Going solar can make life sunnier for some homeowners. In addition to reducing energy dependence by “borrowing” energy directly from the sun, purchasers may also enjoy a 30 percent federal Solar Investment Tax Credit and other incentives, according to SEIA.

Solar roofing can boost a home’s equity in some cases, while making it more attractive to future buyers in sun-drenched parts of the country. Best of all, financing that solar roof may be a more attainable goal than homeowners think.

Leasing vs. Owning

Perhaps the first question a green-minded homeowner should consider is whether to own solar roofing or lease it. Leasing solar panels from a third-party provider bypasses the need to take out a traditional loan or purchase a solar roof with cash.

Energy.gov notes that PPAs (Power Purchase Agreements) allow homeowners to pay fixed monthly payments based on the amount of energy the roof will likely generate over the period of the lease. But it’s worth noting that leasing also bypasses the tax credits and other financial benefits and incentives of ownership.

The Traditional Loan Route

Traditional loans can finance solar roofs just as they can other major home renovations or improvements. For homeowners who already own their homes outright, this approach offers a simple, cost-effective way to enhance the property. Other homeowners may want to look into the Department of Energy’s Residential PACE (Property Assessed Clean energy) loans aimed at promoting energy-efficient modifications.

Those who seek to take out a mortgage on a solar-roofed home, however, should watch out for the proverbial fine print. For instance, PACE loans trump mortgage loans, so having a PACE loan in place can make getting that mortgage loan impossible. 

Fannie Mae’s HomeStyle Energy Mortgage

The HomeStyle Energy Mortgage from Fannie Mae offers an attractive alternative to traditional loans, according to the Washington Post. This product includes the solar roof (or other energy-efficient modification) within the overall mortgage loan.

A HomeStyle Energy Mortgage factors in the anticipated energy savings offered by the modification in figuring the loan terms. It also lets borrowers take out larger amounts that they might receive through traditional mortgages — up to 15 percent of the home’s “as-completed” appraisal value.

Some smart financing strategies can turn the objective of owning a solar roof from an out-of-reach dream into a practical reality. A skilled real estate expert can help homeowners weigh all the available options and come up with a sensible plan that suits their needs.

When you are in the market for a new home, you may be faced with numerous options for financing your home. One of the choices you will have to make is whether to apply for a fixed or adjustable rate mortgage. In some cases, an adjustable rate mortgage (ARM) may be your best option, but keep in mind, they are not the answer for everyone.

Adjustable rate mortgages can be risky for some borrowers and it’s important to understand both the pros and cons.

When To Consider Adjustable Rate Mortgages

Perhaps one of the best things about ARMs is they typically have a lower starting interest rate than fixed rate mortgages. For some borrowers, this means it is easier for them to qualify for a loan. ARMs are beneficial for borrowers who:

• Anticipate an income increase – for borrowers who are anticipating their income to increase over the next year or two, an ARM may be the right option.
• Will be reducing their debt – those borrowers who have automobile loans or student loans that will be paid off in the next few years may benefit from an ARM which would allow them to qualify for a larger mortgage today anticipating their ability to covert to a fixed-rate mortgage.
• Are purchasing a starter home – when you anticipate living in a home for five years or less, an adjustable rate mortgage may help you save money for a bigger home.

Adjustable Rate Mortgage Concerns

There are a number of different types of adjustable rate mortgages and they are each tied to specific interest rate indexes. While an ARM may offer borrowers some flexibility in terms of income and debt ratios, the downsides cannot be ignored. Some of the cons of using an ARM to finance your mortgage include:

• Rate adjustments – borrowers should carefully review their loan documents to see how frequently their interest rates may increase. Some loans adjust annually while other may not increase for three to five years after the mortgage is signed. For borrowers, this means they may anticipate an increase in their monthly payments.
• Prepayment clauses – oftentimes, lenders include a prepayment penalty with ARM loans which can be surprising for borrowers. Before agreeing to an ARM, make sure you read the documents very carefully to determine how long you need to hold the loan and if there is a prepayment clause.
• Home values – one of the biggest challenges borrowers face with an ARM is what happens if the property value decreases: Refinancing a home into a fixed-rate mortgage may be more difficult if this occurs.

Borrowers who are searching for the right mortgage should discuss all options with their loan officer. There are specific instances when an ARM may be the best option and there are other times, such as if you plan to stay in your home for more than five years, where a fixed-rate mortgage may be your best option.

Are you in the market for a new home? If you are considering a mortgage, you may be curious about mortgage insurance, commonly referred to as PMI or MI. Let’s explore the topic of mortgage insurance, including how it works to reduce risk and how it benefits you as the mortgage borrower.

Mortgage Insurance = Risk Reduction

You might not know this, but the toughest part of the home buying process for many individuals and families is coming up with the required down payment. For example, if you were to buy a $200,000 home, you may want to invest $40,000 or $60,000 or more in the down payment. The remainder would be borrowed in your mortgage, which you would then pay off each month.

Most mortgage lenders require a minimum of 20 percent as a down payment. In the example above, this means having $40,000 cash on hand before you buy the home. If you can’t come up with this much, your lender may require mortgage insurance be purchased to protect them in case you default on the loan.

Mortgage Insurance Can Help You Qualify

Since mortgage insurance reduces the lender’s exposure to risk, it can help you in a number of ways during the qualification process. First, you can put less in your down payment than you had initially intended, which can increase your buying power and the size of home you can afford. Mortgages backed with a private insurance policy tend to be approved a bit faster than those that aren’t. Also, if you decide that you don’t need it later, many mortgage insurance policies can be canceled, which saves you a bit of money.

Look For Supplemental Benefits

Finally, don’t forget to ask your mortgage lender about any supplemental benefits offered with your mortgage insurance policy. Some policies protect you in the event that you lose your job or provide a partial claim advance if you can’t pay your mortgage. Note that not all policies have these benefits, so be sure to ask.

While it is true that mortgage insurance provides benefits to lenders, it also offers significant benefits to you as the borrower. To learn more about mortgage insurance or to get pre-approved for a mortgage so you can buy a home, give us a call today. Our friendly team of real estate professionals is happy to help.

When buying a home, there are certain steps a buyer should go through before the home sale is official. First the buyer makes the offer, then the offer is accepted.

Next the buyer schedules the inspection and home appraisal. Finally, everyone is ready for closing.

It’s easy to overlook the impact of some of these steps, but when it comes to a mortgage, the home appraisal is actually quite important. Banks want to see that they are lending money for an investment that is worthwhile, so that appraisal is a crucial step to getting financing. Here is what buyers need to know about how the appraisal could affect their mortgages.

Understanding The Home Appraisal Process

The home appraisal gives a home valuation expert the chance to evaluate the home a buyer’s considering to determine its market value. Home appraisers are highly trained, state-licensed professionals that know how to evaluate homes and assign value to them.

The appraiser will use various approaches to determine the final appraised value. The appraisal typically happens after an offer on the home was approved but before the lender loans the money.

The Appraisal And Mortgage Approval

The appraisal is one factor that a mortgage lender considers when deciding whether or not to approve a final loan request. Even if a borrower had preapproval, a low appraisal could cause the mortgage to fall through.

Why is this? A lender only wants to lend enough to cover what the home’s actual value, and if the appraisal comes in lower than what the borrower is asking for, the lender can deny the loan.

If the lender does not deny the loan completely, they may refuse to lend more than the home’s value. In order to buy the home at the agreed price, the buyer may need to come up with the difference in cash at closing.

What Can Buyers Do If The Appraisal Is Low?

If an appraisal comes in low on the home someone wishes to buy, the buyer shouldn’t panic. It is possible to get a new appraisal at a higher value.

First, consider the condition of the home. Did the seller let some things fall into disrepair? If the seller fixes those items, a new appraisal may be higher.

Does the home look rundown or cluttered? This shouldn’t affect the appraisal, but it can sometimes cause the appraiser to trend lower. Sometimes, simply asking for a second opinion might get a slightly different appraised value.  That said, if the appraisal is low, make sure to evaluate the purchase price. Is it in line with current market conditions and the overall condition of the home?

If the answer to that question is no, then the offer may be too much for the home. The appraisal, in this case, gives the buyer the opportunity to reevaluate the purchase decision.

When it comes to mortgage approval, the appraisal is one of the critical steps in the process. If a buyer has shopped wisely, the home should pass with flying colors, and soon the home sale process will be over.  As always, your trusted real estate professional is the best resource for appraisal information in your local market.

On the surface, a short sale seems like the perfect deal. However, before you take the plunge, you need to understand how this type of home purchase works.

What Is a Short Sale?

A short sale is a home sale in which the homeowner is selling the home for less than he or she currently owes on the mortgage. In most cases, this means that the buyer is paying less for the home than it’s worth, which leads to instant equity.

Short sales allow homeowners to get out from under mortgages without damaging their credit as much as a foreclosure. Lenders often agree to short sales because the foreclosure process is lengthy and expensive, so short sales can be more beneficial for both parties in the long run.

Advantages

When you buy a short sale, you can often get a nicer home for a lower price. In most cases, you will still be able to use financing to purchase a short sale.

A homeowner attempting a short sale also tends to be highly motivated, which means they will be willing to negotiate on almost any aspect of the sale.

Disadvantages

Although purchasing a short sale can be lucrative, the process isn’t easy. Short sales can take as long as nine months to complete, which is much longer than the time required for the typical home purchase.

Because the homeowner owes more on the mortgage than you will be paying, the bank must agree to the price. This means that even if the homeowner is willing to accept your offer, the bank can still reject it.

If the home secures more than one mortgage, all of the lenders must agree to the sale before it can close. This can lengthen the process even more.

Even though the bank will hold up the process, they will want you to be flexible. Banks are less likely to approve offers from buyers with multiple contingencies, such as a house that needs to sell before closing.

Should You Purchase a Short Sale?

The decision to make an offer on a short sale home is personal. Although there are many obstacles and potential disadvantages, you may be able to save money and build equity quickly if you are able to complete a short sale successfully.

Keep in mind that most banks considering a short sale will want to see a well-qualified borrower who offers flexible closing terms, so it’s best to contact your mortgage professional for a pre-approval before you make an offer on the home.

Your trusted real estate professional is a qualified partner to help you with a short sale home purchase.

When buying a house in a market that favors sellers, buyers must be able to move quickly. Mortgage pre-approval is critical to this. Here are some tips buyers can use to get approved fast.

1. Estimate Purchase Costs

Buyers need to know what their target purchase price is. This could speed up the pre-approval process according to Realtor.com.

If buyers have been saving for a down payment, they should also tell the lender the amount they plan to put down on the home. Again, this helps speed up the pre-approval process and ensures greater accuracy.

2. Check The Credit

Lenders will check a buyer’s credit score before offering mortgage pre-approval. Checking their own credit first and making improvements if needed could help buyers speed up the approval process.

Buyers who have credit problems may want to reach out to their lender first to see what they can do to improve their credit situation. Lenders know what strong credit looks like and may help buyers make changes that improve the credit score quickly.

Knowing credit ratings before asking for mortgage pre-approval also helps buyers know what to expect from their mortgage offer. The better the credit, the better the terms on the mortgage the bank offers.

3. Get The Paperwork Ready

If the lender has to ask for a piece of paperwork after starting the approval process, a buyer will face delays. Organizing all paperwork and delivering it with the pre-approval application should help.

Start with proof of income that will be used to qualify for the mortgage including 30 days of pay stubs and the previous two years of tax returns with W-2s or 1099s.

Buyers should then gather two months of savings and checking account documents.

Finally, anything connected to retirement, assets, or 401(k) funds needs to be included.

If the buyer has any funds deposited that were from regular paychecks or do not show in the employment and payment records, they may need to have a written explanation.

4. Present Everything Clearly To The Lender

Buyers who bring everything they need to the lender in an organized fashion should get their pre-approval letters quickly. Sometimes lenders can deliver the letter the same day that they receive the information.

That said, buyers with complications, like unusual employment structures or credit problems, may face delays. Most lenders are able to deliver an answer within a few days, even with complex applications.

Mortgage pre-approval is a critical tool in the negotiation tool box for home buyers. Doing a little homework and preparation first can help buyers get approval fast, even in a competitive market. With approval, the chances of a successful offer increase significantly.

A pre-approval in hand will make home buying a much easier experience. Your trusted real estate professional can now help you find just the right home in the right price range for you.

For first-time home buyers, closing costs are a major hurdle for home ownership. Coming up with a down payment and several thousand dollars for closing costs can be hard without home equity to tap.

To help, buyers often ask sellers to cover all or some of these costs. In markets favoring buyers, this is a common habit, but when the market switches to favoring sellers it becomes harder. Sellers who know they may get multiple offers are less likely to say “yes” to this request.

Yet even when the market favors sellers, buyers can still ask for this help. It all depends on how the offer is presented. Here’s how to potentially make it look appealing, even with other offers on the table.

Buyers Need To Consider The Total Amount

Many sellers build negotiation room into their asking prices. This means they anticipate some offers coming in that are lower than their asking price.

Buyers asking for closing costs can offer the full asking price or more than the asking price to make the offer more appealing.

For example, if the buyer needs $2,000 in closing costs, and offers $2,000 more than the asking price, the seller won’t stand to lose money and will find the offer more appealing. This, in effect, rolls the closing costs into the loan.

On the flip side, if a buyer makes an offer well below the asking price, then also asks for closing costs, the seller is likely to say no.

Buyers Should Consider Other Components Of Their Offer

Sometimes the problem the buyer faces is a lack of cash to cover the closing costs, particularly when using a no- or low-down payment loan option. To make the offer more appealing, buyers should look at the rest of the offer’s terms.

For example, a buyer may ask for closing costs but overlook other contingencies, such as non-urgent repairs. This makes the offer appealing, because the seller’s costs even out.

Buyers Can Offer To Close Quickly

Another way to make seller-paid closing costs something a seller will accept is moving the closing date up. Most sellers want to sell quickly, so the faster the buyer can close, the better the offer may look.

For buyers in a seller’s market who need closing cost help, the key is to make all other aspects of the offer appealing. By doing so, these buyers may just get the closing cost help they need to move forward with their home purchase.

Your trusted real estate professional is well-versed in the art of negotiation and will be a great resource to guide you through your home buying or selling process. 

Securing the best conventional mortgage rate possible can pose a challenge for even veteran property buyers.

Your mortgage rate will be determined by a variety of factors that pertain to your unique financial portfolio as well as economic forces. While no one has full control over all of the things that influence the process, understanding the manageable aspects can improve your negotiation position when securing a conventional mortgage.

Consider these four things that impact how conventional mortgage rates are determined.

1: Credit Is King

A borrower’s credit score has a tremendous impact on the final mortgage rate. The general rule is that the higher the score, the lower the rate. The opposite generally holds true as well.

Lenders usually require a minimum credit score of at least 620. Some will dip as low as 580. If yours falls lower, qualifying for a conventional loan may not be an option. But the good news about credit scores is that this is an element you have control over.

A credit report details your repayment history, previous loans, credit card and financial bandwidth, so to speak. Before mortgage shopping, get a copy of your credit report, clean up any blemishes and amp it up as high as possible.

2: Economic Growth Matters

The average home buyer has zero control over the economic forces that impact mortgage rates. But you do have choice about when to buy.

It’s no secret that the country is in the midst of tremendous GDP growth, historically low unemployment, improved consumer confidence and rising wages. This may seem like a good time to buy. Not necessarily when it comes to conventional mortgage rates.

Prosperity tends to create an uptick in consumers vying for home loans. That demand seems like a good thing. But the Fed often responds to high levels of consumer confidence by raising rates across the board. The theory behind this unfortunate environment stems from the idea lenders have limited resources.

It may seem counterintuitive, but weak economies often enjoy lower rates. For practical buying purposes, the U.S. economy looks like a juggernaut right now. You may want to buy sooner rather than later. Rates could go up again.

3: Price And Down Payment

Another set of facts that you have control over are the down payment amount and price of the home.

Conventional mortgages require a minimum down payment of 20 percent or higher. Like credit scores, the higher the down payment to better positioned you will be to secure the lowest possible rate. The basic concept trails back to the level of risk the lender takes by writing the loan.

For example, borrower defaults often force banks to take losses upwards of 30-60 percent of the loan. That 20 percent shows that you have real skin in the game and are less likely to stop paying the monthly premiums. Big down payments often correlate to lower mortgage rates.

Although 20 percent remains the industry standard, borrowers can secure a loan with less down. If you qualify for a conventional loan with less than 20 percent down, expect a less than desirable rate and the additional cost of private mortgage insurance. It’s kind of a double whammy.

4: Loan Types Differ

There are several variables in the loan-writing process that directly impact rates.

Most loans have terms of 15-30 years and lenders are more apt to offer lower rates on shorter term mortgages. Fixed- or adjustable-rate types are also profoundly different. Adjustable mortgages tend to enjoy lower rates in weak economies. But when the country ramps up, so does your interest rate and monthly premium.

Fixed-rate conventional mortgages are static throughout the life of the loan. The rate may be slightly higher at the closing. However, you won’t be betting against the economy.

Lastly, borrowers have the ability to buy points. This practice allows borrowers to pay more upfront costs and enjoy lower mortgage rates for the life of the loan. It’s one method some people use to overcome less-than-perfect credit scores.

Contact your trusted real estate professional to discuss the best plan for finding and securing the home of your dreams.

You probably already know that qualifying for a mortgage can be the biggest hurdle — aside from actually finding that dream property — along the path to home ownership.

Rather than agonizing about it, however, there are some positive actions you can take in advance to help you realize your dream.

Take A Close Look At Your Budget

If you don’t currently operate with a comprehensive household budget, get started now to analyze your income and monitor your spending habits. There’s no better way to prepare for home ownership than by being realistic about how you spend your money. If you don’t have a regular savings program, or if you’re constantly short on cash prior to the next payday, take steps to remedy the problem. Plan for the future by getting the present in check.

Gather Employment And Earnings Records

Mortgage lenders want to see stability and commitment. Finding and organize your employment records to show a consistent earnings pattern and, hopefully, a record of growth, both in terms of income and responsibility. Simplify the task of gathering required documents by collecting all records in a binder or notebook that can easily be copies when it’s time to submit them to a lender. It’s a confidence-building step as well.

Organize Your Banking Records

Lenders will not only want to see employment records, but they will require copies of all bank and investment accounts as well. Again, by being organized and getting a handle on your dollar inflow and outflow, you’ll gain insights into your individual spending habits and make the job easier for a mortgage specialist.

Make Copies Of Your Tax Returns

Tax returns confirm and validate all the other financial information that you will be required to supply. Typically, returns for the past two or three years will be required. If you own a small business or have income in addition to that from paid employment, make copies of those records as well.

Put A Halt To Spending

Perhaps the best way to demonstrate your serious intent to purchase — and pay for — a new home is by curtailing your spending on impulse purchases and expensive entertainment. This is not the time to buy a new car, book an exotic vacation, purchase major electronics or even home furnishings, or commit to time payments of any sort. Frugality should become your mantra in the months leading up to loan qualification.

Monitor Your Credit Cards

If your credit rating is within acceptable limits, do what you can to make all payments on time, pay down balances, minimize new purchases and demonstrate your continuing ability to “live within your means.” Do not apply for new credit cards, no matter how tempting the offers, because increased account activity can adversely affect your FICO score. In addition, if you have a blip on your credit report, do what you can to repair it prior to making a mortgage loan application, or be prepared to explain the circumstances, in detail and in writing.

Applying for a loan need not be scary. Understanding the financial reality is a great benefit.

Securing your financing is an important part of the home buying experience. Your trusted real estate agent is ready to help you every step of the way.

The struggle to achieve the American homeownership dream often feels like it happens in a vacuum. Everyday people work hard, save money and polish up their credit to get a low mortgage rate.

But there are powerful forces at work that are far beyond each person’s control. And until recently, the gap between American wage growth and rising home prices was widening. According to data coming out of the U.S. Department of Labor, unemployment recently hit a 49-year low and wages are enjoying the greatest uptick in nearly a decade. That is good news for prospective home buyers.

American Wages On The Rise

The 2018 economic news has seemed like one long greatest hits album. Historic-low unemployment for African-Americans and Hispanic-Americans has spurred confidence among these groups and the national unemployment has been steadily under 4-percent. The stock markets are booming, and the GDP growth has been impressive.

But there has been some frustration over stubborn wages that haven’t kept pace with other metrics. A report following stagnant salaries in February pointed to no slow down between rising home prices and wallowing pay rates. The growth rate was reportedly a modest 0.1 percent gain in February and that put Americans behind the curve in terms of buying homes.

But numbers coming out of the second quarter jobs report point to a 10-year high wage increase. The Bureau of Labor and Statistics reported wages are rising as employers compete to fill positions and the 12-month increase stands at 2.9 percent through August.

These are key numbers that may put a smile on potential home buyers’ faces.

• Wages rose 0.5 percent in the second quarter of 2018.
• Through August, wages rose 2.9 percent over the previous 12-month period.
• Private industry compensation increased by 2.9 percent.
• Government compensation increased by 2.3 percent, down from 2.6 in 2017.
• Sales jobs gained by 3.5 percent.
• Transportation jobs increased by 3.4 percent.

Experts are also claiming that setbacks from hurricanes likely blocked wage growth from topping the 2.9 high in 2009.

Where The Housing Market Stands

There’s little doubt that the surging economy put a higher number of Americans in position to purchase homes. However, inventory has remained well behind demand and that created a seller’s market with rising listing prices. But home prices are coming within reach for more people in 2018 and possibly 2019 market.

Since bottoming out in 2102, today’s home prices reportedly stand at about 6 percent higher than they were at their 2006 peak. That is not necessarily an indication that another housing bubble exists. Rather, the uptick in home prices is a natural reaction to an inventory shortage and economic growth.

The optimistic news for prospective home buyers is that wage growth appears to be gaining on home costs. As the gap closes, it’s likely that more and more people will be financially able to secure the American Dream of owning a home.

If you are in the market for a new home, be sure to contact your trusted real estate professional!