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VA loans, backed by the U.S. Department of Veterans Affairs (VA), offer eligible active-duty military members, veterans, and surviving spouses a unique path to homeownership. These loans come with a variety of benefits, making them an attractive option for those who qualify. However, like any financial product, they also have their drawbacks. Understanding the pros and cons of VA loans can help potential borrowers make an informed decision.

One of the most significant advantages of a VA loan is that it requires no down payment. Unlike conventional mortgages that often demand at least 20 percent of the purchase price upfront, VA loans enable eligible borrowers to buy a home without any initial cash investment. This feature alone makes homeownership accessible to many who might otherwise struggle to save for a down payment. Additionally, VA loans do not require private mortgage insurance (PMI), which is typically mandatory for conventional loans with less than 20 percent down. This can result in substantial monthly savings for VA loan borrowers.

Another benefit of VA loans is the generally lower interest rates and fees compared to conventional loans. Lenders often offer more favorable terms to VA loan recipients, leading to long-term savings on interest. The VA also limits the amount that lenders can charge for origination fees, helping to keep closing costs manageable. Furthermore, VA loans come with more lenient qualification requirements, making it easier for individuals with lower credit scores or past financial difficulties to secure financing. The VA even provides convenient refinancing options, such as the Interest Rate Reduction Refinance Loan (IRRRL), which simplifies the process and reduces costs.

However, VA loans are not without their drawbacks. One notable disadvantage is the funding fee, which can range from 1.25 percent to 3.3 percent of the loan amount, depending on the borrower’s down payment and loan history. This fee can be financed into the loan, but it still increases the overall debt. Additionally, VA loans impose property restrictions, limiting purchases to primary residences and often excluding investment properties and certain types of housing like manufactured homes. Lastly, because VA loans typically require no down payment, borrowers start with less equity in their homes. This can be a risk if property values decline, potentially leaving homeowners owing more than their property is worth.

In conclusion, VA loans offer significant benefits, including no down payment, no mortgage insurance, and lower interest rates, making them an excellent choice for eligible borrowers. However, potential applicants should also consider the funding fee, property restrictions, and the slower equity buildup associated with these loans. If you are a veterans or active-duty service member we can help you decide if a VA loan is the best fit for their home financing needs.

The Fed’s pattern of rate hikes through early 2022 to mid-2023 culminated in a pause, announced at their latest meeting on March 20, 2024. Despite this pause, we’ve seen mortgage rates fluctuate. A notable instance was the decrease in rates in late December, despite the Fed’s decision to maintain its key rate during its December 13 meeting.
Lawrence Yun, the chief economist at the National Association of Realtors, explains that the bond market, including mortgage-backed securities, often adjusts longer-term interest rates in anticipation of future Fed policies. While the Fed plans to cut rates later this year, the exact timing remains uncertain. While the rates have remained unchanged, there’s an expectation of three rate cuts in 2024.
How the Federal Reserve Influences Borrowing Costs
The Fed sets borrowing costs for short-term loans via the federal funds rate, which affects how much banks charge each other for overnight loans. This rate, increased in 2022 and 2023 to control inflation, impacts borrowing costs across the economy, including credit card rates and home equity loans. However, fixed-rate mortgages, the most popular home loan type, are more closely aligned with the 10-year Treasury yield rather than the federal funds rate.
The Fed’s role in buying and selling debt securities also indirectly affects mortgage rates by influencing the credit flow.
What Affects Mortgage Rates?
The primary influencer of fixed-rate mortgages is the 10-year Treasury yield. A notable gap typically exists between this yield and the fixed mortgage rate. In 2023, the gap widened, leading to more expensive mortgages.
Mortgage rates are also subject to:
• Inflation: Higher inflation often leads to increased fixed mortgage rates.
• Supply and Demand: Lenders adjust rates based on their current business volume.
• The secondary mortgage market: The demand from investors for mortgage-backed securities can lower mortgage rates. Conversely, lack of investor interest might cause rates to rise.
The Fed’s Impact on Adjustable Rate Mortgages (ARMs)
While less common than fixed-rate mortgages, ARMs are significantly influenced by the Fed’s decisions. ARMs often tie to the Secured Overnight Financing Rate (SOFR), which the Fed’s actions can affect. Changes in the fed funds rate lead to adjustments in SOFR, consequently impacting ARM rates.
If you are looking to make a move this spring make sure to schedule a consultation with us on our website and we can review your needs and what best fits your needs.

When you’re in the market to buy or sell a home, understanding all the costs involved is crucial. One of these costs, often overlooked, is the real estate transfer tax. This blog post aims to shed light on what real estate transfer taxes are, how they differ from other taxes, their costs, who typically pays for them, and where the funds go.

A real estate transfer tax, sometimes referred to as a deed transfer tax or documentary stamp tax, is a one-time fee imposed during the transfer of property ownership. This tax is usually based on the property’s sale price and can vary significantly depending on the location.

How Does It Differ From Other Taxes?
It’s important to distinguish real estate transfer taxes from other types of taxes like property taxes, estate taxes, and gift taxes. Property taxes are an ongoing expense paid annually, mainly used for public services like schools and roads. Estate taxes apply when transferring assets (which might include real estate) of a deceased person to their heirs. Gift taxes are due when property is gifted and its value exceeds a certain threshold. Unlike these, real estate transfer taxes are a one-time cost incurred during the property sale process.

Cost of Transfer Taxes
The rate of real estate transfer tax varies by state. For instance, a $500,000 property sale might attract just $50 in transfer taxes in Colorado but can be as high as $3,500 in Florida. This cost is part of the closing costs and is not deductible against income tax. However, it can increase the tax basis of the property for the buyer, which might be beneficial in reducing future capital gains taxes.

Who Pays the Transfer Taxes?
The responsibility for paying transfer taxes can differ based on the state and even the specific terms of the real estate contract. While in many places the seller pays these taxes, in others, it’s the buyer’s responsibility, or the cost is split between both parties. This can often be a point of negotiation during the sale process.

Where Do Transfer Tax Funds Go?
The funds collected from real estate transfer taxes are used by local governments for various purposes, such as infrastructure maintenance or paying public employee salaries. In some states, these taxes contribute to the state budget.

States Without Real Estate Transfer Tax
Interestingly, several states do not impose any real estate transfer tax. These include Alaska, Idaho, Indiana, Kansas, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon (in most counties), Texas, Utah, and Wyoming.

In 2024, new homeowners are seeing mortgage interest rates have more than doubled since 2021, making the dream of home ownership with the traditional down payment of 20% seem like a bridge that is very far.
However, there are many options and programs that don’t require 20% down. Some loan programs now allow for a much lower down payment, requiring as little as 3 percent in cash. This development significantly eases the burden for homebuyers, especially first-timers.
Understanding 3 Percent Down Mortgage Options
These low down payment mortgages are often part of special programs, typically targeting first-time homebuyers or those who haven’t owned a home in the recent past. Here’s a closer look at these options:
1. Conventional 97
• Backed By: Fannie Mae
• Key Features: Only 3% down required; down payment can be a gift, grant, or other assistance.
• Qualifications:
• Must be a first-time homebuyer or not have owned a home in the past three years.
• Homebuyer education course required for all first-time buyers.
• Minimum credit score of 620.
• The home must be a primary residence.
• Conforms to loan limits (e.g., $766,550 for a one-unit property in most areas).
• Additional Info: Requires private mortgage insurance (PMI) until 20% equity is reached.
2. Fannie Mae’s HomeReady Program
• For: A wider range of properties, including multi-family units.
• Qualifications:
• Open to those who haven’t owned a primary residence in the past three years.
• Credit score minimum of 620.
• Income cannot exceed 80% of the area’s median income.
• At least one unit must be the owner’s primary residence.
• Unique Feature: Counts rental income towards income requirements; down payment can be entirely from gifts or assistance.
3. Freddie Mac’s HomePossible Program
• Distinctive Feature: Allows non-occupying co-borrowers to contribute to the down payment.
• Qualifications:
• Homeownership education for first-time buyers.
• Credit score of 660 or above.
• Income limits apply.
• Must live in the home as a primary residence.
• Additional Info: PMI required until 20% equity is achieved.
4. HomeOne by Freddie Mac
• Target Audience: First-time homebuyers and those looking for cash-out refinances.
• Qualifications:
• At least one applicant must be a first-time homebuyer.
• Usable credit score required.
• Property must be a single-unit primary residence.
• No Restrictions: No income or geographical limitations.
Other Low-Down Payment Options
• FHA Loans: Minimum 3.5% down. Available to a broader audience, including those with lower credit scores.
• USDA and VA Loans: No down payment required, specific to rural area borrowers (USDA) and military personnel (VA).
The path to homeownership in 2024, despite the daunting landscape of high interest rates and challenging savings goals, is made smoother with these innovative low down payment mortgage options. Whether you’re a first-time homebuyer or someone looking to re-enter the housing market, these programs offer a ray of hope and an opportunity to achieve the dream of owning a home. Fill out our easy pre-qualifier on our website and we can see what program best fits your needs!

As 2023 comes to end its a good idea to do a year end financial checkup.
1. Review your budget and savings plan
Analyze your spending and saving for the year. Your savings might not have gone to plan this year and that’s ok – focus on replenishing your emergency fund first if needed and recalibrate plan for 2023 if needed.
2. Maximize Retirement Plan Contributions
If you participate in a 401k make sure you maximize contributions before the December 31 deadline, you have until April for Roth contributions
3. Review Your Insurance Coverage
Check your insurance coverage in many parts of the country housing prices went up, make sure you home is covered under current market prices. Also check your liability coverage and consider getting an umbrella liability policy that covers all your assets, you can get a million dollar policy for a few hundred dollars a year!
4. Health Savings Account
Make sure you contribute to your health savings account (if needed) as there are great tax benefits. Also check to see if you need to reimburse yourself from the account for out of pocket payments you made during the year!
5. Charitable Contributions
Finally remember to give if you can! Even if you don’t itemize your returns you can still deduct up to $300 for charitable contributions!

As 2023 comes to end its a good idea to do a year end financial checkup.
1. Review your budget and savings plan Analyze your spending and saving for the year. Your savings might not have gone to plan this year and that’s ok – focus on replenishing your emergency fund first if needed and recalibrate plan for 2023 if needed.
2. Maximize Retirement Plan Contributions If you participate in a 401k make sure you maximize contributions before the December 31 deadline, you have until April for Roth contributions
3. Review Your Insurance Coverage Check your insurance coverage in many parts of the country housing prices went up, make sure you home is covered under current market prices. Also check your liability coverage and consider getting an umbrella liability policy that covers all your assets, you can get a million dollar policy for a few hundred dollars a year!
4. Health Savings Account Make sure you contribute to your health savings account (if needed) as there are great tax benefits. Also check to see if you need to reimburse yourself from the account for out of pocket payments you made during the year!
5. Charitable Contributions Finally remember to give if you can! Even if you don’t itemize your returns you can still deduct up to $300 for charitable contributions!

As we’ve seen large storms hit both coasts recently, it’s a good idea to use the old Boy Scout motto and “be prepared.” We are going to review general steps to take to prepare for something we of course never happens. Natural disasters, from hurricanes to earthquakes, wield a devastating power that leaves homeowners and entire communities grappling with significant property damage and high repair costs.

The Financial Impact of Natural Disasters on Homes
In 2022, the Insurance Information Institute documented nearly $100 billion in insured losses stemming from natural disasters. Here’s a breakdown of the data:

Severe storms: These accounted for over $29 billion.
Earthquakes: About $14.7 billion per year, as per a joint study between the USGS and FEMA.
Floods: 15 instances in 2022 led to $3.3 billion in losses.
Wildfires: Resulting in a staggering $8.9 billion from 26 separate events.
Hurricanes: Three events led to a total loss of $53.2 billion.
Winter storms: Produced $4.1 billion in damages from 13 occurrences.
How Can Homeowners Prepare?
1. Reinforce Vulnerable Areas
Install wind-resistant doors and storm-proof shutters.
Use plywood to board up windows and doors when a storm approaches.
2. Know Your Utilities
Identify where water, gas, and electrical lines are and know how to shut them off.
3. Water Diversion
Use sandbags around entryways and flood-prone zones.
4. Secure Loose Items
Ensure outdoor furniture is tied down.
Move grills, tools, toys, and other items inside.
5. Tree Maintenance
Trim trees regularly to prevent overhanging branches from causing damage.
6. Furniture Safety
In earthquake-prone areas, attach heavy furniture to walls.
7. Landscaping Smartly
Choose fire-retardant plants like Rockrose and aloe, and avoid flammable trees like pines.
8. Guard Against Pipe Bursts
Wrap vulnerable pipes to protect them during extreme cold.
9. Have an Emergency Plan
Assemble an emergency kit with food, water, medications, chargers, and other necessities.
Keep both digital and physical copies of important documents, including evacuation routes and insurance policies.
What Does Home Insurance Typically Cover?
A standard homeowner’s insurance policy covers damage due to:

Thunderstorms
Hurricanes
Tornados
Wildfires
Blizzards
However, it’s essential to note that standard policies usually exclude flood or earthquake damage. Those living in vulnerable zones should consider supplemental policies to stay covered.

In conclusion, while the unpredictable force of nature cannot be avoided, homeowners can adopt a proactive stance. By understanding your insurance policy and taking preventive measures, you can shield yourself from the worst financial aftershocks of natural disasters.

This week we saw the release of Consumer Price Index (CPI) for June 2023, which recorded a rise of 0.2 percent, a slight increase from May’s 0.1 percent, according to the U.S. Bureau of Labor Statistics. Year-over-year, the all-items index experienced a 3.0 percent hike, a decrease from May’s 4.0 percent, indicating a sustained deceleration in inflation for the past 12 months. With the inflation rate now standing just one percentage point above the Federal Open Market Committee’s 2 percent goal, the inflation scenario, particularly its impact on the housing market, demands a closer look.
The slowing of inflation, however, does not translate equally into the housing sector. The Bureau’s data highlight the ‘shelter’ category, encompassing housing costs, as the most significant contributor to the CPI’s all-items increase. However, he also hints at potential stabilization in rents and home prices, a necessary step in addressing the critical issue of housing affordability in the nation.
Encouraging data from CoreLogic suggest a slowdown in the home price growth rate, while Fannie Mae’s Home Purchase Sentiment Index shows a meager increase, pointing to a potentially less heated market. However, with current high mortgage rates, potential home buyers might still hesitate. Lawrence Yun, Chief Economist at the National Association of Realtors, offers some optimism, “Low inflation means low mortgage rates. Therefore, decelerating consumer prices could steadily lift home sales and increase home production in a few months.”
If you are considering making a move, schedule a consultation with us on our website and we can recommend options based on your unique needs.

There are numerous benefits to being self-employed – you’re your own boss. However, when it comes to securing a mortgage, the process deviates slightly from traditional mortgages. It often involves additional requirements and more administrative procedures. Here are some tips to help you get organized and approved if you’re self-employed.

Apply for a mortgage when your income is high. We understand this is easier said than done, but lenders will focus most on your income from the last two years. If your income fluctuates, it’s best to apply in a high-income year. This strategy can help you qualify for a larger loan amount and a lower interest rate.

Lower your DTI. Your debt-to-income ratio is one of the critical factors in getting approved. Therefore, it’s beneficial to pay down both business and personal debts. Also, avoid opening new lines of credit a few months before applying.

Don’t mix business and personal finances. Keep your business and personal finances separate by maintaining distinct bank and credit card accounts for business and personal use. This separation helps lenders easily discern business income and expenses and demonstrates that you are managing your business professionally.

Please feel free to give us a call or contact us through our pre-qualification app, and we can determine which product best suits your needs. You may be a candidate for a Qualified Mortgage (QM) or a non-QM lender. Either way, we can review and help you get started!