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Last Updated on February 24, 2022 by Mark Ferguson

Rental properties can be a great investment if they bring in cash flow and are bought below market value. I bought 16 rental properties from the end of 2010 to the middle of 2015. I stopped buying rentals in my market because prices increased so much that it became very tough to cash flow. I bought my properties well below market value, and prices in my area (Colorado) increased tremendously. I put a lot of thought into whether I should sell the properties, keep them, or refinance them. So when does it make sense to sell your rental?

I decided to sell a couple of properties, refinance a few more, and keep the rest as they were. The reason I decided to sell some of my properties was I had $100,000 of equity in some of them but was only making $500 per month. That means I was making about 6% cash-on-cash returns on my equity (I was making much more on my initial investment since it took around $30,000 to buy each house). Even though I was making close to 20% on the money I had initially invested, I could make much more by taking my equity out and buying more houses.

Should you sell your rental properties if they are not making you any money?

My readers and podcast listeners constantly ask me when or if they should sell their properties. Many people are not making very much money on their rentals but have a lot of equity. Here is an example:

  • The house is worth $200,000
  • The house rents for $1,500 per month
  • The investor has a loan of $125,000 against the house
  • The payments are $1,100 per month

On the surface, it looks like this rental is making $400 per month, which is great. However, the investor has not accounted for any maintenance or vacancy expenses. Those expenses usually add up to 10 to 20% of the rents every month, which would equal another $150 to $300 in expenses. The investor is only making a couple of hundred dollars per month on this rental but has $75,000 of equity in the property. That is only a 3% return on your money. There are other advantages to rental properties, like depreciating the property, equity pay down, and increasing rents. However, which opportunities are the investor missing by keeping the property and all that money tied up? I think the investor should sell the property and invest the money in more houses or apartments.

If you sold this property, you would not be able to keep all the equity. There would be selling costs and taxes you have to pay unless you do a 1031 exchange. The selling costs could end up being 6 to 10% of the cost of the house. If the house sells for $200,000, that would be $12,000 to $20,000. Taxes on the sale of a rental property would most likely be 15 or 20% depending on which tax bracket you are in. You only pay the taxes on the profit you made on the property and any recaptured depreciation. We will assume the investor bought the property for $150,000 a few years ago, which means they would pay around $6,000 in taxes. That leaves the investor with about $50,000 in cash to play with if they do not do a 1031 exchange, which could reduce the taxes to nothing.

How much more money could an investor make?

Rental properties can be expensive, which is one of their downfalls. With $50,000, you could buy a better-performing rental property that generates more money. Not only could you buy a rental that generates more money, but you could also buy the property below market value, which will make up for all that money you lost selling the other property. Here is an example:

  • Buy a property for $100,000 that needs $10,000 in work
  • Put $20,000 down on the property, with a house payment around $600
  • Repair the property and rent it out for $1,200 per month
  • If you bought the property correctly, it should be worth at least $140,000

You now have a house with $60,000 in equity (almost as much as you had before). You are making more money every month. You even have $15,000 in cash leftover ($20,000 down payment, $10,000 in repairs, $5,000 for miscellaneous costs).

Some of you may not think this is an awesome deal, but you have more cash in your pocket that can be used to buy additional rentals in the future. You also have a property that generates much better income every month. If you have some extra money to buy a second property right away, the equity and cash flow would double, and the investor would be much better off. If you have a property with more equity than my example, you would buy more rentals right off the bat without using any extra cash and be way better off as well. If you are trying to decide whether you should keep or sell some of your rental properties, analyze how much cash you could get from them and how much you could make with that money.

What did I do with my rental properties?

I got really good deals on all of my rentals, and our market took off in Colorado. I had properties that I bought for $100,000, put $20,000 of work into, rented out for $1,3000 a month, and are now worth $220,000. I had properties with $120,000 in equity but were only generating $7,000 per year. I was making 6% on my money, which is good for some investors but not what I am used to from investing in real estate. I always wanted to make at least 15% cash-on-cash return on my rentals. I knew I wanted to make more money, but I was not sure how. I ended up refinancing some properties, selling a couple and keeping others as they were.

I refinanced properties because I could take cash out of them and still make money. In the example I first used for the investor with a $200,000 house, he could have refinanced as well. You can usually refinance a house at 75% of what it is worth. The investor could have taken a loan out for $150,000 on the $200,000 house and had payments around $1,100 per month after taxes and insurance. If you are wondering why that payment is the same as the payment I used for the $125,000 loan balance above, I assumed the investor had the loan for a while and the original balance was $150,000 at a higher interest rate than we have now. When you refinance a house, you have to pay closing costs again, which can add up to 3% of the loan amount, or $4,500 in this example. By refinancing, the investor would get $20,000 back in cash with a similar payment as he had before. That is not a bad deal, but I do not know if $20,000 is enough to buy another rental. If so, the investor may be better off refinancing than selling.

I had more equity in my properties than in the example we used. I was able to take out anywhere from $25,000 to $50,000 in cash from many of my rentals and still make decent cash flow. By refinancing my properties and selling a couple of other ones, I was able to get all the money back out that I had used to buy my 16 properties, and I was still making $7,000 per month from them. I sold the properties that were the least desirable to me and kept the ones I liked.

How do you buy new rental properties if there are no good rentals in your area?

The problem I ran into when I wanted to sell my properties and buy more rentals was I could not find good rentals in my market. Prices had increased, but rents had not increased nearly as much. I had to use much more cash to buy houses because prices were high, but I made less money on that cash. I decided to stop buying properties in my area and look in other markets. I went to Florida and found good rentals, but I ended up not buying any properties there. Instead, I started to flip more houses, and that is where I invested my money. I have historically flipped from 5 to 10 houses per year, but in the last three years, I flipped 12 and 18, and this year I will come close to flipping 30 houses. I want to buy more rentals. In fact, I have a goal to buy 100 properties. I am not going to buy bad investments to reach that goal, so I have switched directions with my investing. If I find the ideal place to buy rentals or my market changes, I will be set up to invest a lot of money into rentals thanks to the flipping business. You can watch the video below to hear more about investing in expensive markets.

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I have not bought any residential rental properties since 2015, but I bought two commercial properties this year and have two more under contract to buy. Commercial properties are completely different from residential ones but can be great investments as well. I bought a small shop for my flipping supplies earlier this year, and I just bought a 7,500-square-foot commercial property that I will write about later this week. Not only can you buy different types of rentals when prices are too high in your area, but you can also buy out-of-state rentals or even turn-key rentals.

Should you sell your rental property if you are not making any money on it?

Many people buy rental properties without any cash flow, hoping to make money through appreciation. Some people end up being accidental landlords when they turn a property into a rental because they could not sell it. I think, in both instances, owning a rental that does not generate any money is very risky. Betting on appreciation is tough because of all the selling costs we talked about, and if you are not making any money, it makes it tough to get a new loan on properties. I would suggest getting rid of rentals that don’t make any money and focusing on investments that do. This advice assumes you are not ultra rich and have so much money that you do not care if a property makes money or not.

Conclusion

Many investors have seen their properties go up in value over the last few years. It is tough to know what to do with all that equity. Should you leave it and let it earn a small return? Should you refinance? Should you sell? I chose to do all three, and it has worked out well. I do not want to max out the loans on every property I own because it would hurt cash flow and be risky. I also do not want to leave unused equity in my properties. I sold some properties to take advantage of the hot market and clean out some of my poorly performing assets. If you are thinking of selling some rentals, run the numbers to see how much money you would get, see what properties or other investments you could put that money in, and maybe selling will make sense. If you would like me to look over the numbers of your rental property for you, you can post them on the InvestFourMore Insider.

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Categories Rental Properties

Source: investfourmore.com

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Having to compete against all-cash investor offers when trying to buy your first home is becoming all too real in Utah and Phoenix. All-cash offers accounted for over 27% of all single-family home and condo sales at the end of 2016, many of which (roughly 19%) were distinguished as investment properties. And, with investors typically purchasing properties in the “starter-home” range (between $150,000-$250,000), first-time home buyers must be creative with their offers in order to stay competitive.

So what can buyers do to place themselves in a better position? Here are some strategies to consider:

#1. Bring your best game face

The most straightforward way to compete with an all-cash investor offer (or any potential bidding war, for that matter) is to present your strongest offer first. When you leave nothing on the table, you can rest assured knowing that you gave it your best shot. In a competitive seller’s market, this can mean a full-price or above-asking offer. 

#2. Become BFFs with Homie Loans

If you’re going to compete with an all-cash offer, being pre-qualified is the bare-minimum. A pre-qualification letter says your lender or mortgage broker has reviewed your basic information and feel like you’re qualified to purchase, but no documentation has been supplied.

If you want to take that a step further (and you do, because #mustcompete), talk to* about getting a pre-approval letter, not just a pre-qualification letter. Pre-approval means your mortgage broker has documented your income and other financials and that you’re approved for a specific mortgage amount. This can demonstrate to sellers that you’re a serious contender. 

#3. Drop some cash up front

Earnest money is essentially a “deposit” that you put into an escrow account once a signed agreement is reached. Like a pre-approval letter, beefing up your earnest money deposit can show you mean business and aren’t likely to back out of the deal. Investors often skimp on (or even exclude) earnest money in their offers, as they don’t want to tie up their funds—so this can give you a leg up on the competition.

Although it can vary based on where you live, earnest money of 1% of the purchase price usually the minimum and an earnest money deposit of 2-3% can start to woo your seller.

#4. Make it quick and painless

When you make an offer on a house, there are a myriad of contingencies you can add in order to protect yourself during the transaction. If you’re competing against an investor who will likely not require an inspection, for example, perhaps you reduce your inspection time. This can be risky, so be sure you’re confident in the condition of the house before taking this action.

Similarly, if you’re working with Homie Loans, they can get you basically most of the way through underwriting (called pre-underwriting), shortening the length of time needed to close order to compete with an all-cash offer that ish likely close quickly.

#5. Woo the seller

There are two main strategies here: 1) find out what the seller’s motivations are and 2) let them know YOUR motivations. Perhaps the seller is in a pinch and needs to move quickly. Having this intel means you can structure your offer to suit their needs (in this case, to close quickly). Always ask: “why are you selling?”

Likewise, let them know YOUR motivations. Perhaps they’ll be more inspired by a first-time homebuyer looking to start a family in the neighborhood where they spent their own childhood versus a real estate investor looking to flip their home in 60-days. Include a letter of intent with your offer —you never know!

#6. Go where they can’t

There are few scenarios in which all-cash investors don’t have the upper hand, but purchasing a foreclosure that was backed by a government agency like the VA, USDA, FHA, etc. can mean having first dibs before investors. These agencies often give preference to families and individuals who will be using the home as a primary residence and even have restriction periods where investors must wait to submit their offers.

Check their websites for lists of available foreclosures and watch the bid dates so you can beat others to the punch.

#7. Pull out all the stops

When all else fails (or when you love the house so much that you can’t stand to possibly miss out), you may need to gather some cash and compete apples-to-apples. It’s not uncommon to see first-time homebuyers’ parents refinancing or taking out another mortgage on their already-paid-for-home in order to give their kids the cash they need to compete.

Similarly, first-time homebuyers are also borrowing money from their parents to offer a larger down payment or escrow deposit. If you’re able to get your hands on a lump sum of cash, be sure to submit a “Proof of Funds” letter with your offer to indicate you really do have the buying power you’re suggesting.

You’ve got this. Homie’s got your back.

Whether you’re trying to win against an all-cash investor offer, or you’ve found yourself in a multiple-offer situation (or you just really, really want the house), talk to your Homie agent about ways you might be able to make your offer as desirable as possible. Sometimes your Homie agent can chat with the owner’s agent and get the inside story of what might make the difference for a particular owner. We’re going further for you, and you can keep up to 50% of our commission** when you work with a Homie Buyer’s Agent.

* Homie Loans (NMLS # 1016597) and Homie have a business relationship in that both are owned by the same persons.

**Subject to terms and conditions outlined in the Buyer Broker Agreement.

Source: homie.com

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There are so many possibilities for living arrangements once you move out on your own. You can decide to live alone or with one or more roommates. You can share space in a house or get an apartment. Another option, that has been around longer than you may think, is buying into or renting within cooperative housing.

Unlike all these other options, people who buy into a co-op own a piece of the entire building. It’s a unique way to own property that’s often more affordable than buying a condo or home.

It’s also a big investment. As a renter, living in a co-op creates a different, more communal atmosphere that you may not find elsewhere.

Before deciding to research co-ops in your area, it’s important to understand what a co-op apartment is.

What is a co-op apartment?

Cooperative housing is where you buy in to become a part-owner of that entire piece of property. “When you buy into a co-op, you become a shareholder in a corporation that owns the property. As a shareholder, you are entitled to exclusive use of a housing unit in the property,” says Lisa Smith from Investopedia. Rather than owning a single unit, you become a part-owner of the whole building. This gives you the right to live on the premises, in an available apartment.

Everyone who is a part of a particular co-op shoulder some of the financial responsibility of ownership. This includes primary expenses of mortgage payments, maintenance costs and taxes. Other fees can consist of utility bills, the expense of running the building, maintaining amenities and insurance premiums. Each cost breaks up among the total number of people vested in the co-op.

The history of co-op apartments

“There is no clear-cut answer as to when the first housing cooperative appeared in the United States.” Says Lynne Goodman from The Cooperator New York. She does reference authors Richard Siegler and Herbert J. Cooper-Levy in “Brief History of Cooperative Housing,” who claim the first American residential co-op was established in 1876 in Manhattan.

As the starting point for co-ops, New York City continued throughout history to offer this housing option. Moving in waves of popularity in this ever-growing city, co-ops began as home clubs, where people organized with the intention of building an apartment building together.

Co-op popularity hit another high in the 1920s as urban populations boomed, post-WWI. The next uptick was in the 1940s as a response to rent control provisions. In the 1980s, popularity rose as a result of increasing oil prices.

Today, co-ops are more than just living arrangements. You can buy into a food co-op or shop at a store that produces goods from a co-op. The methodology of being a part of a larger group has grown beyond investing in housing.

Where can I find cooperative housing?

In varying degrees of availability, you can find cooperative housing in every part of the country. “Housing cooperatives are quite common in certain parts of the country, such as New York City, Washington, D.C. and Chicago, but can be harder to find in other areas,” according to the National Association of Housing Cooperatives. They’re popular throughout the Northeast but exist elsewhere.

How do fair housing laws impact cooperative housing?

The Fair Housing Act consists of laws that prohibit discrimination based on race, skin color, sex, nationality, religion, disability and more when it comes to buying, selling, renting or financing housing.

Co-ops must abide by these laws, but at the same time, their approval processes for tenants is very different than what you find in a regular apartment. There’s no landlord-tenant relationship. Instead, a community board reviews applications. The members of this board can set up their own qualification system within the fair housing parameters. This can include net worth minimums or a certain debt-to-income ratio for eligibility.

“The board must not reject an applicant based solely on his or her race, gender, national origin, religion, sexual preference, marital status or familial status. The board can, however, take into consideration factors that impact an applicant’s ability to meet the financial obligations of the community, as well as governing responsibilities,” according to the law firm, Pentiuk, Couvreur & Kobiljak P.C.

A community board can be more restrictive than other housing options when it comes to inviting people to become owners or renters. This can make for a longer and more tedious approval process that doesn’t always feel so fair.

Is it worthwhile to buy in and become a part-owner?

Personal preference is what makes a co-op apartment appealing. To figure out whether it’s the right place for you, weigh the pros and cons carefully.

The perks

As a part-owner within a co-op, you influence how the building runs. You attend board meetings and get to vote on all decisions. This includes shaping rules and regulations for how the building is managed and who is eligible for consideration to join the co-op. You pretty much get to pick your neighbors and prevent anyone from moving in who might not maintain their space in the same way as the rest of the shareholders.

Another perk is the cost. Cooperative housing can cost less than owning a condo. “Co-ops tend to be cheaper per square foot. They typically offer buyers more control as an individual shareholder and often have lower closing costs,” says Lester Davis from The Washington Post.

The last primary perk to co-op living is community. This special living situation gives you more than somewhere to live, you get a whole community. You more often than not know your neighbors, have a network of people watching out for you and our home and connect with people you can rely on when in need of assistance.

The drawbacks

To get into a co-op, prepare for a more rigorous approval process. Not only will the board run a background and credit check, but you’ll have an in-person interview to get through. Everyone receives the same treatment. Once you’re approved, you’re in, but the process can also make it harder to sell when you’re ready to leave the co-op.

Rules within cooperative housing can feel more confining than in other living situations. Because you don’t own the unit you live in, you’ll have to contend with restrictions on how you can use your unit, whether you can sublet and more. You’ll also need extra insurance for your personal belongings since the building’s insurance won’t cover it.

One final key drawback goes back to cost. It may cost less to buy into a co-op, but with shared expenses comes more potential financial responsibility. If someone defaults on their payments, you and your neighbors are obligated to cover a portion of their missed payment.

Can I rent within a co-op?

This is a tricky question. Since a set of shareholders own the building, no single unit belongs to any one person. Because of this, many co-ops don’t allow renters at all. Additionally, the rate of owner occupancy in cooperative housing is much higher than you’d find elsewhere.

If a building does allow it, you may face a large application fee, along with set limits on the length of your lease. You’re also technically subletting rather than renting outright since you rent the unit from the co-op shareholder who holds a lease on that particular space. It’s a little more work to rent within a co-op, but it’s not a terrible option. If you want something more flexible, with a little less upfront cost and rigidity when it comes to the approval process, you may want to consider other options.

Is a co-op right for me?

A co-op may be right for you if, after learning more about what it really is, the idea still sounds appealing. It all depends on your own personal needs, which is why it’s good to know you have options when searching for your perfect living situation.

While co-ops can get you more square footage for your dollar, they can also feel more strict when it comes to rules and regulations. Finding the perfect balance of cost and comfort will help you know whether it’s time to start looking for a co-op.

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Posted on: February 2, 2022

Choosing the right VA lender is incredibly important. Not only does it impact your VA home loan experience but it also influences your costs.

Are you trying to decide between VA home loan lenders? Here’s how to choose the best one.

Get matched with a mortgage lender. Start here (Apr 29th, 2023)

How to find the best VA mortgage lender 

Who is the best VA home loan lender? There’s no clear-cut answer to that one. All lenders offer different rates, fees, and levels of service, and their qualifying standards can vary, too. To find the best one for your unique scenario, you’ll need to:

#1. Prepare for your mortgage application

Before you can begin applying for VA loans, you need to set the stage first. This means saving up for your down payment (if any), getting your credit and budget in order, and avoiding big financial changes in the months before applying for a mortgage (jobs, income, new credit cards, etc.).

You should also begin gathering up all the documentation you’ll need for your loan. This includes your Certificate of Eligibility (COE), your bank statements, and your tax returns.

#2. Set your budget

Your next step is to prep your budget. Before you can begin the loan process, you need to have a good idea of what you can spend each month on your mortgage payment. Keep in mind your mortgage will also include things like homeowners insurance, property taxes, and HOA dues, if necessary. 

You can use our VA loan calculator to get a good idea of what you might be able to comfortably spend on a house.

#3. Familiarize yourself with your mortgage options

You already know you want a VA loan, but there are actually several types of VA mortgages to choose from. It’s helpful to know what type of mortgage you want before you start shopping.

For example, if you’re a Native American veteran and are buying on certain federal lands, you’d use the VA’s NADL program. If you’re refinancing, you could opt for a VA cash-out refinance or VA Streamline Refinance (also sometimes known as an Interest Rate Reduction Refinance Loan (IRRRL)). 

The VA has a full breakdown of these loan options on its website.

Determining which VA mortgage program you want to use will help narrow down your choice of VA lenders since not all companies offer the full suite of VA loans. 

#4. Compare rates and terms from at least 3-5 lenders

Next, it’s time to get quotes from at least three VA home mortgage lenders. This requires providing a little basic information — your income, credit score, and other details — but they usually take only a day or two to receive. 

Once you have estimates from each lender, compare them line by line. How do the closing costs and fees measure up? What about the interest rate? You should also factor in the level of service and responsiveness you’ve received thus far.

#5. Get pre-approved

When you’ve chosen the best VA home loan lender for you, it’s time to get pre-approved for your loan. This essentially means the lender has evaluated your financial details and thinks you’re a good candidate for a loan.

To get your pre-approval, you’ll fill out a short application with the lender. Once they’ve gone over it, you’ll get a pre-approval letter stating how much you can borrow and at what interest rate. You’ll include this in any offers you make to show you’re serious about the home.

#6. Read the fine print

Finally, make sure you understand your loan’s fine print. You should have a good grasp on all your loan’s terms before you sign, including:

  • What is your closing date?
  • Does your rate lock extend through the expected closing date?
  • How much money do you need to bring to closing?
  • What will your monthly payment be and how will you pay it?

If you have any questions or are unsure about something, ask your loan officer before heading to the closing table.

Get a personalized mortgage quote. Start here (Apr 29th, 2023)

Why you should shop around for a mortgage lender

Shopping around for your veteran mortgage lender is incredibly important, especially if you want to minimize your costs as a buyer. According to Freddie Mac, getting quotes from just five lenders can save you as much as $3,000 over the life of the loan.

Some of these savings come from fees and other closing costs. Much of it comes from interest rate discrepancies.

Here’s an example: Say you were quoted a 3% rate on a 30-year, $200,000 loan with Lender A and a 3.25% rate on that same loan with Lender B. It doesn’t seem like much, but Lender A would actually save you $27 per month and a whopping $10,000 in interest over the next three decades.

How to compare mortgage loan offers 

To compare your loan offers, you’ll want to look at the loan estimate — a three-page document given to you by the lender. These forms break down all the costs, fees and other financial details of your loan. These loan estimates are standardized, so comparing them line by line is quite simple.

You’ll want to pay particular attention to the loan amount, the interest rate, the estimated monthly payment, and your estimated closing costs. The “Comparisons” section on page 3 can be helpful, too. It shows what your balance will be in five years and can be a good way to compare loan option costs.

Questions to ask your mortgage lender

Before you decide which VA loan lender to go with, make sure you ask them some questions. 

You’ll want to know things like:

  • How long do you expect the process to take? Some lenders take longer to process loans than others, so be sure and get an estimate before moving forward. You’ll need to know an estimated closing date when making offers and negotiating with sellers. (It will likely play a role in which offer they choose, too). 
  • Who will be my main point of contact throughout the process? You’re going to have a lot of questions along the way, and you need a go-to person. You’ll also want to ask how you can get in touch with this person. Are they available via phone, email, or text? And during what hours?
  • Which parts of the process will be online and which will be in-person? Most lenders will let you do everything remotely and online these days, but it still helps to ask. How will the logistics of your loan work? Where will you sign the closing papers? Get all the details.

You might also ask how often the lender does VA loans. These mortgages can be more complicated than other types of loans, so you want one who’s experienced and well-versed in the process.

Start comparing mortgage lenders today (Apr 29th, 2023)

Benefits of a VA loan

VA loans come with countless benefits, but the biggest perk is that they require no down payment.

Because these mortgages are guaranteed by the U.S. Department of Veterans Affairs, lenders can afford to pass substantial benefits along to VA borrowers.

Unlike other mortgage programs, which ask for anywhere from 3% to 20% down, VA loans require no down payment at all. This can offer significant savings right off the bat. (A low-cost FHA loan requires at least $7,000 down on a $200,000 house, for example, while a VA loan requires $0 down).

Some of the VA loan benefits include:

  • Competitively low interest rates
  • No credit score requirements
  • Limits on closing costs
  • Loans are assumable, meaning future buyers can take over the loan (and the favorable rate and terms it comes with)
  • No private mortgage insurance (PMI)
  • No loan limits
  • Can be used multiple times

VA loan mortgage rates 2023

When compared to other loan types — conventional loans and FHA loans, for example — VA home loans offer consistently lower rates than loans for the average consumer.

  VA Conventional FHA
December 2021 2.99% 3.38% 3.39%
November 2021 2.95% 3.32% 3.32%
October 2021 2.88% 3.22% 3.22%
September 2021 2.85% 3.17% 3.20%
August 2021 2.88% 3.19% 3.23%
July 2021 2.94% 3.27% 3.27%

Source: Ellie Mae Origination Insight Report, June 2021

A lower interest rate translates to a lower monthly mortgage payment and substantial savings over the life of your loan.

VA Home Loan Lender FAQ 

Do all lenders provide VA loans?

No. Only approved lenders can offer VA loans, so you’ll need to be choosy about which mortgage company you work with. That said, most major lenders are authorized to originate VA loans. 

Who is the best lender to get a VA loan from?

That really depends on your financial situation, where you’re buying, your budget, and the level of service you want. A great place to start is our best VA home loan lenders guide.

Who is eligible for a VA home loan?

VA loans are only for active-duty military members, veterans, and their families (including surviving spouses), so there are strict service requirements you’ll need to meet to qualify.

The VA doesn’t set specific financial standards for its loans, though private lenders — the companies who actually issue the loans — do. These vary from one lender to the next, but in most cases, borrowers need at least a 620 credit score and a debt-to-income ratio of 41% or less.

If you fall short of these requirements, you still might qualify. Just make sure to shop around for your lender, work on improving your credit, and consider making a down payment.

What is the VA funding fee?

To get a VA home loan, you’ll need to pay the VA funding fee. This is a one-time cost at closing which helps the VA maintain the VA home loan program and continue to offer valuable home loan products to military homebuyers. The VA funding fee can be financed into your total loan amount and paid down over time.

The amount of the VA funding fee depends on your loan type, the nature of your military service, the number of times you’ve used your VA loan benefit and the amount of your down payment.

What is the minimum credit score for a VA loan?

The VA doesn’t have a minimum credit score for these mortgages, but individual lenders do. These minimums vary and are usually around 620 or 640.

What is a VA direct loan?

This is a loan issued directly by the VA (meaning the VA is the lender). They’re only available for Native American veterans buying or refinancing in certain areas of the country. 

What is the max loan amount for a VA loan?

There are no maximum loan amounts for VA mortgages. While there is a cap on how much you can borrow without making a down payment, the loan program technically has no limits.

What is the lowest VA mortgage rate ever?

The lowest VA rates have typically been in the low 2% range. You’ll get lower rates on shorter loan terms (so, 15-year loans typically have lower rates than 30-year ones). Higher credit scores will also help you qualify for lower interest rates.

Can I use a VA loan to buy a second home?

You cannot use the VA loan for a second home or investment property. The VA home loan program is intended to help military service members become homeowners and is specifically meant for the purchase of a primary residence.

Do different lenders offer different rates on VA home loans?

Yes. All mortgage lenders offer slightly different rates and fees. Your rate will also depend on your creditworthiness and the size of your down payment (if any). 

Which lenders offer VA home loans for people with bad credit?

There aren’t any bad credit VA home loan lenders per se, but every VA lender sets its own credit score minimums. This is why it’s so important to shop around — especially if you have a low credit score. Generally speaking, most lenders require a score of at least 620 or 640. If your score is below this, you can often make up for it with a larger down payment or by having more in cash reserves.

How do I decide which lender to use?

You’ll want to compare the loan estimates, factor in the service and responsiveness you’re receiving, and look at online reviews and ratings. Not all lenders are created equal, nor will they come with comparable pricing.

VA home loan lenders: The bottom line

Because the Department of Veterans Affairs guarantees VA loans, lenders can offer substantial benefits to veterans, active-duty service members and their families. The VA home loan program includes some of the best mortgage products on the market.

Get a personalized mortgage quote. Start here (Apr 29th, 2023)

Source: militaryvaloan.com

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All rights reserved. Intuit and QuickBooks are registered trademarks of Intuit Inc. Terms and conditions, features, support, pricing, and service options subject to change without notice.

Source: mint.intuit.com

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While your neighbor’s home loan may be none of your business, how they choose to finance their property can affect your home’s value.

A new Home Value Forecast Update from Teck Valuation Services revealed that areas where homeowners took out high loan-to-value (LTV) loans experienced larger home price declines.

Zero Down Palmdale

For example, in Palmdale, California, a city about 60 miles (by car) north of Los Angeles, the average LTV was approximately 94% from 2000 to 2012. And since home prices peaked there around 2006, they’ve fallen by more than 60%.

Put simply, in areas where homeowners took out high LTV loans, there was much less incentive to stick around once home prices began to fall.

Additionally, homeowners may have had difficulty keeping up with payments, as many of the high-LTV loans carried expensive second mortgages with interest rates in the double-digits.

This led to a downward spiral as more and more homeowners missed payments and/or walked away, with little or no home equity to keep them invested.

Established Arcadia

Conversely, in areas where LTVs were lower, home price declines tended to be much more muted, as was the case with Arcadia, CA, which is closer to the urban center of Los Angeles.

There, the average LTV was below 70% for the same period, and home prices only experienced a “very shallow decline” in 2008-2009 before bouncing back to all-time highs.

As you can see, the spread between mortgage amount and average sold price was a lot wider in Arcadia, and seemed to have peaked in the first quarter of 2013.

In other words, the chances of these homeowners walking away were pretty slim, even if home prices declined by a sizable amount. At worst, they could still sell if they couldn’t keep up with payments anymore.

Where Are the Good Homeowners?

While it’s not necessarily easy to tell where homeowners take out higher-risk mortgages, there are some clues.

Many of the newly-built neighborhoods offered up by the big publicly traded home builders tend to tout all types of creative financing to get prospective homeowners in the door.

So if you’re getting a great deal on financing with very little or nothing down and all kinds of tax breaks, your neighbor probably is too.

And if the entire neighborhood is relying on that type of financing, a sudden reversal in home prices could wreak havoc on everyone involved.

However, if you purchase a home in an established neighborhood with mostly older residents that appear to have lived there for a long time, chances are the LTVs are a lot lower, assuming they didn’t go nuts cashing out over the years.

Unfortunately, these neighborhoods tend to be in desirable parts of town, which are often priced much higher than surrounding areas.

Clearly there’s no guarantee to what your neighbors might do when it comes to financing, but finding a home in an older and more affluent neighborhood could provide a buffer if the economy tanks again and home prices get hit.

Sure, the potential upside might be more limited in an area that’s already established, but do you really want to gamble on a home purchase?

Source: thetruthaboutmortgage.com

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Published: by Crystal Paine on June 21, 2014  |  This post may contain affiliate links. Read my disclosure policy here.

Guest post from Emily of The Unextreme

Do you know the BEST way to score free items?

In case you haven’t heard, free product coupons are the new way to shop! I’m talking a 100% savings on full-priced items. The only problem is that they can be hard to come by.

It’s not impossible though and I will let you in on my little secret!

The way that I have earned the majority of my free product coupons has been through playing games. That’s right: I enter and play sweepstakes and giveaways all the time. Many companies offer these free product coupons as prizes.

You may say that you don’t have a lot of time to give to enter sweepstakes everyday. After all, you’re not guaranteed to win. However, it might not take as much time as you think — and you might just be amazed how many freebie product coupons you’ll end up with!

I make time for sweepstakes every day — just like I did when I began couponing. I allot myself 30 minutes in the morning to enter as many as I possibly can before my son wakes up.

There are a few different types of sweepstakes that you can enter online:

  • Single entry
  • Daily entry
  • Instant-win
  • Facebook

Consistency is key.

If a giveaway is open for 30 days and allows you to enter every day, make sure to try and enter each and every day to increase your chances of winning!

Some sweepstakes require you to enter once and others allow you to enter daily until the giveaway has ended. Always make sure that you read the contest rules before you enter! Entering multiple times in a “single-entry only” game can eliminate your chances of winning completely!

My favorite sweepstake games are instant-win games. You know the feeling that you get when you save a ton of money at the register, better known as the “coupon high”? That’s the way it feels to win an instant-win game!

If you are interested in some of these games, always remember to “Like” you favorite companies on Facebook! Not only do they often offer coupons on their Facebook pages but some will host giveaways and sweepstakes! A good bit of Facebook sweepstakes are instant-win games. You can find single and daily entry sweepstake promotions on Facebook as well.

Another great way to find free product coupons is by emailing your favorite companies. I have been sent numerous free product coupons as a “thank you” for telling them how much I enjoy their product. Companies love to hear how much you love them.

Finally, always check your coupon inserts from the Sunday paper! They are not common but some companies will offer a 100% rebate on the purchase price of one of their items. Although it’s not a coupon to receive it for free at the register, it will be free once you are reimbursed for the product. Free is free, right?

What are your favorite ways to find freebie coupons?

Emily is a freelance writer and also the blogger behind The Unextreme. As a new mom desperate to be able to afford to stay at home, she found a way to save and make money with coupons. Her blog focuses on work-at-home options, sweepstakes, freebies, and more!

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Source: moneysavingmom.com

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Effective immediately, the FHA will lower its owner-occupancy requirement for certain approved condominium complexes to just 35%.

That means a given complex only needs about a third of the units to be owner-occupied, instead of the prior rule stating that 50% had to be primary residences.

The rule change should increase FHA lending on condos, something the National Association of Realtors has been pushing for to help lower-income renters become homeowners.

After all, condos tend to be a more affordable option than single-family homes.

About a year ago, the FHA eased its occupancy requirement in a variety of ways to make that occupancy number easier to satisfy, but this change goes even further.

In a nutshell, more investor-owned units means more risk for the building as a whole, something the FHA isn’t too fond of.

Their position is that owner-occupants are less likely to default on their HOA dues compared to non-owner occupants.

But The Housing Opportunity through Modernization Act of 2016 (HOTMA) directed the agency to issue new guidance to avoid harming the marketability of a building.

For example, it might be more difficult to sell a condominium unit if the buyer was planning to finance it with an FHA loan. That could lead to a price drop or a failed sale.

After some evaluation, HUD determined that the FHA’s Mutual Mortgage Insurance Fund (MMIF) could allow for a lower percentage of owner-occupants in some complexes but not in others.

Condos Must Meet Certain Conditions

  • While the new rule will make more condos FHA-eligible
  • There are some additional conditions that must be met
  • Including minimum reserve requirements for expenses and maintenance
  • And no more than 10% of units can be behind on HOA dues

Not every FHA-approved building will enjoy the new, lower occupancy requirement.

In order to take advantage of the updated owner-occupancy requirement, the building must meet the following conditions:

• Applications must be submitted for processing/review via HUD Review and Approval Process (HRAP)

• At least 20 percent of the condo development’s budget must provide for funding of replacement reserves for capital expenditures and deferred maintenance

• No more than 10 percent of the total units can be in arrears (60 days or more past due) on their HOA dues

• Three years of acceptable financial documents must be provided

Assuming the complex can satisfy all these requirements, a new buyer will be able to purchase a unit in the building using an FHA loan, even if it’s only 35% owner-occupied.

That will come as welcome news to those who are unable to qualify for a conventional loan, or simply want to take advantage of what the FHA has to offer.

For condominiums currently under construction, or for those being proposed (including projects less than 12 months old), and gut rehabs, the FHA will maintain its existing 30% occupancy guideline.

Prior to the Housing and Economic Recovery Act (HERA) of 2008, the owner-occupancy requirement was as high as 80%. It was then lowered to 51%, and after HERA to 50% for existing projects and 30% for those other projects mentioned just above.

If you have your eye on a certain condo, make absolutely sure it allows for FHA financing before making an offer, assuming you need/want to finance it with an FHA loan.

I’ve seen many properties marketed as FHA-approved, only to find out that the information was thrown up haphazardly on the MLS.

A good real estate agent should know whether it’s approved for FHA financing and a good lender should be able to determine the occupancy levels to ensure all goes smoothly.

Source: thetruthaboutmortgage.com

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Published: by Crystal Paine on December 9, 2014  |  This post may contain affiliate links. Read my disclosure policy here.

Guest post from Holly of The Work at Home Woman

It’s no secret that Americans are foodies! In fact, according to the Bureau of Labor Statistics, Americans spent an average of $6,602 a year on groceries and eating out alone (source).

If you’ve been looking to launch your own home-based business and you love to create culinary delights here are 5 different food careers to consider:

1. Teach Cooking Classes

Do people always rave about your cooking? Then perhaps you should launch a home-based cooking class business. Gather individuals or small groups of people in your home and teach them how to cook or bake like a pro.

Don’t want to mess with a business plan and all the logistics of setting up a business? Consider joining Healthy Hands Cooking. It’s a home-based franchise that certifies instructors to teach kids how to cook healthy meals and snacks. Start-up fees are minimal and include training, certification, marketing tools, business materials, as well as ongoing support.

2. Create Gourmet Goodies

Are you a whiz in the kitchen? Then consider starting your own gourmet food business. Foodies not only love to consume delicious goodies, they also make make great gifts! From fancy gourmet sauces and treats, to healthy and specialty snack items.

Set up your own website or use an e-commerce platform like Foodoro and you’re ready to start selling your custom treats.

3. Become a Direct Sales Consultant

Would you love to own your own cafe or bistro but don’t have the funds to invest in a brick and mortar storefront? No problem. The direct sales industry has made it easier than ever to have your very own home-based business within the food industry.

Companies like the Traveling Vineyard, Tastefully Simple, and Dove Chocolate Discoveries offer home-based business opportunities selling products like wine, gourmet mixes, spices, desserts, chocolates, and gift sets.

As a direct sales consultant you will be paid a commission on each product that you sell. Most direct sales companies will also pay you a small bonus commission from consultants who you refer into the program.

4. Start a Food Blog

Do you enjoy writing? Do you love to test out new recipes? Then join the ranks of Julie Powell, who set out to cook all the recipes in Julia Child’s cookbook, Mastering the Art of French Cooking.

Not only did Julie’s blog quickly generate a huge following, but she went on to the write the bestselling book Julie & Julia, which was later turned into a movie. While you can make money through book sales, bloggers can also make money through direct ad sales, affiliate marketing, as well as working with brands.

Tip: Read more on how to make money blogging here.

5. Food Stylist

Do you have an eye for detail? Then working as a food stylist may be your calling. Food Stylists prep and prepare food items for displays, cookbooks, photo shoots, advertisements, and menus. Becoming a Food Stylist requires knowledge of the culinary industry as well as additional training or apprenticeship.

Denise Vivaldo, a seasoned food professional with over 27 years of experience has created workshops and classes for those who are interested in this field. You can also check out her book on Amazon, The Food Stylist’s Handbook.

For more information on ways to make money, visit The Work at Home Woman, where you can read about topics like how to make money completing short tasks, selling your used stuff online, and businesses you can start with no money.

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Source: moneysavingmom.com