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Are you holding off buying a home because you don’t have 20% down payment saved?! Would you like to buy, but not sure if your credit score or income will limit what you can afford? Good news! There are many options available for you.
While having 20% down with a 800 credit score is very desirable, many people could qualify to buy their own homes. You just need to know your options and talk to the right lender to see what is possible for your situation! Here are the different type of loan options to consider when buying a home:
USDA Home Purchase
Home Ready/Home Possible
Low Downpayment Lenders
Determining the best financing option also depends on your current market, the terms of your offer and strength of your lender! Using a local bank, versus a large corporation or internet lender will help your contract be competitive and also ensure that you will make it to settlement.
If you are curious about downpayment options and picking the best program and lender for you, contact us at firstname.lastname@example.org!
Here are just a few of the national real estate numbers we are tracking for you now. For more info contact us.
Are you an seller or investor looking to sell a property, buy a new property, but want to avoid paying capital gains or recapture taxes?
Have you heard of 1031 exchange? This is a process where you are redistributing the equity of one property into another investment, to defer additional taxes.
Here are some simple facts on the 1031 process;
1. Sell property & identify new purchase within 90 days.
2. Find a like kind/replacement property you want to acquire. (Must be equal or greater value).
3. Reinvest all equity into the new property OR apply equity to a higher valued property.
This transaction is similar to a trade, where the equity is transferred to a new property, rather than received as proceeds, and taxed.
We have had clients sell a long term investment property, for a new construction investment, sell their investment, and apply the proceeds towards a portion of an investment or, apply the equity of one property to the purchase three new properties.
As part of the exchange process, the purchase property must be identified with in the specified time frame, and the owner may not receive cash or other benefits from the sale.
Using a Qualified Intermediary to complete this process is highly recommended, given the complicated nature and timing of the transactions.
If you have more questions about completing a 1031 Exchange, our team has completed these types of transactions on our personal properties, and for clients. Contact us today, for more info!
The City of Falls Church offers closing cost and down payment assistance of up to 20% of the purchase price of a house (less than $450,000) for first time homebuyers. The assistance is a second interest-free loan, with repayment due at the sale or refinance of the home, or if the buyer rents the home out (it is no longer the buyer’s primary residence). One caveat: the City wants an interest in any appreciation in the property for the use of the money. If they loan you 20% of the purchase price of the home and it appreciates, when you sell the home, they want 20% of the new sale price.
Requirements to qualify:
Ask us for more information about how this program stacks up to others on offer in the area, or a recommendation on getting started in your search or working with a lender.
If you are looking in Arlington and haven’t yet saved up the money for a down payment or closing costs, Arlington County has a program that may help. Arlington’s MIPAP program offers a deferred 0% interest rate loan to first-time homebuyers to help cover a down payment or closing costs of up to 25% of the purchase price. You make no monthly payments on the subordinate loan from the County until you sell or refinance. The County does get a shared interest in any potential appreciation of the property down the road when you go to sell or refinance. At the sale, you split any appreciation, up to 25% (determined by an appraisal), proportionally with the county in addition to paying off the original loan. If the property hasn’t appreciated, you simply repay the original loan, interest free.
If you are interested in learning more about this or other programs available to homebuyers, please do reach out. We are happy to help you understand your options and find the right place for you.
Have you ever wondered what the difference is between the tax assessed value of a property, versus the fair market value? And how these two values compare to the appraisal value? You aren’t alone. Many sellers and buyers are confused about these values and how these values are determined and intertwined
First, lets look at the definitions for all three:
Tax Assessment: The amount that your county assigns to your home based on the value of the land, and the building itself. The value is calculated using an algorithm of sales in your neighborhood, and county based on the size of your lot, size of your home, number of bedrooms, bathrooms, and any other major upgrades (additions/decks/garages, etc). This calculated value determines the property taxes you will pay each year. The assessed value will changed based on how strong or weak the past year’s sales were, so typically it is a lagging indicator of the market, meaning it represents past values.
Market Value: The value at which a buyer is willing to purchase and the seller is willing to sell a home. This value is more subjective, and often linked to supply and demand in the specific area. Condition and upgrades will play a factor in the value, but ultimately the market value is the amount that both parties agreed to in a contract. A buyer may be willing to pay more for a home, if its in a desirable area with limited inventory. Similarly, if there is a surplus of inventory, or the home is located on a major road or has other challenging features, it may be sold at a lower value.
Appraised Value: This value is determined by an appraiser (usually 3rd party) to confirm or validate the market value for home buyer and/or a lender. The appraised value is generally calculated by using like kind properties, within a mile or so radius, looking specifically at sales for the previous three to four months. Adjustments are usually made up/down for more square feet, additional bedrooms, bathrooms, garage spaces and other upgrades. The appraiser may take supply and demand in account, but generally they are looking primarily at the condition/amenities of the home and how it compares to other sales in the immediate neighborhood.
So, while many buyers may not want to pay more than the “assessed value” of a property, the market value is usually higher. Additionally, a seller may order an appraisal before going on the market and refuse to sell for less than the appraised value, even if that may not be the correct market value. Tax assessment values and market values may vary depending on your neighborhood, county and state. While, tax assessments may be lower than market value by $50-$100K in some areas, the assessment and market values may be the same or higher in other areas.
If you have questions about assessed values, vs market or appraisal values, please contact us for more information!
Photo Credit: Newsday.com and epcrossing.org
Many clients are frequently baffled about where to begin the financing process and what they should be looking for in a mortgage. With so many changes over the years, it’s hard to keep up! We decided to simply and effectively lay out the most common loans and their general guidelines over the coming weeks as part of a series “Let’s Talk Loans”.
Conforming Conventional Loans
What is it? “Conforming” loans are the most common loans in the marketplace, and meet the required standards of both Fannie Mae and Freddie Mac (that is, they “conform” to Fannie and Freddie rules), both of which purchase loans from lenders and then package them up to sell on the secondary market. This allows lenders to receive cash up front for you loan, so they can lend to someone else. Conforming loans can be fixed rate or adjustable rate, and can be 15 year or 30 year.
Why is that important? Investors buy these packaged loans from Fannie and Freddie. Fannie and Freddie charge a guarantee fee, which is approximately 0.5% more than your interest rate. Some banks, however, keep these loans in their own portfolio rather than sell them, depending on the market and their own investment objectives.
What are the guidelines? Typically, you need at least a 5% down payment, and good credit. The conforming loan limit is generally 417,000; however, in more expensive markets of the country, including the DC Metro area, high-value conforming loans up to $625,500 can be found. But be prepared to have a 10%-20% down payment for these larger loans. And without 20% down, you can expect to pay private mortgage insurance, as well.
Next Up: Let’s Talk Loans: FHA
To find out more, or to speak with a home loan expert, contact us!
So you’ve decided to purchase a new-construction home. This series of posts will detail the process from start to finish, and hopefully give you a good idea of what to expect throughout the process. In part one, we’ll look at how to get started by securing construction financing and what to expect from the lender.
The first thing you should do before embarking on the journey of building a home is to secure financing. Actually, this is true no matter what type of home you’re buying, be it resale or new construction. You need to know how much house you can afford.
You’ll need to shop for lenders. Compare rates and loan terms. Construction loans sometimes have a higher interest rate than a traditional resale mortgage. During construction you may be paying a bit more in interest, but when the project is finished, the construction loan will convert to a long-term note and you should be able to get a lower rate going forward.
Be aware of the time limit on the construction loan. If the loan term is for nine months, be sure the builder can complete construction in that time, or you’ll likely be paying penalties every month that construction drags on (this happened to a member of our team). The penalty will vary from lender to lender, so it’s important to ask about this when shopping around.
Construction financing differs from a mortgage used to buy a resale home in other ways, as well. For starters, the bank has to approve your builder. Some of the larger builders will already be approved by multiple banks, or they may have an in-house or affiliated lender that offers incentives to use them. You might get some discounts if you go with an affiliated lender, and sometimes this is the most cost-effective way to go. But don’t be afraid to comparison shop. Building a home is a huge undertaking, and you want to be diligent every step of the way.
If you go with a smaller builder, then the bank will likely need to check out the company finances before they will give the go-ahead to your project. This protects both you and the lender, and any reputable builder will be happy to provide the necessary paperwork to gain approval. If a builder balks at this, this should raise red flags. The last thing you need is for a builder to go belly up in the middle of building your home.
Another difference with construction loans: The bank holds onto the money and makes payments to the builder in installments, called draws. Before the bank will release a draw to the builder, an inspection will be scheduled to make sure work on the house is progressing in a timely manner and the work is up to par. Some banks require the borrowers’ permission to release the funds. If possible, go to the house yourself to check and make sure the work that has been done is what is in the contract. If there’s a problem, notify the builder and the bank immediately. And consult an attorney before withholding payment.
As with all financing, do your research. Ask questions about the process, fees, terms, etc, so you don’t wind up surprised at any point during the process. Building a home can be stressful, but some of that stress can be reduced if you understand what you’re getting into, starting with the construction financing.
Questions about building a home or financing? Contact us! We’ll be happy to help.