Market Trends • April 13, 2023

The Heat is On: How Rising Mortgage Rates Are Impacting the Spring Housing Market

by Cori Hamilton

The sun is shining, flowers are blooming, and the spring housing market is heating up—right? Once the market cooled off at the end of 2022, real estate experts predicted the 2023 housing market to warm up in the spring months. However, as inventory remains low and mortgage rates rise, some people are starting to fear another housing market crash.

Not to worry! I’m here to tell you why that isn’t the case. Keep reading to learn why you shouldn’t fear the worst for the 2023 housing market.

Let’s look back at 2008

1. Slipping Mortgage Standards

Looking back at the statistics in 2008, it’s easy to see that nearly anyone could get a mortgage for a home they couldn’t afford. Banks were creating artificial demand by granting loans with few restrictions. This led to many homeowners defaulting on their loans and ushering in a new wave of foreclosures. The economy took a huge hit from all these loans crumbling beneath faulty restrictions—and luckily, the mortgage industry has taken many steps to learn from their errors in the past.

2. Overflowing Inventory

Because of the banks’ artificial demand, homes were being built right and left for anyone who would buy them. Then, once the foreclosures hit the market, there were too many homes and insufficient demand—forcing national home prices to plummet at an alarming speed.

So, what’s the deal today?

1. Unsteady Interest Rates

Many experts predicted the mortgage rates to ease off at the end of 2022 and into early 2023, but the recent hikes in the market are starting to turn some heads. These increasing mortgage rates are still a direct result of increasing inflation.

The Feds are keeping a close eye on the rates as they continue to assess the nation’s inflation. So, it’s possible to see the rates yo-yo up and down throughout the beginning of the year as the Feds decide when to conclude the uptick in mortgage rates.

2. Sellers Are “Rate Locked”

What do we mean by “rate locked”? A large portion of the nation’s homeowners are sitting on a mortgage rate around 4% or lower, and they are hesitant to enter the market and swap their rate for the current percentage. This has contributed to another shortage of inventory as we ease into the warmer months of the year.

How can this benefit you?

As we compare the current market trends to the housing bubble of 2008, it’s clear that we are tackling much different hurdles—and luckily, these seem to be temporary trials. Experts foresee the mortgage rates leveling out throughout the year as the market picks up in the spring and summer months.

And as for home prices, we are still experiencing a shortage of inventory. As long as demand outweighs supply, you can expect your home to continue to appreciate, even if it’s at a slower pace than the last few years.

Buyers. We’re seeing an influx of buyers pull out of the market now that the interest rates are peaking once again. However, this is a great opportunity to hunt for a home while there’s less competition. And with so many builders offering new-build incentives, now is a great time to sneak into the market while the waters are calm. Lisa Sturtevant, Chief Economist at Bright MLS, spells out the mindset of today’s buyers:

“For some buyers, higher mortgage rates will be a hurdle but ultimately will not keep them from getting back into the market after sitting on the sidelines for months.”

Sellers. Whenever there’s an inventory shortage, you can always expect the market to work in your favor. With less people willing to sell, you will stand out to prospective buyers. Jeff Tucker, Senior Economist at Zillow, says:

“. . . sellers who price and market their home competitively shouldn’t have a problem finding a buyer.”

All in all, the increase in mortgage rates have caused some waves in the housing market, but we expect the market to settle into calmer waters as the year progresses. If you are looking to buy or sell your home in the coming months, it is always beneficial to work with an experienced agent to guide you through the ups and downs of the market. Contact me! I’m happy to assist with your real estate needs.

Financing • March 9, 2023

How to Stick to a Budget

by Cori Hamilton

Do you have financial goals but don’t know where to start? Setting a budget is the first step to financial success. However, many people will create a budget and fail to stick to the parameters they’ve put in place.

So much for a budget, right?

If managing money is not your forte, consider these five tips to keep you on track:

(Click the photo above to watch my Youtube video!)

Budget as a Team

If your budget affects more than one person, could you include them in the budgeting process? This keeps you and all involved parties on track to achieve the same financial goals. Set a dedicated time every month—or even quarterly if you’re a pro—to check in and reassess your spending habits.

Expect Monthly Differences

Let’s be honest; not every month in the year is created equal. To stay on top of your budgeting, try to predict when you will spend more significant amounts due to certain life events. Do you have a month that’s a little birthday-heavy? Summer vacations? Don’t forget those new clothes and back-to-school supplies in August! You know your lifestyle better than anyone else, so try to predict the expenses and budget for them ahead of time.

Start with the Essentials

When deciding where to funnel your earnings, consider life’s top four essentials. Everyone requires food, shelter, utilities, and transportation. These four necessities in life should be prioritized when creating a budget. After meeting these needs, you can get creative about where to distribute the rest of your funds.

Don’t Set it and Forget It

Once you create a budget, it’s common for people to set it aside and let it collect dust. However, your budget should adapt to your lifestyle changes. Did you get a promotion? Congrats! You can now adjust your budget to reflect your new financial goals and lifestyle. Did you have an unexpected medical expense? You might need to reflect on your budget and see how to adjust and accommodate.

Online Budgeting Tools

While I love a great Excel Sheet as much as the next person, there are helpful apps and software programs that can keep track of your budget for you. Take a look at apps such as Mint, EveryDollar, and Goodbudget to craft a budget in a pinch!

Setting a budget is the first step in a long road of financial possibilities. Believe in yourself and know you can create positive habits that will help you succeed in the future.

If owning a home plays a part in your financial goals, I am happy to assist you when the time comes! Real estate is an excellent investment, and I’m here to help you achieve your financial and homeownership dreams!

Other • February 9, 2023

8 Things To-Do When Moving To or From Hawai’i

by Cori Hamilton

Let’s paint a picture.

You’ve just finished a mighty game of Tetris with the moving boxes, the family waves goodbye to a house once-called home, and you’ve all settled in for a long plane trip. It’s official! You’re moving out of state.

Moving can be a stressful time, but relocating to or from the islands is a trans-pacific adventure and very different than moving on the mainland. From packing, understanding the wooden lift vans, and shipping your car, then the journey to your new community—but surprise! A few things might have slipped your mind.

No need to worry! Here are 8 things to add to your to-do list when moving:

1) Visit Your Future Destination. It’s always a good idea to get the lay of the land when it comes to your future home. Drive the neighborhood streets and map out the closest schools, parks, grocery stores, and gas stations. These are important features of everyday life, and having a better understanding of your future surroundings will offer an easier transition.

2) Change Your Billing Address. Don’t forget to switch all your bills to the proper address. Not sure where to start? Here are some examples to remember:

Utilities. Gas, water, electricity, and even garbage pickup! Most of the companies that offer these services vary by state. Tip: I can help! Ask me for a list of recommended vendors on Oahu.
Credit Cards. Most people opt for online billing payments, but if you’re one of the few who prefer paper statements, don’t forget to update your address for your credit cards.
Insurance. Moving could be a good opportunity to start shopping for local rates. If you’re looking for a new insurance source, now could be a good time to switch for a more competitive price.

3) Voter Registration. It’s easy to forget about this item on a to-do list, so don’t put it off until it’s too late! A new state means a whole new pool of political candidates.

4) Pet Registration. Yes, pets need to be registered with the state. Each city varies regarding how many furry friends (and which types) you can include in your humble abode, so make sure that you are registered and up to date.

5) Forward Your Mail. Don’t let your favorite magazine subscriptions and family Christmas cards get lost in the mail! Make sure to set up a mail forward with the post office before moving away. USPS will forward your mail to your new address for up to a year. Here is the link to inform USPS of your change in address: https://moversguide.usps.com/mgo/disclaimer

6) Look for New Wi-Fi & Cable Companies. Take a look at what your future neighborhood provides and get your home set up. Trust me, people will be asking for your Wi-Fi password the minute those neighbors come over for a backyard BBQ.

7) New Driver’s License. Each state’s deadline varies when it comes to switching over your driver’s license. Research what your new state’s requirements are before you officially relocate.

8) Get to Know Your Neighbors. The car and boxes are in, the dust has settled—it’s time to get out and meet some people! Introduce yourself to your neighbors or sign-up for the local gym or rec club. One of the easiest ways to meet people is through a mutual activity or hobby.

As your local Oahu Realtor, I’m here for you, no matter where your next adventure takes you. Reach out to me to get connected here on Oahu or anywhere in the country!

Other • January 11, 2023

3 Steps to Planning Your Year

by Cori Hamilton

Entering a new year can be overwhelming. Just like an artist’s empty canvas or a writer’s blank sheet of paper, it’s hard to know where to begin. But remember, starting fresh also offers an abundance of opportunities. Now is the time to take your year by the horns and steer it in the right direction.

Don’t know where to begin? The following 3 steps are a great place to start:

Step 1: Setting Intentions

Setting your intentions at the beginning of the year is like making a map. Without them, how will you know where you’re going? Or, more importantly, how will you know when you get there? It’s hard to find the “X” that marks the spot if you don’t know what you’re looking for.

Okay, pirate lingo aside, it’s important to lockdown your annual goals at the beginning of the year. These intentions will help you stay on track whenever you’re feeling lost.

TIP: Write them down in a planner, on a Word document, or even in the notes app on your phone. Make sure your intentions are documented somewhere so you can always refer to them.

Step 2: Creating SMART Goals

Do you have your intentions in mind? Great! Now, let’s dig a little deeper.

We want to turn these intentions into SMART goals. This is an acronym meaning goals that are specific, measurable, achievable, realistic, and timely. Adding these parameters will provide clarity for your objectives and help you achieve the future you desire.

Goals that are specific and measurable help you narrow your intentions and track your progress (that way you know whether you’ve reached your milestones or not.) Next, be sure to set goals that are achievable and realistic. There’s nothing more discouraging than setting a goal that you secretly know you won’t achieve. And lastly, make sure you can reach these objectives within the year.

Now your 2023 is REALLY starting to take shape!

Step 3: Choosing Your “Word” for the Year

While we believe in the power of setting future goals, that may not be for everybody. Instead, consider a word for the year.

Think about your intentions for the year and narrow them down to a single word or phrase. No need for something fancy. How about—inspire? Or maybe reset? Choose something that you would consider meaningful for your year to come. The book One Word That Will Change Your Life by Jimmy Page & Dan Britton covers this idea in detail, so consider giving it a read as you establish your word for the year!

Have we turned you into a goal-getter yet?

Don’t forget that setting real estate goals is an important part of planning your year. If your real estate goals for 2023 involve buying, selling, or investing in a home, please text or call me at (808) 375-3959 or send an email to cori@cori-hamilton.com.

Buying • Financing • December 13, 2022

3 Ways to Reduce Your Interest Rate When Buying a Home

by Cori Hamilton

Are you kicking yourself for not buying when mortgage rates were lower? You’re not alone! With the housing market slowing, sellers reducing prices, and interest rates peaking at the highest level in 20 years, many would-be buyers have put their plans on pause.

But is waiting the smartest strategy?

While we try not to give blanket advice, our team still encourages clients to pursue home buying because it supports long-term wealth building. After all, 7% is 93% less than 100% interest (which is what you pay when you continue to rent).

“There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades.” – Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR)

If you’re thinking about buying in the new year, it’s important to understand there are many creative loan programs that can temporarily reduce your interest rate. Watch the video below to learn more.

PRO TIP: Contact me to get connected to a trusted lender who can help you explore these options and get pre-qualified!

2-1 Buydowns

With a 2-1 buydown mortgage, the buyer pays a lower interest rate over the first two years of the loan in return for an up-front payment of the interest. The interest rate is reduced by 2% in the first year, 1% in the second year, and then the full interest rate for the remainder of the mortgage. This is the most common buydown option.

For example, if rates today are at 7%, the first year’s rate would be at 5%, the second year’s rate would be at 6% and then the remainder of the loan would go back to 7%.

Costs on this are typically around 2-3% of the purchase price and can be used on FHA, VA and Conventional Loans regardless of down payment size.

3-2-1 Buydowns

With a 3-2-1 buydown mortgage, the buyer pays a lower interest rate over the first three years in return for an up-front payment of the interest. The interest rate is reduced by 3% in the first year, 2% in the second year, and 1% in the third year.

For example, if rates today are at 7%, the first year’s rate would be at 4%, the second year’s rate would be at 5%, the third year’s rate would be 6% and then the remainder of the loan would go back to 7%.

Costs on this are typically around 4% of the purchase price, so on a conventional loan the borrower must have at least a 10% down payment since that allows for over 3% in seller concessions.

Who Can Buy Down A Mortgage?

Although it’s the buyer (or borrower) who benefits from a buydown, the buyer isn’t always the one who buys down a mortgage. Sellers and builders can also be responsible for purchasing points to lower the buyer’s interest rate.

Sellers may offer to buy down a buyer’s mortgage to incentivize the buyer to purchase their home. In these circumstances, the seller will make the one-time payment and deposit it into an escrow account or pay for points over the entire loan term as part of seller concessions.

Adjustable-Rate Mortgage (ARMs)

An adjustable-rate mortgage is a home loan with an interest rate that adjusts over time based on the market. The fixed period on these can be 5, 7 or 10 years, so it’s a great option for buyers who want to take advantage of a lower rate but want the security of a longer fixed period than the buydown options offer.

For example, let’s say you take out a 30-year ARM with a 5-year fixed period. That would mean a low, fixed rate for the first 5 years of the loan. After that, your rate could go up or down for the remaining 25 years of the loan.

The Bottom Line: Should You Buy a Home Now or Wait?

If you’ve found a home that you can afford and it meets your family’s needs for the next five years, it’s reasonable to move forward with the purchase. This may sound like a very simple answer, but it is difficult to perfectly time the housing market. By taking advantage of one of these creative loan options, you can get into your dream home now at a lower rate and refinance once rates drop in the future.

Traditionally, markets like this will stabilize, but when that happens is up in the air. If you’re thinking about buying a home in the new year, reach out to me! I’m here to help you decide if it makes sense to make a move now or wait!

Other • November 30, 2022

Send someone special a COMPLIMENTARY letter from SANTA!

by Cori Hamilton

(Click on the photos below to be redirected to the form)

Market Trends • Real Estate • November 3, 2022

7 Reasons Not to Fear The Current Housing Market

by Cori Hamilton

Will the real estate market crash? Are the headlines as bad as it reads? Should you buy a house now or wait? These are questions our team has been getting a lot lately! We know the current market can seem overwhelming, but the good news is you don’t have to face it alone!

As the market slows (btw: totally normal for this time of year!), you may have questions about what will happen next. After all, memories of the Recession that took place in 2008 are still very fresh for many of us! This is why our team is tracking top economists and the latest market data, so we can provide you with sound advice as you prepare to navigate these changes.

Whether you’re a buyer or seller, click here to watch a quick video on why you shouldn’t fear the housing market this fall!

If you are a buyer:

1.) There is less competition – more homes on the market means fewer offers on each home, so you won’t have to come up with crazy ways to entice the seller to pick you.

2.) There is room to negotiate – some sellers are offering concessions like paying part of a buyer’s closing costs or helping buy their rate down.

3.) You don’t have to waive your inspection and financing contingencies, which gives you the flexibility to call the deal off if issues arise. A luxury many buyers didn’t have last year!

4.) You have more options, which makes the process of looking at homes fun again.

If you are a seller:

5.) You can still benefit from the enormous appreciation in home values we have seen over the past 2 years.

6.) You are still in a seller’s market and will sell your home quickly – 88% of recently sold homes spent less than a month on the market.

7.) As long as you have a trusted professional to help you strategically price your home, you will still get a lot of interest from buyers.

Plus, if you are wanting to not only sell, but also purchase a new home, you will benefit from all of the above!

Something to keep in mind: The National Association of Realtors (NAR) reported an increase of 100,000 members since 2021. The average experience of NAR agents has decreased to only 8 years. Who knows how long these agents will last in a shifting market—that’s why you need to trust a professional with the skills and experience to get you to the closing table!

The ever changing real estate market can be overwhelming! We know what it takes to guide you through investing, selling, or finding your dream home. Contact me today to learn more about our local market!

Buying • Financing • November 1, 2022

How Many Times Can You Use A VA Loan?

by Cori Hamilton

By: CrossCountry Mortgage LLC

Whether it’s the need for more rooms, a backyard for the children to play, or extra storage space to store valuable things, ultimately, the hunt for the new “perfect” house begins.

However, this process can be costly, as families try to save capital for a traditional down payment. Thankfully, this is where VA loans come in handy.

VA loans allow you to buy a house with limited fees. They offer affordable mortgage and housing options for Active-Duty Service Members, entitled Reservists, eligible National Guard employees, Veterans, and qualifying Surviving Spouses who belong to one or more of these groups and planning to buy a new home soon!

Acronym for Veterans Affairs loan, a VA loan, can help unlock your desired home door. But the big question is, how do you apply for a VA loan, and how many times can you use a VA loan?

You may have used a VA mortgage to buy a house before and wondering if you can apply for another VA loan or if there is a limit on how many times you can benefit from the program.

This article comprehensively explores everything you need to know about VA loans, including but not limited to what exactly it is, how to apply, how to use VA entitlement, and, more importantly, how many times a Veteran can use their VA home loans.

Without further ado, let’s dive right into it.

What Is A VA Loan?

A VA loan is a mortgage loan given by private lenders via a program set up by the United States Department of Veterans Affairs (formerly the Veterans Administration). Due to the VA guarantee, these loans feature home loan benefits like lesser lender risk, limited fees, etc., compared to other traditional loans.

The hallmark features of the VA loans program make homebuying easier for eligible candidates. With VA loans, Active Service Members, their Surviving Partners, and Veterans can buy a house with less or no down payment, no private mortgage insurance, and get a competitive mortgage interest rate.

VA Loan Benefits

The advantages of a VA loan are the same, regardless of your choice of lender. They include:

No requirement for private mortgage indemnity.
No deposit consequence if the lender pays off the loan on time.
No compulsory down payment unless mandated by the lender or if the residence’s purchase price is more than the fixed worth of the property.
Help is available from the VA to assist borrowers in preventing defaults.
Closing prices are reduced and may be paid by the seller.

Who’s Eligible to Get A VA Loan?

Eligible Veterans qualify for this loan depending on what time you served and if you were on active duty in the National Guard or the Reserves.

Generally, if you started your service after Aug. 2, 1990, and you were an Active-Duty Service Member, your qualification for a VA loan will involve that one of the following situations applies to you:

Minimum of 24 months of service nonstop.
90 days at least during which you were ordered or called to active duty.
Less than 90 days if you obtained a service-connected disability discharge.
Minimum of 90 days if you were liquidated for a hardship, the government convenience, or a force reduction.
No account of a dishonorable, other-than-honorable, or bad-conduct discharge.

As mentioned earlier in this article, VA loans are home loans offered through banks and mortgage companies but backed by U.S. Veterans Affairs (VA) Department. Consequently, the government and the lenders may have unique eligibility requirements just like any other loan. Ensure you confirm these requirements to be sure you qualify to apply.

Can I Use a VA Loan More Than Once?

Yes! You can use your VA loan benefit unlimitedly throughout your lifetime; so far, you still meet the VA and your lender requirements. Your VA entitlement determines your loan amount. As long as your entitlement remains, you typically have the chance to get another VA loan.

For eligible borrowers who qualify with an approved lender, there’s no limit on the number of times you can use a VA loan benefit in your lifetime; it may even be possible, in some cases, to have more than a VA loan at a time. This sometimes happens when a Service Member obtains Permanent Change of Station (PCS) orders, meaning they need to relocate to a new duty station.

However, you may have to sell your VA-financed home before you can use a VA loan to purchase another house.

VA Loan Entitlement: What Is It?

The key to using your VA loan two or more times is entitlement. VA loan entitlement is the amount the VA is willing to pay the creditor if the lender defaults on their loan. It’s usually 25% of the loan amount.

Eligible borrowers have two entitlement levels: Basic (or Primary) and Bonus (or Secondary). When Veterans procure a home, they use some or all of their loan entitlement.

Your Certificate of Eligibility (COE) includes an entitlement code that shows your lender how you got your entitlement. Also, it’ll show your Basic Entitlement amount – $36,000. With the VA promising to repay 25%, it means you have access to about $144,000. Typically, this is the maximum amount you can borrow.

However, this doesn’t mean your loan rate has to be $144,000 or below; it can be more, implying that you’ll use your bonus entitlement.

Bonus entitlement begins when your loan is above $144,000. If you have full entitlement, the VA will cover 25% of your loan sum, even if it’s higher than $144,000. If you have reduced entitlement because you’ve already used some of your entitlement, the VA will sum up to 25% of your county’s specified loan limit.

Restoring Full VA Loan Entitlement

Using full entitlement means you’re either a first-time VA loan user or completely paid off a previous VA loan. There’s no restriction on how many times you can use a VA loan benefit, as that $36,000 is restored every time you pay off a VA loan.

If you’ve acquired a VA loan before, the VA can only offer you a one-time full entitlement restoration if you have cleared your VA loan but still possess the building you used the loan to acquire. However, you may have to sell such a building before you can have your entitlement restored fully in the future.

Using Reduced VA Loan Entitlement

Your entitlement amount is said to be reduced if some of your entitlement is stuck in a VA loan that you’re presently paying, if you’ve repaid your loan in full but still have the home you used a previous VA loan to buy, you haven’t applied for entitlement restoration, or if you’ve defaulted on a previous VA loan.

You can still use your reduced or partial entitlement to obtain another VA loan, but how much you can borrow now has limits.

Using a partial entitlement indicates the VA will only accept your loan up to that conforming loan limit and deduct the entitlement you’re using in your present region. With that, you can still acquire more than your entitlement based on your lender’s requirements, but you’ll possibly have a down payment to make up for the difference.

How To Apply for A VA Loan

Below is a step-by-step guide to applying for a VA loan:

Step 1: Choose A VA-Approved Lender

Step 2: Get A Certificate of Eligibility (COE)

Step 3: Pre-Qualify for Your Loan Amount (Optional)

Step 4: Go House Hunting

Step 5: Sign a Purchase Agreement After Finding Your Choice Home

Step 6: Lender Processes Application and Orders VA Appraisal

Step 7: Complete the Closing Process and Move In

However, understand that these steps may not always sequentially occur, as explored above. Nonetheless, they represent the normal application process for obtaining a VA loan.

How To Get a Second VA Loan

Pay Off Your Current VA Loan First: You can apply for your full entitlement restoration; with that, you’ll be able to use that full entitlement on your subsequent VA loan, but remember that this can only be applied once.
Delay 2 Years After a Foreclosure on A VA Loan: You’ll miss the entitlement used in the foreclosed residence, but you can use your remaining entitlement for a new VA loan.
Refinance To a Non-VA Loan: This is helpful if you want to possess a house as your second home or investment property to create your VA loan benefits for a primary residence. However, you’ll need to repay the VA fully to restore your full entitlement.

Conclusion

The bottom line is that once you’re eligible and meet a lender’s requirements, you can use a VA loan as often as possible during your lifetime.

However, some situations may limit the amount you can borrow without paying a down payment. For example, if you’re planning to get another VA loan without paying off the existing one, or if you’ve settled your former VA loan but still retained the home, you might have a partial or reduced entitlement or apply for one-time entitlement restoration.

Overall, the VA home loan benefits you’ve earned for serving your country; therefore, once you are eligible and qualified, you can use this great benefit for housing options and affordable mortgages as often as you want in your lifetime!

CrossCountry Mortgage is a mortgage lender committed to helping our Veterans. If you are interested in learning more about our VA home loan benefits, find a loan officer today.

CrossCountry Mortgage LLC

3555 Harding Ave, Suite 100

Honolulu, HI 96816

(808) 451-3532

Resource: https://crosscountrymortgage.com/how-many-times-can-you-use-a-va-loan/?utm_medium=email&utm_source=sfmc&utm_campaign=PTR_Monthly&utm_content=https%3a%2f%2fcrosscountrymortgage.com%2fhow-many-times-can-you-use-a-va-loan%2f

Buying • Financing • November 1, 2022

Are VA Loans Assumable?

by Cori Hamilton

By: CrossCountry Mortgage LLC

VA loans offer many benefits for Active Service Members, Veterans, and Military Families, such as low closing costs, no down payments, and low interest rates. In addition, unlike many other mortgage options, VA loans are assumable mortgages. Even civilians not eligible for a VA mortgage can assume a VA home loan.

An assumable mortgage allows the homebuyer to take over the home seller’s home mortgage while securing the same terms as the original loan, including interest rates, monthly mortgage payments, and balance. It can be an exciting option when interest rates are rising, as is currently the case.

Here is everything you need to know about assumable VA loans, including the procedure to follow to assume a VA loan and the pros and cons of this transaction.

What is a VA Assumable Loan?

If the original loan was a VA Guaranteed Home Loan that closed after March 1, 1988, it is a VA assumable loan. VA assumable loans allow a homebuyer to take over a homeowner’s mortgage, including the existing loan’s balance, the interest rate, and the monthly mortgage payments, as long as the buyer satisfies the original lender’s borrowing requirements. VA loan assumption is subject to the original lender and VA approval.

Who Can Assume a VA Loan?

Unlike the VA mortgage loans, which are only available to active or retired Service Members and their families, anyone the lender deems qualified is eligible to take over the loan. The lending requirements vary depending on the seller’s financial institution, but borrowers must typically satisfy the following criteria:

The buyers must have a credit score of at least 580.
Their debt-to-income ratio must be 45% or lower.
Unless the buyers qualify for an exemption, they must pay a VA funding fee equivalent to 0.5% of the existing principal loan balance. In addition, the buyers are also required to pay a processing fee (typically $300 or more) and a credit report fee.
The buyers must agree to take over the terms of the original loan, including the mortgage lender, mortgage rate, etc.
Both the buyer and the seller must have a 12-month history of no missed or late payments.
If the assumer is a Veteran using their entitlement, the subject must be a primary residence. If the assumer is a NON-Veteran, there is no occupancy requirement.
Those who qualify for the VA funding fee exemption typically belong to one of the following categories:
Recipients of compensation for an injury resulting from their Military service, or those entitled to such compensation but receiving active-duty or retirement pay instead.
Those eligible to receive compensation due to a pre-discharge disability examination.
Purple Heart recipients.
Surviving Spouse of a Veteran who died in service, went missing in action, was a prisoner of war, or died from a service-related disability.

Although the person assuming the VA mortgage loan does not need to be related to the Military, it may be in the sellers’ best interest to choose a qualified Military borrower since they might be eligible to substitute your own VA loan entitlement for the seller’s. Otherwise, the entitlement utilized to purchase the home remains tied up in the property until the loan is fully repaid, and the sellers may not use their $0 down purchasing power if they decide to buy another property using a VA loan. Besides, the sellers may lose the portion of their entitlement tied in the property entirely if the homebuyers default.

What is the VA Loan Assumption Process?

Although the VA loan assumption process bypasses some of the paperwork related to obtaining a mortgage, it is still a very involved process. Here is how the VA loan assumption process works.

Your real estate agent may direct you to a property with sellers who are willing to allow you to assume their VA loan, or you can look for suitable properties on the multiple listing service (MLS). You may also find relevant listings on specialized websites like TakeList.com or Zumption.com.

VA loans often have lower requirements for credit score, income, or DTI than other mortgages, but the borrowers must meet these conditions to obtain the original lender and VA’s approval.

Unlike a traditional mortgage application, the borrower cannot shop around for a mortgage lender and must agree to have the same payments and interest rate as the previous homeowner.

Without this document, the seller will still be held accountable for any late payments made by the new borrower, which could impact their finances and credit score. Before closing on a VA home loan assumption, the home seller should confirm with the lender that a release of liability will be provided when requested since it could be a dealbreaker. The original owner must fill out and submit the VA form 26-6381 to request the release of liability from the VA mortgage.

Unless the buyer satisfies the VA funding fee exemptions mentioned above, they will need to pay the equivalent of 0.5% of the existing principal loan balance fee, which goes directly to the VA and helps keep the loan program running for future generations of Military buyers. In addition, the VA loan assumption includes closing costs such as the credit score processing fee. Finally, depending on the balance of the original loan amount, loan assumption can come with a hefty down payment if the seller holds significant equity in the property and the contract price is higher than the loan balance. The higher the down payment, the lower the funding fee will be.

If the buyer qualifies, they exchange their VA loan entitlement with the original owner so the latter can reuse their VA loan benefits to buy a new home.

1.) Finding a house for sale with a VA mortgage loan

2.) The borrower must be eligible for VA mortgage assumption

VA loans often have lower requirements for credit score, income, or DTI than other mortgages, but the borrowers must meet these conditions to obtain the original lender and VA’s approval.

3.) The borrower agrees to take over the responsibility of the original loan

Unlike a traditional mortgage application, the borrower cannot shop around for a mortgage lender and must agree to have the same payments and interest rate as the previous homeowner.

4.) The seller must obtain a release of liability from the lender

5.) The buyer must pay the funding fee, closing costs, and down payment (if applicable)

6.) The buyer exchanges their VA loan entitlement for the seller’s (if applicable)

Should I Assume a VA Loan?

Whether you are the buyer or the seller, a VA loan assumption is not a transaction to take lightly. Although it can be advantageous to both parties, it can also present its challenges. Here are some of the elements to take into consideration.

Benefits of a VA Loan Assumption

If the mortgage rates are increasing, assuming a VA loan can give you access to a lower interest rate than you would qualify for otherwise.
Depending on the loan amount, the buyers may save thousands of dollars in closing costs and other fees required for a new mortgage. Besides, the funding fee for an original VA loan is 2.3% – 3.6% of the total loan, but the buyer only has to pay 0.5% for a VA loan assumption.
The sellers may regain their full VA loan benefits to buy a new house if the buyers are qualified Military borrowers and substitute their VA entitlement benefits for the sellers’.

CONS OF A VA LOAN ASSUMPTION

VA loan assumptions are subject to the approval of the VA and the original lender.
The buyers may need to pay a sizeable down payment to make up the difference between the home’s purchase price and the loan balance. It can be a significant drawback since original VA loans do not require a down payment.
A seller may have to forfeit their entitlement if the buyer does not meet Military service requirements.
If the seller does not obtain a release of liability, the lender will hold the initial borrower responsible for late and missed payments.
Under VA loan requirements, the property can be a primary residence or a non-primary residence.

CrossCountry Mortgage LLC

3555 Harding Ave, Suite 100

Honolulu, HI 96816

(808) 451-3532

Resource: https://crosscountrymortgage.com/are-va-loans-assumable/?utm_medium=email&utm_source=sfmc&utm_campaign=PTR_Monthly&utm_content=https%3a%2f%2fcrosscountrymortgage.com%2fare-va-loans-assumable%2f

Buying • Financing • November 1, 2022

What are the Benefits of a VA Loan?

by Cori Hamilton

By: CrossCountry Mortgage, LLC

Believe it or not, buying a home doesn’t always require a traditional 20% down payment. If you’re a current or former member of the U.S. Military, you may qualify for a VA loan, which allows you to purchase a home without a down payment.

That’s just one of the advantages you receive from a VA loan. Keep reading to explore the additional home loan benefits of VA loans.

What Is a VA Loan?

A VA loan is a mortgage loan issued under a program designed for Active and Veteran Service Members and their Surviving Spouses. VA home loans are offered through private mortgage lenders, but they’re ultimately backed by the U.S. Department of Veterans Affairs, which was previously known as the “Veterans Administration.”

Several types of VA loans exist. These include:

Purchase loans
Cash-out refinance loans
Interest rate reduction refinance loans
Native American direct loans

The program allows you to use a VA loan to purchase a home or tap into your home’s equity to make home improvements. When using a VA loan to purchase a home, the loan can fund up to 100% of the home’s value, which is how you eliminate the need for a down payment.

Who Qualifies for a VA Loan?

VA loans are designed for Veterans, Active-Duty Service Members, or their Surviving Spouses. To qualify for a VA loan, you’ll need to provide proof of your Military service and meet the other eligibility requirements set forth by both the VA and your VA-approved lender.

The following items detail the requirements to secure a VA loan:

Certificate of Eligibility (COE)

First, you’ll need to provide your lender with documentation proving your Military service. This document is known as a certificate of eligibility (COE) and can be obtained from the VA website.

The department may request that you provide additional service-related documentation which confirms your status as Active Duty or a Military Veteran.

Credit Score

On the one hand, the VA does not have a minimum requirement for your personal credit score. But VA lenders can have different eligibility requirements, so it’s important to check with each lender before applying for any type of loan.

Generally speaking, it’s easier to qualify for a VA loan than a conventional loan, though some mortgage lenders may charge a fee to applicants with less-than-stellar credit.

Debt-to-Income Ratio (DTI)

All lenders will look at your debt-to-income ratio (DTI) before approving you for a loan. Your DTI is calculated by dividing your monthly debts by your monthly income. Most VA lenders will approve loans if your DTI is 45% or lower, though, as with your credit score, this threshold can vary considerably between lenders.

The VA Funding Fee

Approved applicants will have to pay a modest VA funding fee. This fee helps support the VA program so that other Veterans and their families can receive the benefits of a VA loan. This fee is a percentage of your total loan amount, which can vary depending on how much you’re borrowing.

The funding fee doesn’t have to be paid upfront, nor does it have to be paid at closing. You can roll this funding fee into your regular monthly payments to make it easier to cover.

However, you may be eligible for a refund or a waiver of this funding fee if you have service-connected disabilities. Contact the Department of Veterans Affairs to see if you qualify.

Property Requirements

To qualify for a VA loan, the property you are buying must meet the minimum property requirements. The property itself must be:

A conventional family home
The borrower’s primary residence
Free of any structural defects (e.g. rot, termite infestations, etc.)
Free of any mechanical or electrical issues affecting safety
Able to supply adequate heating

These restrictions mean you can’t use a VA loan for commercial property or real estate investing. But homebuyers will find no restriction on the home’s geographic location, which allows you to use this loan program for any home in the U.S.

However, if you want to buy a condo with a VA loan, you’ll need to search the approved condo database on the Department of Veterans Affairs website.

Benefits of a VA Loan

VA loans make particularly great options for first-time homebuyers. If you or your spouse are a current or former member of the U.S. Military, you have access to the following benefits of a VA loan:

No Down Payment

One of the primary benefits of a VA loan is eliminating the need for a down payment. Traditionally, homebuyers could expect to make a 20% down payment when purchasing a house. And while this requirement can vary by loan program and lender, a VA loan eliminates this requirement altogether.

Of course, while this removes one financial barrier for qualifying applicants, the flip side is that you’ll be making a higher monthly mortgage payment, so make sure to factor this into your overall budget to ensure you find a home in your price range.

No Private Mortgage Insurance

What is private mortgage insurance? Typically, when you purchase a home with a down payment of under 20%, the lender requires you to purchase private mortgage insurance (PMI).

The actual cost of your PMI can vary but usually ranges from 0.1% to 2% of every $100,000 you borrow. So for instance, if you purchase a $300,000 home, you could find yourself paying an additional $100 to $250 each month.

A VA loan requires no PMI payment because the VA guarantees at least a portion of the loan, reducing the risk lenders take in providing you with a mortgage. As a result, qualifying homebuyers can purchase a home with no money down and no additional monthly mortgage insurance fees.

Lower Interest Rates and Closing Costs

While the department backs VA loans, they are originated and funded by private mortgage lenders. This setup means that U.S. banks, credit unions, and mortgage lenders must compete to offer the best loan rates and fees.

Homebuyers can therefore compare lenders to find the best interest rates. The upshot of this is that VA loans typically have lower interest rates than conventional mortgages, which can reduce your monthly mortgage premiums.

Secondly, VA loans offer lower closing costs. A “closing cost” is a fee you pay to the lender in return for their assistance. VA loans have specific restrictions on what closing costs your lender is permitted to charge, limiting costs such as the origination fee and prohibiting prepayment penalties or attorney fees.

Easier to Qualify

If you’ve read this far, you probably already qualify based on your Military career or your spouse’s. But beyond this basic requirement, VA loans are easier to qualify for than other mortgage types.

For one thing, you can qualify for a VA loan even if you have a low credit score, with some lenders willing to work with borrowers with credit scores in the 550 range. Additionally, lenders are more willing to work with Veterans with a higher debt-to-income ratio — as high as 45% — which can reduce the barriers to home loan eligibility.

Government Guarantee

The U.S. Department of Veterans Affairs guarantees all VA loans. This setup means that the government is on the hook for at least a percentage of the total loan amount in the event of a default.

Such backing is mainly good news for lenders, who take on less risk when extending these types of home loans. But recipients of VA home loans also benefit from this guarantee since lenders can adopt less-stringent eligibility requirements.

Assumable Loans

Understandably, first-time homebuyers may be looking for a “starter home,” with plans to sell the property at a later date. The good news is that most VA loans are “assumable.” This designation means you can transfer your current VA loan to another buyer if that buyer is also eligible for a VA loan.

An assumable loan can increase the resale value of your home since future buyers can take on the low mortgage rates of your current loan if interest rates have risen.

Alternatives to VA Loans

Despite the benefits of a VA loan, there may be times when you wish to use a different type of loan entirely. For instance, if you have strong credit and enough savings for a 20% down payment, you may qualify for better rates and terms with a conventional mortgage.

You might consider other first-time home loan options if you’re not eligible for a VA loan. If you’re buying a home in a rural or suburban area, you may qualify for a USDA loan, which will also allow you to purchase a home with no down payment.

Otherwise, you might look into an FHA loan backed by the Federal Housing Administration, which offers rates as low as 3.5% for qualified buyers.

Thank You for Your Service

VA loans are just one way of thanking the dedicated personnel of the U.S. Military for their sacrificial service. This mortgage vehicle can put homeownership well within reach and provide you and your family with some much-needed comfort and stability.

CrossCountry Mortgage LLC

3555 Harding Ave, Suite 100

Honolulu, HI 96816

(808) 451-3532

Resource: https://crosscountrymortgage.com/what-are-the-benefits-of-a-va-loan/?utm_medium=email&utm_source=sfmc&utm_campaign=PTR_Monthly&utm_content=https%3a%2f%2fcrosscountrymortgage.com%2fwhat-are-the-benefits-of-a-va-loan%2f