Hey Veterans: Learn all about the VA Construction Loan

World War II defined the 1940s in the U.S. With the return of our soldiers came the Boom – the Baby Boom generation. Our men required homes to house all those kids and President Roosevelt came through for them by creating The Servicemen’s Readjustment Act, more commonly called the GI Bill.

The bill generated college tuition and home loans for the men who served this country on the battlefields. In fact, $33 billion in home loans were issued to veterans.

The United States Department of Veterans Affairs is one of only two government entities that provide guarantees for no-down payment home mortgages (the other is the United States Department of Agriculture).

The VA doesn’t directly loan money; it guarantees conventional lenders that a portion of the loan will be repaid in the event the borrower defaults. This assurance allows lenders the ability to offer our veterans more attractive mortgage rates and terms.

November is when we celebrate both National Veterans and Military Families Month and Veterans Day (November 11).

What better time to dive into the housing benefits provided to our nation’s heroes?  And, although the VA has a number of loan programs, one of the more difficult to obtain is the construction loan.

The Challenge

Although they are allowed by law, many lenders hesitate to make construction loans for VA loans because of the risks involved, such as construction disputes.

If you want to act as your own contractor you’ll most likely need to find construction financing outside of the VA and, when construction is complete, obtain a VA loan to refinance the construction loan.

This is not to say it’s impossible to find a lender willing to underwrite a construction loan, but it may be challenging.

Overview

Like all government programs, the VA home construction loan has specific requirements about who can receive the guarantee. The program also has specific builder tasks.

To qualify for the VA construction loan program, an applicant must be any of the following:

  • A United States veteran
  • Active duty service man or woman
  • Current Reserve member with at least six years of service
  • Current Guard member with at least six years of service
  • Surviving spouse
  • A current or former Commissioned Officer of the Public Health Service and National Oceanic and Atmospheric Administration

Additionally, the applicant must have:

  • Separated from the service under other than dishonorable conditions
  • Decent credit
  • Sufficient income to make the mortgage payments
  • A valid Certificate of Eligibility (COE)

Finally, the veteran or surviving spouse must intend on living in the home.

The Construction Loan

There are two types of VA construction loans:

  • One-time close (or single close) loans which is “… used to close both the construction loan and permanent financing at the same time, according to the VA’s Circular 26-18-7. “The permanent financing is

established prior to construction, and the final terms are modified to the permanent terms at the conclusion of construction,” they conclude.

  • Two-time close construction loans. As the name implies, this loan includes two closings, one before the start of construction of the home and “… a second closing where permanent financing is used to take out, or replace the initial loan.”

The beauty of the loan, other than the fact that it doesn’t require a down payment, is that the veteran doesn’t begin making payments until the home’s construction is completed.

Builder Responsibilities

The builder of your new dream home has certain VA-mandated fees to pay during the home’s construction. These include:

  • Paying the interest while the home is being built
  • Commitment fees
  • Inspection fees
  • Title fees
  • Insurance

Application Process

Just as veterans who apply for an existing home mortgage, those planning on building need to get their Certificate of Eligibility (COE). Many lenders can obtain the COE for you, so check with your lender first. You can also get a COE through the VA website by clicking here.

You’ll also need proof of military service. DD/214 separation documents are the best way to provide this proof and you can submit your request for the records online or by fax or mail.

The process is a little different for surviving spouses. They need to use VA Form 26-1817, Request for Determination of Loan Guaranty Eligibility – Unmarried Surviving Spouses which can also be found at the VA website.

If you have questions about the VA construction loan, contact the VA Regional Loan Center nearest you.

How to choose a buyer’s agent

Although Americans continue to be smitten with the DIY craze, buying real estate is not a do-it-yourself project. Sure, it’s fine to surf the Internet to search for your dream home, but when it comes time to actually view the homes, make sure you are fully represented by your own real estate agent.

Many new homebuyers don’t understand that although it may be perfectly legal in your state for the seller’s agent to also represent the buyer, it isn’t wise. This situation is known as “dual agency,” a type of transaction that at one time was outlawed in all 50 states, and here’s why:

The seller’s real estate agent has a duty to his or her client to act in the client’s best interests.

Now, how can this happen in a dual agency situation when the seller’s interests and the buyer’s interests are the exact opposite? Although agents feel they can offer the same ethical treatment to both parties, it doesn’t always happen.

To protect your interests during the purchase process, secure your own representation. It costs you, as the buyer, nothing. The seller pays the buyer’s agent’s commission out of the proceeds of the sale.

Do I Need a “Buyer’s” Agent?

Some real estate agents specialize in working only with buyers. That said, most agents have experience working on the buyer’s side of the transaction.

When looking for an agent to represent you in your home purchase, don’t feel that you need to restrict yourself to an agent who professes to work solely with buyers.

That said, there are several situations in which you should seriously consider working with an agent who not necessarily works strictly with buyers, but who is a bona fide specialist in the following:

  • The mobile home purchase
  • Buying a short sale
  • The purchase of ranch property
  • The purchase of a farm

Aside from these situations, pursue the best agent for your needs. Read on to find out how to go about finding this needle in a haystack.

Get Referrals

Whether you need a real estate agent to list your home for sale or to assist you with buying a home, a referral is the best way to find one. Ask everyone you know, including family members, co-workers, neighbors, friends and local business people.

The checkout lady at the grocery store may have just purchased a home and adores her agent. So don’t neglect to ask everyone you come into contact with and start compiling a list of names.

What if you’re relocating to an area and don’t have a network of contacts there? There are several other ways to find the perfect real estate agent for your needs:

  • Online: Check reviews at Yelp.com and Google.com.
  • Relocation Representative: If you work for a large company and find yourself relocating as a result of this employment, consult the employee relocation representative for a list of agents to interview.
  • Chamber of Commerce: Call the Chamber of Commerce located in the area where you are moving. The folks there typically have a directory of members and will be happy to refer you to several agents in the area.

Ask the Right Questions

Most guides to choosing the right real estate agent will counsel you to find out if the agent is full-time or part-time and suggest that you go with the full-time agent. The thinking behind this suggestion is that the full-time agent will have more time for you.

Not so fast. Ask a follow-up question: How big is your staff? The superstar agent with a staff of 15 is the agent you will probably never speak with or see until closing, if then. That’s not to say this person isn’t a good agent, but to remind you that if you’re looking for personal, one-on-one interaction with the agent you hire, don’t hire the superstar with a huge staff.

Ask the agent how many other clients he or she is currently working with. The more clients the agent has, the thinner his or her attention is spread. If you find a house online that you absolutely love, time is of the essence in a fast-moving market. Will the agent have time to accommodate your last-minute showing needs?

If it’s important to you that the agent has a certain amount of experience, by all means ask how long he or she has been in the business. Keep in mind, however, that new agents typically work securely under the wing of their brokers, so you are actually getting the wisdom and benefit of a highly experienced real estate pro, although second-hand.

As important as it is to ask the right questions, listening to the agent is equally as important. What types of questions does the agent ask? One of the most important is whether or not you have loan pre-approval.

The savvy real estate agent understands that until you have seen a lender, looking at available homes is a waste of time, both yours and hers. Reject any agent who doesn’t pose this question.

Should I Sign an Agreement?

Many agents who consider themselves buyer specialists will ask that you sign a broker’s agreement.

This document commits you to working exclusively with the agent for a pre-determined amount of time. Broker’s agreements typically state that the agent will be compensated in the event the buyer switches to another agent and ends up purchasing a home shown by the original agent.

If the agent insists that you sign an agreement, ask for a short-term commitment. This way, should you decide the relationship between the two of you isn’t working out; you’re only locked into working with her for a short time. Agents typically ask for a 90-day commitment but the terms are negotiable, so choose a time period that you are comfortable with.

You are also within your rights to ask for a guarantee. Request that a clause be inserted into the agreement stating that if either party decides the business relationship isn’t a good fit, they will be released from the agreement.

Getting your finances in order and securing funding for the purchase of your home should always be the first steps in your home buying process. Finding the right real estate agent, while second on the to-do list, is no less important.

 

What you need to learn about a home before committing to buy it

Here’s something we find fascinating: 90% of diners researched a particular restaurant online before dining there. That is more than any other business type, according to a survey by Upserve.com.

It makes sense at first glance. Let it sink in, though, and you’ll begin to wonder why physicians, dentists, hairstylists, plumbers and others aren’t at the top of the list.

By the same token, why doesn’t what may become the biggest investment we ever make, a home, deserve such careful scrutiny?

Homebuyers are a trusting bunch which can lead to remorse after they purchase.

The market is thankfully changing and you will be able to take time to consider your purchase. Ask your agent the questions he or she can get the answers to. Then, do your own research on the remaining.

Here’s a list to get you started.

  1. How old is the home? This is an easy question for your real estate agent because the year built is typically stated in the MLS listing.

 

  1. How old is the water heater, HVAC system, roof and other systems in the home? For instance, the average life expectancy of a water heater is 10 years. If the one in the home you have your eye on is going on 11 years, you may want to negotiate for a new one or a credit to purchase one.

 

  1. Ask about any renovations that have been done to the home, if the work was permitted and ask for copies of the permits. Who did the work? Is the contractor licensed?

 

  1. Ask your agent to request a CLUE report from the seller. “The report generally contains up to seven years of personal-auto and personal-property claims history,” according to the Washington State Office of Insurance Commissioner. The Fair Credit Reporting Act entitles Americans to a free copy of the CLUE report. Your agent can point the seller to this website on which the report can be ordered.

 

  1. Ask your agent to find out what the average utility bills amounted to over the past year. This should include electric, gas, water, trash and sewer.

 

  1. You will be given a packet of information from the Homeowners Association if the home is in a managed community. We urge you to read everything and, if possible, run it by your attorney. These are sometimes complicated documents but what is in them impacts how you will live in the home.

 

  1. Visit the local planning department to determine if there is potential property development planned for the area near the home. For instance, will a Walmart be built on the vacant parcel behind your home?

 

  1. Are any of the non-built-in appliances included in the sale? This might include the refrigerator, washer, dryer, etc.

 

  1. Contact the local police department to find the answers to your questions about crime in the area. You can also plug in the address of the home at Areavibes.com and get its Livability Score, find crime stats for the neighborhood at SpotCrime.com and do check the National Sex Offender Public Website.

 

  1. If schools are important to you, check them out online at SchoolDigger.com, GreatSchools.org and Education Consumers Foundation.

 

 

 

 

 

3 critical tips when selling your home during a market transition

You’ve no doubt heard that the housing market in changing. In fact, one expert claims that “We’re in a housing recession right now.”

While he is a lone voice on that front, there’s no doubt that the market is transitioning.

For instance, first-time homebuyers are putting their plans on hold for the time being. The pool of these homebuyers has shrunk from 34% to 26% since this time last year, according to the National Association of Realtors.

Does this mean that you’ll have trouble finding a buyer for your home?

Not at all.

What it does mean is that you should forget about the wonders of yesterday’s housing market. Tales of multiple offers, homes selling for more than the asking price, homes flying off the market within 24 hours and being able to call most of the shots during the transaction.

In other words, the market will, hopefully, correct to a normal real estate market.

There are a few other aspects of selling a home that you would do well to keep in mind right now.

1. Understand how market value is determined

Even if his home is identical to yours, it doesn’t matter what neighbor Joe’s home sold for 6 months ago. Yours isn’t worth that now. In fact, your home is only worth what a willing buyer will pay for it.

At this point in the market transition, that price is a moving target. You should certainly not rely on what the big online real estate portals (Zillow, etc.) suggest. Even professional appraisers will have to crunch more numbers to come up with a suggested value for their clients, the lenders.

Homes for sale in your neighborhood don’t dictate market value either. List prices are a bit like Fantasyland. They represent what the seller is hoping to get for the home. Only the prices of recently sold homes can help us determine current market value.

It’s important to be realistic when entertain a list price for your home. You are no longer selling at the height of the market, regardless of how much we all wish you were.

2. Most improvements don’t add significant value to a home

Many homeowners are surprised that the improvements they’ve made to the home won’t raise the value of the home. “For cost recovery, remodeling projects generally must fix a design or structural flaw to earn back the cost of construction,” warns Rebecca Baldridge, CFA, at Investopedia.com.

She goes on to caution homeowners that “The return on investment (ROI) of any given renovation project is a function of local market characteristics, the condition of the residential real estate market when the property is sold, and the quality of the work performed.”

Each year, the pros at Remodeling magazine research the average costs of a number of remodeling projects and determine how much the projects add to a home’s value.

In 2022, none of the projects studied result in a 100% or greater ROI. A garage door replacement, with specific products (which you can find here), comes closest with an ROI of 93.3%.

Again, it’s important to remain realistic about your home during the selling process.

3. Never be afraid or embarrassed to ask questions

Knowledge is power. It is therefore imperative that you understand every part of the home selling process. We are happy to help you with this.

Never allow fear of the unknown to overtake you at any point during the sale process. Ask questions and demand answers until you find your comfort zone.

 

Can’t make the payments on your VA home loan?

From the high (and going higher) cost of food to escalating energy bills, budgets are being destroyed across the country. And being able to shop at the commissary doesn’t offer much of a break to our military heroes either.

While inflation is impacting most Americans, veterans are being particularly hard-hit. More than 25% of veterans who purchased a home with a VA mortgage in 2022, are underwater on that mortgage, meaning they owe more than their home is worth. (Black Knight, Inc.)

Should you fight to stay in your home or throw in the towel and give it up? This is just one of the many questions faced by millions of homeowners who, for a number of reasons, find themselves at the end of the month with not enough money to pay the mortgage.

If you have a mortgage backed by the U.S. Department of Veterans Affairs (VA), and you can no longer make your payments, you have several options.

Your lender should notify you as soon as you go into default. This is the time to work with the lender to bring your loan up to date. Once you’ve missed two payments, the lender is required to notify the VA.

Before that occurs, call a VA Loan service representative for assistance. The best number to call is 1-877-827-3702, between 8:00 am to 6:00 pm EST.

Be prepared to tell the representative why you are in default, your current financial situation, who occupies the property and whether or not you wish to keep it.

The VA offers several suggestions on ways to avoid foreclosure:

  • Sell the home – You may be granted additional time to sell the home.
  • Pay the delinquency.
  • Deed-in-lieu of foreclosure – If you have exhausted all other possibilities, the VA may consider taking back the deed to your house instead of pursuing foreclosure. You may be released completely from future liability, or you may have to agree to repay the government in the future.
  • Forbearance – A plan that allows you to repay a portion of the delinquency every month, on top of your mortgage payment. If your financial problems are temporary and you expect them to end sometime in the near future, the lender may suspend these additional payments for a time.
  • Loan modification.
  • Short sale.

Consider a refinance

One of the more common ways veterans avoid foreclosure is through a refinance. This is the ideal situation for those who would be able to hang on to the home if the payment is lower.

The VA has a program known as the IRRRL, the Interest Rate Reduction Refinancing Loan. To qualify, the mortgage must be a VA-backed loan and you are not allowed to receive any cash out from the refinance. Fixed-rate mortgage refinances must lead to a lower interest rate, and the VA cautions that an adjustable-rate refinance may result in a higher mortgage rate.

Benefits of the IRRRL include:

  • No appraisal is required by the VA.
  • No credit check is required by the VA.
  • You won’t need a certificate of eligibility.
  • The refinance can be performed with no cash out of your pocket, rolling the cost into the new loan.

The above are VA-supplied benefits only. Since a lender performs the refinance, you will most likely still be required, per lender standards, to submit credit information and have the home appraised.

The loan amount cannot exceed the outstanding balance of your existing mortgage, plus fees and closing costs. The VA cautions that, depending on your current loan balance, these fees may raise your balance to more than what the home is worth.

For more information on the IRRRL, see the Department of Veterans Affairs website.

Servicemembers’ Civil Relief Act

If you are on active-duty and being threatened with foreclosure, the Servicemember’s Civil Relief Act (SCRA) may protect you.

Enacted in late 2003, the SCRA mandates that lenders acquire a court order to proceed with a foreclosure on property purchased by military personnel prior to entering the service if it is secured by a deed of trust or mortgage. This protection extends throughout the time of service or up to nine months after completion.

SCRA’s provisions apply to both conventional and government-backed mortgage loans. A lender’s failure to comply with the act voids the foreclosure or sale. To find out more about the SCRA, visit ConsumerFinance.gov.

Should you buy a house before you sell the current one or wait?

If you are a homeowner who wants to purchase another home you’re most likely asking yourself a question common to folks in your situation: should I sell before I buy?

The answer to that question depends on several factors.

Your personality

Just the thought of having two mortgage payments – even for a short period of time – can cause massive anxiety in some folks. Despite assurances from your lender of a simultaneous close on the two homes, the uncertainty may linger.

Then there is the pressure to accept an unattractive offer on your current home just to ensure the home sells. On the other hand, if you wait to purchase, you’ll have the luxury of being able to negotiate offers as they come in.

If you crave certainty, you should probably wait until the current home sells to take on the purchase process.

There are, however, those who deal with uncertainty better than others. If that describes you, then going through the home purchase process before you sell your current home probably won’t faze you.

Your finances

Regardless of your personality, if you just don’t have the money to support two mortgage payments then you should sell your home before you purchase another or attempt a simultaneous close (we explain that process later on).

The market

A seller’s market is the ideal situation when you’re selling your current home.

In a seller’s market, when there are few homes available and lots of buyers competing for them, sellers are in the driver’s seat. This is great news when you go to sell the current home, but it may be a tougher process on the buying end.

With multiple offers, not many of sellers will accept an offer that is contingent on another home selling. Thankfully, the overheated market is beginning to correct, so this may not be that big of an issue.

On the flip side, in a hot seller’s market, homes in good condition, located in decent areas, sell quickly.  If yours is among them, you take on little risk if you purchase a new home before selling your current one.

Ascertain if the current market caters to sellers or buyers before making the decision. We are happy to share what we know so feel free to reach out.

The simultaneous close

Selling one home while purchasing another is a bit of a balancing act. If you try to time the closings to occur during the same time period you run the risk of ending up with two house payments.

If you allow sufficient time between closings, on the other hand, you may find yourself renting a home and, thus, moving twice.

The ideal situation is to plan for a simultaneous closing, where both transactions occur on the same day. However, this process too comes with risks. If anything should go wrong on the first transaction you could end up not being able to close on the second.

Not only will you not have the new home, you may be in default of the purchase contract and lose your earnest money deposit.

It’s important to choose the right buyers for your current home. How much do you know about their finances? How firm is their offer? What do you know about their motivation to purchase? How badly do they want the home?

Since the process is a bit like a string of dominoes, and the buyer of your home is the lead domino, it’s important to choose a buyer you know will consummate the deal. Otherwise, if he falls, he takes everyone else down with him.

The key to success is hiring an experienced, professional real estate agent. Your agent can guide you through the process, steering the transaction to keep it on course.

Here’s what’s happening in the current real estate market

Lately, trying to keep up with housing market news can result in whiplash. Everyone seems to have an opinion, but they fall in two camps: doom and gloom or sunshine and lollypops.

Then, there’s the fact that this transition period we are in is spotty, depending on region. The market isn’t consistent across the country.

When trying to figure out what’s happening in the housing market, we like to pay close attention to three aspects of the market and the economy:

  • Pending home sales
  • Mortgage rates
  • Consumer confidence

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

Pending home sales

A signed purchase agreement for a home is known as a “pending sale.” Technically, the home is sold, pending the realization of all those details in the agreement. The home is then taken off the market.

Housing market forecasters use pending homes sales as an indicator of the market’s health, so much so that they’re known as a “leading indicator.”

“Because a home goes under contract a month or two before it is sold, the Pending Home Sales Index generally leads Existing-Home Sales by a month or two,” according to the experts at the National Association of REALTORS® (NAR).

As of this writing, the latest data is from October (November’s will be released in late December). It shows that pending home sales, for the fifth month in a row, have fallen.

The experts are chalking this up to the repeated hikes in mortgage rates this past year but they are optimistic about the future. “The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November,” claims NAR’s chief economist, Lawrence Yun.

Mortgage rates

The number of mortgage applications for home purchases increased 3.2% during the week that ended December 9. This marks the “… highest gain in three weeks,” according to the editors at TradingEconomics.com.

“The ongoing moderation in home-price growth, along with further declines in mortgage rates, may encourage more buyers to return to the market in the coming months,” suggests Mortgage Bankers Association’s vice president and deputy chief economist, Joel Kan.

Economists at Realtor.com predict that mortgage rates will end up around 7.1% by this time next year. If you hope to buy a home sooner rather than later, get into the market soon, before we experience another interest rate hike.

Consumer confidence

Consumer confidence is an important economic indicator in that it “… measures the degree of optimism that consumers have regarding the overall state of a country’s economy and their own financial situations,” according to the editors at Britannica.com.

The Conference Board Consumer Confidence Index® declined in November, “… as inflation and economic uncertainty continued to loom large.” (CNN)

Fannie Mae’s Home Purchase Sentiment Index, which focuses solely on consumer confidence in the housing market, increased 0.6 points. This marks the first increase in almost a year, “… though it remains … significantly lower than its level at this time last year,” according to the editors at FannieMae.com.

The index is compiled of six components, four of which increased in the November index, although slightly.

The month-over-month increase included metrics “… associated with homebuying and home-selling conditions …” while still remaining below last year’s levels.

That is a positive sign, however, and we’ll take all of those we can, regardless of how “modest.”

Mortgage rate escalation and the consumer’s expectation that they will rise even further in the coming year are the culprits when it comes to the bad news.

What about the predicted recession?

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

  • Expansion
  • Peak
  • Recession
  • Trough

So, where are we now and are we looking down the barrel of a recession? That seems to be open to debate. Let’s see what some of the experts have to say:

  • Fidelity: “The U.S. is in the late-cycle expansion phase with rising but moderate recession risk.”
  • Taylor Tepper, Forbes.com: “Nevertheless, a recession may arrive soon.”
  • Ginger Chambless, head of research and commercial banking at JP Morgan: “U.S. economy likely to slow further in ’23, enter mild recession.”
  • Fannie Mae, Economic and Strategic Research Group: “We still expect a modest recession to begin in the first quarter of 2023.”
  • Federal Reserve Board Chairman Jerome Powell: “”I don’t think anyone knows whether we’re going to have a recession or not,” he said. “And if we do, whether it’s going to be a deep one or not, it’s just, it’s not knowable.”

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.

Money is tight. Struggling to make your mortgage payment?

With an economy that is variously described as “teetering,” “worrisome” and “fragile,” many Americans are on the edge of panic. We are “Bracing for a recession, though actual behavior change varies by age and income,” according to senior analyst Anjali Lai at Forrester, a research and advisory firm. (Forbes.com)

Some of us—especially those with low- and middle-class incomes—have already begun to feel the pinch. In August of this year, 63% of consumers were living paycheck to paycheck, claims research released by LendingClub Corporation.

With skyrocketing heating, gasoline and food prices, without a subsequent rise in pay, it’s getting increasingly more difficult to stick to a budget.

What happens if you can no longer make your mortgage payments? Scary thought, we know. Whether you are in that position right now or trying to avoid it, let’s take a look at some tips.

Savings will be your lifeline

If you are currently able to make your mortgage payments but afraid it won’t be this way as rates and prices continue to rise, start socking away money.

Easier said than done, we know. But, no matter how little you can afford to set aside, it is better than nothing and it will most likely come in handy when you need it.

First, see if there are ways to trim your budget. Determine how much comes in and where that money is spent. Vow to stop spending on items that you can either get cheaper or do without.

Starbucks is a good place to start the cost-cutting, but you might consider brown-bagging it for lunch, shopping at discount stores, cooking dinner instead of eating out.

Here are a few other ideas to help you put some money aside:

  • Cut the cable cord and opt for a Roku or Fire Stick. U.S. households spend, on average, $116 per month on cable and internet, according to Maryalene LaPonsie, citing data from Doxo, a bill paying service, at USNews.com.
  • “JD Power told CNBC that the average cell phone bill is now $144,” claims Brett Holzhauer at CNBC.com. Switch to a low-cost service provider, such as Consumer Cellular, Mint Mobile or Republic Wireless, he suggests.
  • Figure out which streaming networks you can live without and cancel them for the time being.
  • Get the family involved in turning off lights when not needed.
  • Switch from baths to showers and spend less time in the latter.
  • Ensure that your windows and doors are draft-proof.
  • Turn down the thermostat and wear more clothing. 

 Can’t pay your mortgage? Act fast

Foreclosure is the last thing you need in times of economic uncertainty, so treat the situation with all the seriousness it deserves.

The pros at the Consumer Finance Protection Bureau (cfpb) recommend that you “… call your mortgage servicer right away. You’ll be asked to explain why you can’t make your mortgage payment and whether this is a temporary or permanent problem.

They will also want information on your income, any assets you own and your expenses.

Hopefully, your servicer has loss mitigation programs, such as a mortgage assistance program.

If you’re still not satisfied with the offered solutions, call the U.S. Department of Housing and Urban Development (HUD) Homeowner’s HOPE Hotline at 888-995-HOPE (4673). They will set an appointment for you to speak with a housing counselor to discuss your options in detail.

If you used a VA-backed loan to purchase your home, it’s important to let the lender know if you’ve received a PCS. There may be additional programs for these veterans.

Then, check into the VA’s IRRRL, short for Interest Rate Reduction Refinancing Loan. It has lower funding fees and other attractive options.

Veterans who used a conventional loan to purchase the house might want to check into refinancing the home into a VA loan. This program allows you to refinance up to 100 percent of the home’s value. Contact your lender to get started.

Finally, should you decide to sell the home, please feel free to reach out to us.

5 ways to save money on a home loan

You’ve heard the news – 30-year mortgage rates surged from 3.22% in January of 2022 to 6.94% in the week of October 20, 2022, according to FreddieMac.com.

Will they come down as rapidly as they rose? Will they come down at all in the near future? Those are common questions right now and the answers are merely guesses.

Obviously, money is getting expensive to borrow, yet home prices are coming down. If you play your cards right and shop wisely for a mortgage, you may just find that the lower prices will help counteract the sticker shock of higher interest rates.

There are tried and true tactics to save money on a mortgage and today we bring you five of the most commonly used.

1. Consider scheduling your mortgage applications around the fall/winter holidays

In winter, 2021, Colin Robertson at The Truth About Mortgage undertook an interesting research project. “I set out to see if there were any mortgage rate trends we could glean from available data, using Freddie Mac’s historical mortgage rates that go back to 1971,” he explains.

For the project, he took the monthly average of 30-year, fixed-rate mortgage rates.

Interestingly, he found that, yes, there are certain months of the year when mortgage interest rates are lower than other months. By far, the lowest average rate, 6.04%, was offered in December, while October and November were right behind with an average rate of 6.08%.

The highest rates were offered in April and May (6.31%).

Read more about Robertson’s research at TheTruthAboutMortgage.com.

2. Work on your credit issues before applying for a mortgage

Use the time while you’re waiting for winter to spruce up your credit reports and, thus, scores.

Yup, you’ve probably heard this one before, but that doesn’t make it any less valid. Borrowers with higher credit scores present less of a risk to lenders who then reward them with lower rates on mortgages.

The folks at FICO® have compiled a chart showing the average rate according to FICO score. It shows that borrowers in the lowest score range (620-639) would be offered a mortgage rate of 7.673 % while those in the higher range (760 to 850) might receive a mortgage rate of 6.084 %.

Naturally, the researchers used several assumptions (loan amount, LTV ratio, points purchased, etc.) when compiling the chart and you can find those online at MyFico.com.

3. Shop around and compare rates and fees

You’ve no doubt heard this admonition as well. Again, if you want to save as much as possible on your mortgage, comparison shopping is a must.

But, that’s not all. You can save on your closing costs with comparison shopping as well. Many homebuyers, especially first-timers, are unaware that there “… are a number of closing costs you may be able to negotiate down with your lender, including application fees, fees associated with rate locks or the purchase of points,” suggests Donna Fuscaldo at Investopedia.com.

She goes on to caution borrowers that “… appraisal fees, property taxes and flood certification fees” are non-negotiable.

Start the process by choosing more than two lenders to compare. “Our research indicates that borrowers could save an average of $1,500 over the life of the loan by getting one additional rate quote and an average of about $3,000 for five quotes,” suggests the results of a study by Freddie Mac’s Economic & Housing Research Group.

When comparing offers from lenders, compare the APRs, not the interest rate. The APR (Annual Percentage Rate) includes the various fees the lender charges, such as some closing costs, loan origination fees and others.

When it comes to haggling over negotiable closing costs, start with the origination fee. Fuscaldo suggests that you “… ask your lender if there are any aspects of it that can be waived, such as the application or processing fees.”

Then, plan on shopping for your own title insurance. Yes, the lender may suggest an insurer, but it truly pays to shop around to compare prices.

“In 2021, the Urban Institute examined variability in title costs in several major markets and found great variability in title charges,” Fuscaldo claims.

They found that Sacramento, California homebuyers who shopped around “could save as much as $326 … and as much as $528 in Broward County, Fla.,” she concludes.

Learn more about negotiating with the lender at BankRate.com.

4. Pay now, save later

Points, for those not familiar with the term, “… are essentially a form of prepaid interest you can choose to pay up front in exchange for a lower interest rate and monthly payments (a practice known as “buying down” your interest rate),” according to the pros at USBank.com.

Robertson offers up an example: The borrower is offered a 30-year fixed loan at 5.125% interest. If she pays 1% of the loan amount now, her rate will drop to 4.875% for the life of the loan. This represents significant savings and a lower house payment.

He goes on to caution, however, that if you don’t plan on keeping the home for a significant amount of time, this strategy “… could end up costing you.”

Speak with your accountant or other financial professional for advice.

Consider an adjustable-rate mortgage

Adjustable-rate mortgages (ARM) offer a fixed rate for a specified amount of time. After this, the rate can change. A 5/1 ARM, for instance, gives the borrower a fixed interest rate for 5 years. After that, the rate may be adjusted every year.

Adjustable-rate mortgages earned a horrible reputation during the Great Recession and that reputation lingers until today. “ These loans … were often misused to enable borrowers to obtain mortgages they really couldn’t afford over the long haul,” recalls Aaron Crow at MortgageLoan.com.

Since then, when the fixed period of the ARM expires, “… there are caps that limit how much your rate can increase over time to help ensure you can still afford the loan even if rates in general are rising,” explains Peter Warden, editor at TheMortgageReports.com.

The fixed rate for these loans is typically lower than you’ll find with a 30-year fixed rate. For instance, as of “… Sunday, November 27, 2022, the current average rate for the benchmark 30-year fixed mortgage is 7.32%,” according to the experts at BankRate.com.

The rate for a 5/1 Adjustable-Rate Mortgage? 5.51%.

That’s a whole lot of savings for the borrower.

If you don’t plan on staying in the home long-term, or you are willing to refinance after the fixed period, this might be the ideal loan for you.

To learn more about ARMs, head over to Mortgage Resource Center.

We are not mortgage brokers or financial experts. Before making any decision based on the above information, seek advice from a financial adviser, accountant, attorney, or other applicable professional.

Tour homes for sale like a pro

Looking at homes for sale — sounds like a no brainer, right? Not if you look at it through the eyes of a real estate professional.

From falling in love with yummy paint colors to going ga-ga over granite counter tops, the sad truth is that homebuyers go about it all wrong. This, in turn, may set them up for disappointment and regret.

Let’s take a look at some common mistakes homebuyers make when touring homes so that you can avoid making them.

Ditch the emotions

Australia’s Commonwealth Bank and psychologist Dr. Tim Sharp conducted a survey of homebuyers and came up with some interesting findings.

The majority of respondents said that they are “rational rather than emotional buyers.” Yet, when asked why they bought the house they did, here’s their responses:

  • 37 percent of them liked the “feel/vibe” of the home
  • 22 percent were instantly attracted to the home
  • Slightly less, 21 percent, said the home suited their personalities

Now, I don’t know about you, but those do not sound like rational reasons to go hundreds of thousands of dollars into debt, for the next 30 years.

But wait – there’s more.

Nineteen percent of first-time buyers were influenced by the home’s décor (proof that staging works).

Most surprising, however, is that nearly 45 percent of these homebuyers said they paid more for the home because they “really liked it.” Love at first site isn’t a good reason to make a major financial decision.

A separate study, performed earlier this year, seems to indicate that members of Gen Z make this mistake more than any other demographic. They want the home they purchase to be “Instagram-ready.”

Watch for these danger zones when touring homes for sale

Dr. Sharp warns that emotions may come into play at several points during the purchase process.

Curb appeal – It’s what lures you into the house. Sure, if the homeowners care enough to maintain the home’s exterior, chances are good the interior has been kept up as well. But, it’s a danger zone because too many fall head-over-heels for the charm or sophistication of a home’s curb appeal and become blinded to the interior’s flaws.

Checking out the interior — Everything from wall colors to floor covering to furnishings can hook your emotions. And, they are all temporary. That gorgeous couch that makes the living room won’t be there when you move in. Remember, a smart home seller will stage their home to deliberately make an emotional connection with potential buyers.

It’s all about the bones

Take off the rose-colored glasses and allow logic to take control. Layout in a home is important – are there areas that seem to serve no useful purpose? Are the bedrooms the appropriate size for your (and your family’s) needs? Regardless of how charming the bathroom appears, if it’s the only one in the house, will you be satisfied?

Kitchens deserve extra scrutiny since they’re the room most commonly staged. Storage is important so don’t be afraid to open the pantry, cupboards and drawers. Open appliance doors to ensure they aren’t impeded by the cabinets.

“Is there good flow between frequently used rooms? Are rooms arranged logically?  Look at how traffic travels through the house as a whole,” suggests Paul Morse, of Morse Construction Incorporated in Boston.

This is valuable information, especially if the home is poorly decorated or messy. Just as a staged home can lure buyers, a dirty home repels them. It would be a pity to walk away from a home that has most of what you want just because you hate the carpet or the house is cluttered.

Then, there’s this

Too many emotional homebuyers neglect to consider other aspects of the home when they fall in love.

How close to your maximum pre-approval amount will the purchase be? And, if it’s at the max, how tight will the payments squeeze your budget?

Is the list price appropriate for the market or is it priced more than market value? What about the area in which it’s located? Will it have an impact on the home’s future market value?

Sure, it’s fine to imagine your sofa in front of that yummy fireplace or how much fun the kids will have in that amazing backyard. Most of us struggle between logic and emotion when considering a large purchase.

The trick is to walk that fine line between both of them.