deciding not to continue with the sale.

If you really want the home, think twice about reopening negotiations unless the home’s defects are major and will require great expense.

Insisting on making a lowball offer

We understand that you want the best deal possible, but a very low offer on a home you truly want to purchase is typically a foolish negotiating tactic.

In a buyers’ market, when there are lots of homes for sale but few buyers, you may get away with an offer under asking price. But a ridiculously low offer will most likely be treated as an insult by the seller.

It also makes you appear like a bargain hunter, ruining your credibility in the eyes of the seller.

A homeowner has several choices when confronted by a low offer. Unfortunately, many of them feel so insulted they won’t even respond.

So, instead of getting a chance to haggle on the price of the home, you’re shut out. Completely.

Assuming the seller wants to part with personal belongings to get the home sold

Sure, in slow markets, sellers may do almost anything if their home has been sitting on the market and they need it sold quickly.

But, before you demand that they leave the home’s furniture, appliances and the dog, keep in mind that desperation on the seller’s part is the exception, not the rule.

Unless expressly stated in the contract, the homeowner is selling their home, not their personal belongings.

Asking for too much makes you appear greedy – and not someone a seller is likely going to want to negotiate with.

The most important thing to remember, especially in a market that favors sellers, is that the seller may very well be negotiating with other buyers. Go in with your best and highest offer and try to keep it as “clean” as possible.

We’re happy to show you how.