Consumer Guide: Mortgages and Financing

originally posted on National Association of Realtors

NOTE: Consumer guides do not constitute any change in NAR policy. Real estate professionals must ensure they market properties consistent with relevant MLS rules and educate sellers on the choices available.

Buying a home is one of the largest personal and financial decisions you can make. For many buyers, the process includes finding a loan that will help you pay for your new home over time. An agent who is a REALTOR® can help you learn about your options. Here’s what else you need to know:

What is a mortgage, and how do I get one? 

A mortgage is a loan offered by a bank or lender that lets you borrow money to purchase a home and repay over time with interest. Mortgages can take many forms, but one of the most popular options is a 30-year fixed rate mortgage. Many factors can affect the mortgage options available to you, including your down payment, personal finances (e.g., credit score, income, existing debt, employment history), and other factors like government policies, current interest rates, and what lender you are working with. Certain buyers, like first-time homebuyers and veterans, might be eligible for special financial assistance programs.

What types of loans are there? 

Factors like where you are searching for a home and how long you plan to stay in your new home will help determine which loan type best suits you. Some options include:

• Fixed-rate mortgage: Sets an interest rate and monthly payment for the life of the loan, which is typically 15 or 30 years.

• Adjustable-rate mortgage (ARM): ARMs may offer interest rates that are lower than you could get with a fixed-rate mortgage for a chunk of the life of the loan, such as five or 10 years. However, after that point your interest rates are subject to change approximately once per year based on market conditions.

What is a down payment, and how much will it be? 

Some lenders require buyers to pay a percentage of the home’s purchase price up front, which is known as a “down payment.” Your down payment can vary substantially depending on your mortgage agreement. Typically, if you pay more money up front, your monthly mortgage payment will be lower. Many local governments and non-profit organizations offer down payment assistance grants and loans if you meet certain requirements. Ask your agent or reach out to your local REALTOR® association for recommendations and guidance on what’s available.

What is the difference between conventional and federal home loans? 

Conventional loans are financed by private lenders, such as banks, credit unions, and mortgage companies. They require stronger credit and higher down payments but may offer better rates. Federal loans are government- backed, meaning lenders carry less risk and can pass savings onto eligible borrowers who may not have pristine credit. Some federal loans include:

• Federal Housing Administration (FHA) Loan:FHA loans cater to first-time buyers and have flexible requirements and down payment options as low as 3.5%, depending on your credit score or debt-to-income ratio.

• Department of Veterans Affairs (VA) Loan: If you served in the U.S. military, you are eligible for a VA loan with no down payment and no mortgage insurance requirements.

• U.S. Department of Agriculture (USDA) Loan: The USDA Rural Development loan is designed for families purchasing a home in rural areas, requires zero down payment, and offers discounted mortgage interest rates.

Are there other ways I can lower my out-of-pocket costs? 

Some sellers may offer to pay certain costs associated with purchasing a home for you, which are called concessions. Certain limits apply to concessions—please consult our guide to seller concessions for more information. You can also ask the seller to pay for your agent’s compensation, which does not count towards concession limits, as part of your purchase offer. Both are options that may reduce out-of-pocket and upfront expenses, helping you stretch your budget. However, keep in mind that the current banking system does not allow for agent compensation to be financed through a mortgage. Talk to your agent about building a home purchase plan that works with your budget.

Practices may vary based on state and local law. Consult your real estate professional and / or an attorney for details about state law where you are purchasing a home. Please visit facts.realtor for more information and resources.

5 Financial Solutions for First-Time Buyers

By: Wendy Rose Gould Published on Realtor.com on May 28, 2024

It’s no secret that housing costs have become increasingly expensive over the past few years, and there’s no sign of a drastic market change anytime soon. Hopeful first-time buyers are arguably experiencing the crunch more than anyone else, with many feeling like their long-held dream of purchasing real estate is simply out of reach. What clients may not realize is that there are numerous financial solutions available that can alleviate some of the financial burden. Ahead, we’re sharing viable options to explore with your buyers.  

Down Payment Grants

The standard 20% down payment isn’t always feasible for first-time home buyers, turning them off from the idea of purchasing a home altogether. If this is the case for your client, investigate available down payment assistance options.

 “[Many] lenders have grant programs or down-payment assistance—and in certain cases zero down even for a non-veteran—for first-time buyers who are strapped for cash but desire to own a home,” says Tia Coates, a real estate professional based in Phoenix, Arizona. “There are also zero-down loans for USDA and VA loans for veterans.”

 She says that some grant programs vary state-by-state, but that federal programs from agencies like Fannie Mae and Freddie Mac are available across the country. In some instances, grants of $5,000 or more are available. 

Group Economics

Amid ongoing housing supply challenges and rising prices, many first-time homebuyers are turning to joint ventures or “group economics” in lieu of a solo purchase. In real estate, starting somewhere is crucial, and collaborating as a group often enables greater progress versus acting alone.

 “Typically involving two to four individuals, this strategy entails pooling financial resources and collective purchasing power to acquire property,” says Isaiah Hazward, director of sales for the Coalition Properties Group in Washington, D.C. “By combining their resources, individuals who may lack sufficient funds individually can achieve homeownership collectively.”

Along with getting into a home, this strategy reduces overall financial risk since costs and ongoing maintenance are shared equally among participants. Coates adds that an alternative to this is to utilize a co-signer—such as a parent with well-established credit—to help offset the closing costs and down payment.

NACA Purchase Program

The Neighborhood Assistance Corporation of America (NACA) is a non-profit organization committed to “closing the racial wealth disparity gap through character-based lending.” The nationwide program serves as an economical solution for low-to-moderate income earners buying for the first time.

 “With a proven track record of over $20 billion in mortgage commitments, NACA offers fixed-rate mortgages featuring below-market interest rates, waived down payment and closing costs, and no mortgage insurance, which often creates an increase in purchasing power when compared to traditional loans with mortgage insurance requirements,” explains Hazward. 

Additionally, NACA provides complimentary credit counseling services with no minimum credit requirements for purchases.

Unconventional Purchases

The current housing market guarantees some pretty stiff competition, particularly for first-time home buyers who may not have as much financial leverage compared to those coming in hot with full cash offers. In this case, it may make sense to look into less conventional avenues.

The first option is to consider bank-owned properties in your search, says Tezeta Roro, a real estate professional based in New Jersey. “While the process, decision makers, and paperwork involved is often different from buying from a private owner, it can be a good option for first time homebuyers who may have a hard time competing in the current market due to low down payment,” she says.

Another option is to consider buying from a family member or friend you know. This helps eliminate some competition and can serve as a win-win since it maintains generational wealth. To that end, Roro adds that those looking to downsize can potentially leverage the 1031 exchange tax code to postpone capital gains taxes and buy a property that can be written into a will to be gifted to the adult child, making it a tax-free gift upon death.

Negotiated Seller Concessions

When people talk about what they can afford, they often have a monthly mortgage payment in mind. Coates says that negotiating seller concessions is vitally important to saving your client hundreds of dollars each month. 

“In some areas, we still see sellers willing to pay closing costs for buyers, which helps offset how much the buyer needs to bring to the table,” Coates says. Other examples of seller concessions include covering some maintenance or home repair costs prior to closing, contributing to the down payment, including furniture or appliances in the sale, or buying down the interest rate.

If your clients are feeling the pinch of soaring home prices and inflation, consider whether any of these solutions can relieve financial tension and get them in their dream home sooner than they imagined.

Wendy Rose Gould is a veteran freelance lifestyle reporter based in Phoenix, Arizona. She covers home, travel, and wellness for outlets such as Martha Stewart Living, Real Simple, Insider, TODAY, and others. Wendy received her journalism degree from Franklin College’s Pulliam School of Journalism and has a second bachelor’s degree in philosophy. You can learn more about her at wendygould.com and follow her on Instagram @wendyrgould.

Design Choices Sellers Might Want to Rethink

Published in Realtor Magazine April. 29, 2024 by Barbara Ballinger

Social media causes a lot of hype, but trends change frequently and could hurt resales. Sellers are wise to play it safe with timeless simplicity.

Three Key Takeaways

• Not everyone loves pastel colors, scalloped furniture or up-cycled pieces, so suggest sellers set aside such items during showings

• What appeals to a wider audience are mainstream classics like monochromatic color palettes, one accent wall and overall simplicity

• Remind sellers the goal is to play up space rather than show off personal possessions

You’ve cautioned your home sellers that the pastel pink upholstered sofa they love because it’s oh-so-Barbie-ish, won’t fly with most buyers. You’ve also warned them that their attraction to antique farmhouse items is great, but the style is light-years from the modern American farmhouse vibe that many now favor since it looks so much fresher and hip. You also empathize with them about their deep attachment to their possessions and how difficult it can be to store them away during showings.

But then it’s time for some brutal honesty. Selling a house is business, and ignoring what’s in and out of favor with the widest pool of buyers may hurt the bottom line. Chris Heller, a real estate expert and co-founder of Agent Advice, based in Austin, Texas, offers a list covering the decor styles that are the least-searched-for and most off-putting by a percentage of site visitors over the last year.

Pastel Colors

Top on the list of least-liked were pastel colors. And it wasn’t just Barbie pink; light blue and lilac both took a hit as well. 

Scalloped Furniture

Next was scalloped furniture, which rose in favor last year among homeowners who liked vintage, doll-like or mermaid-style aesthetics, whether in pillow or bed covers, rugs, curtains or any other place the motif could be introduced. Don’t tell Ariel of “Little Mermaid” fame, however.

Antique Farmhouse Decor

Third was antique farmhouse decor, whether it was full on or using the associated elements of wall paneling, hardwood flooring or rustic brass hardware.

Upcycled Furniture

Fourth was upcycled furniture, which once appealed to those thrifting or repurposing vintage pieces, often from flea markets and consignment shops, to be creative and save money.

Industrial Elements

Fifth was industrial elements, which had come and gone before due to the popularity of factory- and loft-style exposed bricks, high ceilings, wooden floors, open layouts and oversized windows. When they first appeared in the 1960s and 1970s, many artists made them popular in their gritty urban homes. That look came to influence even suburban decor for a while. Recently, its popularity returned, but still, some consider the look too cold and austere.

The remainder of the 10 most out-of-favor designs included Scandinavian decor (yes, hygge), botanical wallpaper, vintage decor, gold cabinet hardware (just when you’ve removed chrome and nickel pulls and knobs to add gold), and geometric wallpaper.

Heller offers this additional caveat against using social media as a design influence. “The data shows the short-lived appeal of trends that rise to prominence of social media, which will attract some, but likely not the majority,” he says. Furthermore, this may also be due to generational preferences, with the biggest supporters of fleeting trends typically younger home buyers.

Data from Google compiled and analyzed by Heller’s team also revealed what potential buyers are interested in: an accent wall that can visually alter the size, shape and feel of a room depending on its color; pendant lighting with oversized fixtures rather than yesteryear’s three small ones; minimalist elements, such as monochromatic color palettes; natural light; and open floor plans, which have appealed for years and remain on trend, though some also like having a niche available for some privacy.

Influencing all of these looks is the desire for simplicity, with Heller recommending a fine line between that and the potential for a lack of personality or warmth. His recommendation? “Opting for warmer neutral tones, plenty of natural light, and removing clutter that may distract from the potential of your home.”

Why should this matter now when inventory is still tight?

The months from March through May are considered the best time to sell a home, and how a home looks can affect potential offers. According to Heller, “Many buyers will be willing to pay more for an aesthetically pleasing property, as it requires less immediate renovation or redecoration.” He continues, “Staging your rooms in a way that feels inviting and comfortable makes it easier for buyers to imagine themselves living in the property, whether viewing it in person or online. Hence, the decor is really key.”

How Mortgage Brokers Help Real Estate Agents Win

originally posted on National Association of Realtors on November 10, 2023

By: FindAMortgageBroker.com

Want to strengthen your professional relationships, expand your referral network and get to the closing table faster so you can get paid sooner? As a new real estate professional, you can set yourself up for early success by partnering with an independent mortgage broker in your area. Here’s how they can help you win more clients:

Quicker Turn-Around Times

Independent mortgage brokers can typically close loans 2-3 times faster than the industry average. Most big banks and direct online lenders have average turn times of 45-60 days, but mortgage brokers can typically close a loan in 15 days or less. This is thanks to their partnerships with wholesale lenders who focus on efficiency and service. This faster process has great benefits including a decreased likelihood in your losing a deal because of long closing times. Additionally, your buyer moves into their dream home faster, and your payday arrives sooner.

More Buying Power

A customizable loan product allows your buyers to get the home and the loan that best fits their needs and their wallets. Mortgage brokers can offer more loan options – often with better pricing – because they have access to a variety of wholesale lenders. Big banks and direct online lenders only offer one set of products, limiting your clients. Working with a mortgage broker makes it more likely your buyers will find the right loan solution for their financial situation, usually with a lower monthly payment – which can mean more buying power. Finding an ideal loan option for your buyer rather than trying to fit them into a pre-selected box makes your buyer feel like a person rather than a number.

A Seamless Process

The convenience and personalized service that mortgage brokers bring to the table can go a long way. For example, if your buyer goes to a bank for their mortgage, they’re at the mercy of a mortgage banker who likely works during standard bank hours at a set location. Mortgage brokers, on the other hand, are local independent entrepreneurs who set their own hours, are accessible whenever questions come up and have the flexibility to meet when and where it’s best for their clients. Plus, they’re your buyer’s personal advocate, taking on the heavy lifting of navigating complex financial situations and making the entire process smooth and worry-free.

Unmatched Expertise

Because independent mortgage brokers are licensed experts who only focus on home loans, they can reliably match your clients with the right loan products. Mortgage brokers can support borrowers in a number of situations – they’re skilled at helping self-employed borrowers and those with second jobs in the gig economy, as well as first-time homebuyers or those with challenging credit histories. Finding the right loan can transform a renter into a buyer, and nets you a grateful client ready to refer more business.

There are many reasons to work with an independent mortgage broker, and it’s easy to connect with one in your area. Visit FindAMortgageBroker.com to learn more about the advantages of working with a mortgage broker and find your partner today.

This is a sponsored post submitted by findamortgagebroker.com. The representations, information, advice, and opinions presented by YPN Lounge authors, sponsors, or advertisers are solely their responsibility. Read REALTOR® Magazine’s sponsored content disclaimer policy.

The FAQs of Title Insurance For Homebuyers

Published on Old Republic Title website

For most of us, a home is the largest investment we'll make in our lives. To buy with confidence, get owner's title insurance. It's the smart way to protect your property from legal claims. To help you understand how owner's title insurance works, here are answers to common questions.

What is title?

Title is your right to own or use your property. Title also establishes any limitations on those rights.

What is a title search?

A title search is an early step in the homebuying process, conducted of the public records, to uncover issues that could limit your rights to the property. If a title issue is discovered, most often your title professional will take care of it without you even knowing. After the title search is complete, the title company can provide a title insurance policy.

What is title insurance?

If you're buying a home, title insurance is a policy that protects your investment and property rights.

There are two different types of title insurance: an owner's policy and a lender's policy.

1. An owner's policy is the best way to protect your property rights. Either the buyer or seller may pay for this policy. Ask your title professional how it's handled in your area.

2. A lender's policy is usually required by the lender and only protects the lender's financial interests. The buyer typically pays for this policy, but that varies depending on geography. Ask your title professional how it's handled in your area.

Why should I purchase owner's title insurance?

Owner's title insurance protects your investment in your property from certain future legal claims regarding ownership of your property. For a one-time fee, you and your heirs receive coverage for as long as you own your home. The owner's policy also covers potential legal fees and court costs for settling claims covered by your policy.

What does owner's title insurance cover?

Sometimes undiscoverable defects can come up after the title search. Under an owner's title insurance policy, you are protected against certain undiscovered errors in the title.

Title issues include unknown:

• Outstanding mortgages and judgments, or a lien against the property because the seller has not paid his taxes

• Pending legal action against the property that could affect you

• Unknown heir of a previous owner who is claiming ownership of the property

Unforeseeable title claims include:

• Forgery: making a false document
  - For example, the seller misrepresents the identity of the person who sold the property.

• Fraud: deception to achieve unfair gain
  - For example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and walks away with the money.

• Clerical error: inconsistent paperwork and historical records
  - For example, an unforeseeable discrepancy in the property or fence line can cause confusion in ownership rights.

What does owner's title insurance cost?

The one-time payment for owner's title insurance is low relative to the value of your home.

How long am I covered?

Your owner's title insurance policy lasts for as long as you or your heirs own your property. Your life will change over time, but your peace of mind never will.

What happens at closing?

Closing is the final step in executing the homebuying transaction. It is the process that allows the transfer of ownership to occur. Upon completion of the closing process, you get the keys to your home!

Where can I get more information?

The American Land Title Association helps educate homebuyers like you about title insurance so you can protect your property rights. Check out www.homeclosing101.org to learn more about title insurance and the home closing process.

This advertising offers a brief description of insurance coverages, products and services and is meant for informational purposes only. Actual coverages may vary by state, or locality. You may not be eligible for all of the insurance products, coverages or services described in this advertising. For exact terms, conditions, exclusions, and limitations, please contact an Old Republic Title representative.

3 Fall Maintenance Tips to Protect Your Home's Foundation

Originally posted by The Founation Works

With temperatures as high as 100 degrees last week in the Los Angeles area, it’s hard to believe that fall is in full effect here in sunny SoCal. Some of us are still basking at the beach, while others are embracing the new season with pumpkin spice lattes in hand. Whether you’re still in flip-flops or already setting out holiday decorations, we thought it would be helpful to send you a few fall foundation maintenance tips before any rain kicks in.

1. Tackle Perimeter Drainage Issues 

We discuss the impact water has on your foundation on our website and explain how saturated soil due to chronic water intrusion can cause foundation issues. This year, we surprisingly received a lot of rain. In fact, the amount of rainfall we had in just the spring alone was 200% higher than the average year, according to an L.A.-based meteorologist. Because of this, the soil around your home may have experienced over-saturation and expansion, which can be troublesome for your foundation.

These dry weeks in October are the ideal time to take care of any perimeter drainage issues that could otherwise add to any over-saturation of the soil under or adjacent to your home. Not sure who to contact for drainage? Reach out to us and we’ll refer you to one of our vetted drainage specialists who have helped serve our clients over the years.

2. Install Rain Gutters or Have Them Cleaned 

If your home does not have gutters, we highly recommend getting them installed. Without gutters, water from the roof collects near the house instead of being directed away from it. This can lead to cracks and other damage to your home's foundation over time. If you already have gutters, the fall is a good time to get them cleaned if you have not done so already. Clogged rain gutters will not work as efficiently, so getting them professionally cleaned will work in your favor. Lastly, you can opt to have your rain gutters extended with downspouts to further help channel rainwater away from your home and its foundation. 

3. Re-slope Soil Away from Your Foundation 

Having a completely flat yard may look nice, but it can lead to drainage issues that harm both your lawn and your home's foundation. Even worse, if your lawn slopes towards your house, water can gather around it. Ideally, your lawn should have a gentle slope away from your home's foundation. Some DIYers may be able to re-slope their soil themselves, but we suggest consulting with a professional to make sure it’s done correctly and to safeguard your foundation against water damage, preventing potential cracks. 

Best Practices for Using Storage to Organize a Home

By: Barbara Ballinger posted on Realtor.com

3 Key Takeaways:

• Storage options should reflect a homeowner’s needs

• Make sure to include storage options in every room

• Keep storage placement, pricing and ease of use in mind

New homes are shrinking in size and storage space, and older homes have their share of storage woes as well, which makes it difficult for homeowners to keep their homes tidy and organized.

Though many homeowners in recent years have latched onto the decluttering philosophies of Marie Kondo and Swedish Death Cleaning, some didn’t organize and store what was left, leaving them with piles. Moreover, most homeowners continue to buy, making it unlikely that their rooms will have space for everything.

Designer Jacob Laws of Jacob Laws Interior Design and his partner know the trials of limited storage space. They own an early 1800s home in Charleston, S.C., and intentionally limit their possessions to ensure it stays tidy. “But it’s easier for us,” he says. “This is what we do professionally.”

The good news is that everyone from home builders and architects to professional organizers and designers are swooping in to help.

Commercial interior designer Mary Cook of Mary Cook Associates, who advises homebuilders, is seeing bigger closets emerge. Jeff Benach, principal of Lexington Homes, has altered the angle of a staircase in one townhouse model to accommodate a second hall closet and also angled the garage to make its ceiling higher to fit more storage. Wingspan Development Group offers extra closets as options in some of its multifamily units, including walk-in styles and pantries off kitchens. Many pros such as salesperson Aleks Videnovic of Compass, a founder of StageIT.site and RenderPRO.io, make visualizing possibilities easier with renderings.

Fall is a good time to encourage clients to organize their storage, and a few best practices can help so the task doesn’t become overwhelming. Doing so also helps when they sell since well-planned storage shows buyers how their houses can work efficiently, says Allison Bond, a salesperson with Cummings and Co. Realtors, which is headquartered in Maryland.

Best Practices

Before organizing, homeowners should declutter, basing their decision on the traditional rule of if something hasn’t been used in three to five years or offers great sentimental value, it goes.   

Figure Out How and Where

Every homeowner should factor in how long they hope to stay since built-ins, including closet systems, can be more costly than many freestanding furnishings, which may be transported to a future home. “Live in your space for a few months before you commit to any storage investment,” Laws says.

The best questions for homeowners to ask themselves, says architect Bob Zuber, AIA, principal at Morgante Wilson Architects, are: What am I storing? How accessible does it need to be based on frequency of use? Does what’s being stored involve special considerations such as temperature control?

Trends come and go. Big entertainment centers and armoires are passé while “Costco Closets” in suburban homes for bulky items are now in, Cook says.

Any systems installed should be adjustable whether shelves in a bookcase or clothing rods in a closet since needs change.

Keep It On Brand, But Not Personalized

Storage should reflect a home’s design style and price point, which means more expensive wood shelves rather than wire in mid-priced to luxury homes.

Think carefully about which materials to use. In general, metal costs more than wood, except for exotic species; stained wood is more expensive than painted; and melamine and similar materials are the least expensive yet still very durable, says designer Rebecca Pogonitz of GoGo Design Group. Wood offers the advantage of being able to be customized, says designer Suzan Wemlinger, principal of Suzan J Designs.

Homeowners should avoid over-personalizing storage unless what’s stored warrants extra expense. This rule may apply to a fine wine collection in a custom cellar. An alternative is a refrigerated wine cooler that can be taken to another home.

Keep the Space in Mind

Storage should never be placed so it blocks doors, windows, furnishings and traffic flow; its purpose is to support daily life rather than make it harder.

Future needs should be considered by not filling up every storage option. That happened during the pandemic when many homeowners hunted for space for a home office. Some found it by converting an extra closet into a functional cubicle.

Off-site public storage should be avoided when possible since it’s costly and often becomes an excuse for delaying decluttering, says Videnovic.

Every room should have some storage. “People will notice if there’s none,” says Amanda Wiss, a stager, organization expert and founder of Urban Clarity.

Real (Estate) Talk

Buying a home is one of the best ways to invest in your future, build equity, and create a space that’s truly your own. But let’s be real: The process is intimidating! We asked REALTORS , members of the National Association of REALTORS , to give us real talk about buying your first home, whether you’re still saving for a downpayment or ready to make an offer.

Click on this link to learn more: Apartment Therapy