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One of the great things about homeownership is the ability to take advantage of money saving tax breaks, such as property tax and mortgage interest deductions.

These deductions can greatly reduce the cost of homeownership for taxpaying individuals who itemize their deductions.

But what about other common costs, such as mortgage insurance that so many homeowners tend to pay these days because they can’t muster 20% down?

Mortgage Insurance Isn’t Deductible in 2014

Well, thanks to the Tax Relief and Health Care Act of 2006 and the Mortgage Forgiveness Debt Relief Act of 2007, mortgage insurance premiums have been tax deductible since 2007. They are simply treated as home mortgage interest, according to IRS rules.

This applies to mortgage insurance provided by the VA, the FHA, the Rural Housing Service (USDA loans), and private mortgage insurance tied to conventional loans.

Later, the American Taxpayer Relief Act of 2012 extended this provision until the end of 2013 as part of fiscal cliff negotiations.

But it expired in 2014, and unless the Senate Finance Committee’s tax extenders package (EXPIRE Act of 2014) gains approval, homeowners won’t be able to deduct private mortgage insurance or any other mortgage insurance premiums paid this year (or next).

If it does pass, it will apply to mortgage insurance premiums paid in 2014 and 2015.

While the savings may not make or break a homeowner, it could amount to hundreds or even thousands of dollars in potential costs annually.

Stop Extending It and Just Make It Permanent

Though homeowners have been fortunate enough to benefit from extension after extension, the uncertainty clearly doesn’t allow homeowners to budget properly.

It also clouds the decision of whether paying mortgage insurance is a good idea or not. After all, you don’t really know the true cost.

Enter Devin Nunes (R-CA), and co-sponsor Joseph Crowley (D-NY), who introduced H.R. 4845 in the House of Representatives on June 11th.

The bill aims to amend the Internal Revenue Code of 1986 so mortgage insurance premiums are permanently deductible. This way homeowners won’t have to worry about the bill getting extended each year.

It still has a long way to go, but it could mark a huge victory for the mortgage insurance industry, seeing that it will make the option of taking on PMI a lot more attractive. At least it can be sold that way…

This is especially important seeing how expensive mortgage insurance premiums are on FHA loans nowadays, making them less affordable than conventional loans in some cases.

And with so many prospective homeowners looking to the FHA, or other low-down payment options, this could be a real lifesaver.

The bill is in its infancy, and has just been referred to the House Committee on Ways and Means.

There Are Still Deduction Limits

Keep in mind that even if this bill becomes law, or the tax extenders finally come to fruition, there are still limits on the MIP deduction.

As it stands now, you can fully deduct mortgage insurance premiums if your adjusted gross income (AGI) is $100,000 or less, per the IRS. However, the mortgage insurance must be associated with home acquisition debt on a main or second home.

It then gets phased out at 10% per $1,000 in income up to $109,000 in AGI, after which point it can no longer be deducted.

Contact your CPA or tax preparer to determine if you can deduct mortgage insurance premiums assuming any of these bills extend the deduction into 2014 and beyond.

For the record, a two-year extension is expected to cost $1.85 billion over 10 years, which makes it abundantly clear why its passage is not guaranteed.

Source: thetruthaboutmortgage.com

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The kneejerk reaction of many renters is to search for apartments owned by a big company, complete with all the bells and whistles that implies. That said, it’s always a viable option to rent from a private landlord. In fact, depending on your way of life and communication style, it might actually be preferable to work directly with one property manager, rather than a whole office full of associates.

There are perks and drawbacks to both options. Let’s dive right in and learn all about the pros and cons of renting from a private property manager. First, the up-side.

Pro: private property owner, personal touch

Some private landlords lease out rental properties like condos, townhouses or single-family homes where they used to live. Because of this, they’re often more emotionally involved in the property than a faceless corporation. For other landlords, the rental property is a serious investment, so it’s important to keep the place well-maintained.

There’s also the fact that the typical individual landlord only has a small number of rental properties. This means that a new resident is likely to get a lot more individual attention than tenants in a community handled by a large management company.

Pro: easier communication

A tenant with a question, problem or maintenance requests need only contact one person when renting directly from a private landlord. This is a welcome change from large property management companies, which often require renters to fill out online forms or call special numbers for different types of requests.

That said, do try to honor some sort of business hours, unless your need is a true emergency. Private landlords need some downtime, too! Also, make sure to maintain honest and clear communication to develop a professional, trusting relationship with the property owner. That’s in everyone’s best interests!

Pro: more flexibility

Landlords in big communities are often hogtied by corporate policies and contracts and such. A private landlord, however, can make adjustments without having to go through a bunch of channels. So, for example, a renter who decides they want to get a cat can simply ask special permission from the private landlord to adjust the pet policy and have an addendum added to the contract.

Pro: more privacy

People who rent houses from a private landlord enjoy quite a lot more privacy than those who rent apartments. They don’t have to share a wall, walkway or parking lot with anyone else, after all.

Pro: fewer rules

Large apartment communities have to have a lot of rules in place to keep the peace. And, while a renter of a house should still be responsible and respectful of neighbors and follow city ordinances, individual landlords tend to impose fewer restrictions than a large property management company. So, if autonomy is your thing, consider looking at houses for rent.

A private landlord may also choose to forego the expense of doing a background check for a new tenant, in favor of getting a general rental history. Never withhold information if asked directly, however. This is grounds for eviction.

Of course, this is all subjective to the private landlord in question. Some people are really paranoid and may have all kinds of extras worked into the contract to avoid liability. As always, read the lease in detail and discuss any sticking points with the landlord before signing anything.

Now, for the flip side. Here are some potential downsides that may occur when you rent from a private landlord.

Con: tentative response to maintenance requests

Repairs to private rental properties have to come out of the pocket of the owner, so often, they’ll try to take the most conservative approach to avoid paying big bills. As a result, sometimes, maintenance issues take longer to get resolved than in a big community, where there’s usually a specific staff, resources and budget in place to manage such issues.

Con: might deal with a property management company

Some private landlords rent out the property themselves but rely on private property management companies to actually deal with the tenants. This is all well and good as long as the company is capable. Otherwise, it’s extra red tape to wade through, and nobody wants that.

Con: more responsibility

Renting houses, in particular, comes with more upkeep and responsibility than the average apartment. First, there’s the fact that homes are generally larger, so there’s more space to keep clean. The landlord will expect any tenant to keep the property reasonably clean, otherwise, they can cancel the lease.

A typical home also comes with land, including a lawn and flower beds, all of which require regular maintenance. If you’re not willing to do this extra legwork make sure that your lease agreement stipulates the private landlord is responsible for lawn care. Some property managers will agree to this, but others will outright refuse.

Con: fewer amenities

Large apartment communities often come with a full slate of amenities, including multiple pools, workout facilities, 24-hour maintenance request lines and so on. For people renting from a private landlord, however, amenities look a little different. Of course, those who rent a condo or townhome generally get to enjoy the same property perks as owners in the community. However, someone who rents a single-family home is unlikely to have access to such bells and whistles.

Con: more expenses

Renting a home from an individual landlord means that there is often more space to furnish, heat and cool than the average apartment. This is especially true if it’s an older home with outdated HVAC systems. Before you sign a lease, inquire about the average monthly utility cost, so that you’re not left footing the bill for some old dinosaur.

Also, renting from a private landlord sometimes comes with higher overall rent and additional monthly fees. This is why it’s important to figure out how much rent you can afford before you sign the lease. Check out this helpful rent calculator to figure out what you can afford on your take-home pay. Pro tip: experts suggest spending no more than 30 percent of gross income on rent.

Con: less streamlined

Compared with a rent-by-owner situation, apartments managed by large property management companies have a lot of tools in place to make it easy to pay rent, request maintenance, lodge complaints and so on. So, tenants who like things automated probably prefer this to writing an old-school check every month.

Con: they hold the ownership cards

Sure, the owner can’t violate the terms of the contract while you’re leasing and kick you out without cause, but they can decide to sell the property once the term is up. This could mean yet another move, even if you’re happy where you are. Obviously, this is a pretty big downside, as it can cost a lot of money to move, plus it’s inconvenient.

Beware of rental scams

Anytime there’s money involved, scams can happen. Make sure the rent by owner home you’re interested in is totally legitimate before handing over any cash because, believe it or not, people do try to rent out properties that they have no claim to!

Here are some helpful tips to avoid rental scams:

  • An in-person meeting with the landlord or property management company at the property
  • Don’t fall for high-pressure tactics. Only sign a lease when you’re completely ready to do so.
  • Comply with all standard requirements, like a background check, credit check, interview, etc. A good landlord wants to have a firm grasp on who will be occupying the property.
  • Hold onto your money until you sign a legal contract
  • Insist on a lease. This contract is in place to protect both the renter and the landlord. Without it, you have no claim to the property and they can kick you out anytime. Above all else, if your gut instinct is to walk away because of a hunch or shady behavior, then do so. There are plenty of other rentals out there.

Ready to rent from a private landlord, instead of big property management companies?

The decision of whether to rent directly from a property owner or a large apartment management company really depends on a lot of personal preferences. Whatever you do, ask all the questions and read the lease fully before you decide between rentals. It’s better to prepare too much than not enough.

A freelance writer based out of the Atlanta area, Alia has penned articles during her decade+ career for such sites as HowStuffWorks, TLC, Animal Planet, Zillow and many more. Her favorite things to write about include fitness, nutrition, travel, healthcare and general lifestyle topics. A graduate of the University of Georgia, Alia’s an avid Dawg, but she also loves reading, sewing, eating all things chocolate and playing sports with her husband, three boys and beloved border collie, Flash.

Source: rent.com

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After finding that big, beautiful house, you now have to find a big, beautiful mortgage. If the amount you need to borrow is over the Federal Housing Finance Agency (FHFA) conforming loan limit of $726,200 for most geographic areas, you’ll need to get a jumbo loan.

A jumbo loan is a little different than a conventional, conforming mortgage and has its own benefits and drawbacks. You can expect increased scrutiny from potential lenders, and possibly some increased costs.

Jumbo Loans: The Basics

Luxury homes, vacation homes, unique properties, and homes in high-cost-of-living areas may need a jumbo loan. A jumbo loan is different from a conventional loan in that it isn’t guaranteed by Fannie Mae or Freddie Mac. This means the lender takes on more risk to issue a mortgage to the borrower. With the additional risk exposure, lenders have higher qualifications. This may include:

•   A higher credit score

•   A larger down payment

•   Strong cash reserves — sometimes up to a year’s worth of mortgage payments

•   A higher income

•   A low debt-to-income ratio

•   More stringent loan-to-value requirements

While the qualifications and loan amounts may be different, they may offer an interest rate similar to what you would find for a conventional loan below the conforming loan limits.

Keep in mind the more stringent requirements shouldn’t dissuade you from looking into jumbo loans. On the contrary, let’s take a closer look at jumbo loan pros and cons to help you decide if you want to go this direction or not.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Recommended: Local Housing Market Trends

Benefits of Jumbo Loans

A jumbo loan may allow you to buy property you otherwise wouldn’t be able to. Some of the main benefits of a jumbo loan include:

•   Higher loan amount. A jumbo loan allows you to purchase property at a higher price point. If you’re looking for high-end property, a vacation property, or your dream home, a jumbo loan may be able to help you access the financing you need. Depending on where the property is located, the conforming loan limits are either $726,200 or up to $1,089,300.

•   Comparable Interest rates. You may be surprised to learn that interest rates on jumbo loans may be comparable to those of conforming conventional loans. Sometimes, they’re even lower!

•   Avoid PMI. There are some lenders that allow you to forgo private mortgage insurance with a jumbo loan, especially if you put down at least 10% on a property. This can save you money every month.

💡 Quick Tip: A major home purchase may mean a jumbo loan, but it doesn’t have to mean a jumbo down payment. Apply for a jumbo mortgage with SoFi, and you could put as little as 10% down.

Drawbacks of Jumbo Loans

While jumbo loans can afford you the loan you need for a higher-priced property, they do have some drawbacks you should be aware of.

•   More stringent qualifications. Jumbo loans are tougher to get. You need a higher income, a high credit score, and a big down payment. Lenders also want to see a debt-to-income (DTI) ratio lower than 43%, and the loan-to-value (LTV) ratio may max out at 80% of a property’s value.

•   Potentially higher rates. Jumbo loans are not guaranteed by Fannie Mae or Freddie Mac, so a jumbo loan can reduce a lender’s liquidity and expose them to more risk. In the past, jumbo loans have been offered at higher interest rates, though recently, many lenders are offering jumbo loans at a lower interest rate than a conventional mortgage.

•   Need to show cash reserves. For some of the best terms for jumbo loans, you may need to show anywhere from three to 24 months’ worth of cash reserves. Furthermore, jumbo loan lenders have different standards when it comes to what is considered a cash reserve. Some lenders may be able to count your 401(k) as part of your cash reserves, while others require money to be held in a more liquid account.

•   Fewer lenders offer jumbo loans. This doesn’t mean jumbo loans are uncommon by any means, but you do have to find a lender in your area that offers jumbo loans.

•   Higher costs. Because jumbo loans are so large, you have higher costs all around. Closing costs are based on a percentage of the transaction. With a higher loan amount, you’ll pay more for these services. You’ll also pay more for fixed-cost services, such as an appraisal or a home inspection, if your home is larger and has more to evaluate.

How Hard Is It to Qualify for a Jumbo Loan?

It’s true — fewer borrowers will be able to qualify for a jumbo loan. But if you know what lenders are looking for, your odds are good. Jumbo loan requirements may include:

•   Credit score of 700 or higher

•   Down payment of 20%, although some lenders allow as little as 10% down

•   LTV ratio around 80% or lower

•   DTI ratio of 43% or lower

•   Cash reserves equal to 6 to 12 months of the monthly mortgage payment

•   Higher income amount

💡 Quick Tip: Your parents or grandparents probably got mortgages for 30 years. But these days, you can get them for 20, 15, or 10 years — and pay less interest over the life of the loan.

Jumbo Loan vs Conventional Loan

Technically, jumbo loans are conventional loans. A conventional loan is a mortgage that isn’t a government-backed mortgage. What’s different about a jumbo loan is that it is not a conforming conventional loan.

A conforming conventional loan is one where the loan amount is less than the conforming loan limit of $726,200 for most areas and $1,089,300 for high-cost areas. This distinction is important, but it’s also common to call a conforming conventional loan simply a conventional loan.

Aside from the loan amount, other major differences between a jumbo loan and a conventional conforming loan include the down payment amount, credit score requirement, LTV ratio, DTI ratio, income requirement, and cash reserve requirement. These key differences are outlined in the chart below:

Jumbo Loan Conventional Conforming Loan
Loan amount Loan higher than $726,200 in most areas or $1,089,300 in high-cost areas. Loan lower than $726,200 in most areas or $1,089,300 in high-cost areas.
Down payment Down payment as low as 10% Down payment as low as 3%
Credit score 700+ As low as 620
LTV Around 80% As high as 97%
DTI 43% or lower, 36% for some lenders Up to 50%
Income Higher Lower
Cash reserves As much as 12 months Not required

The Takeaway

If you have your eye on a property that exceeds the conforming home loan limits for your area, a jumbo loan can make it happen for you. Prepare yourself for the more stringent salary, credit score, and cash reserves requirements and you’ll be able to call that home yours.

When you’re ready to take the next step, consider what SoFi Home Loans have to offer. Jumbo loans are offered with competitive interest rates, no private mortgage insurance, and down payments as low as 10%.

SoFi Mortgage Loans: We make the home loan process smart and simple.

FAQ

Who qualifies for a jumbo loan?

Borrowers with a high income, an excellent credit score, substantial funds on hand for a down payment (plus large cash reserves), and a low debt-to-income ratio may qualify for a jumbo loan. Check with lenders to learn their specific requirements.

How do you apply for a jumbo loan?

You can apply for a jumbo loan through any lender that offers a jumbo mortgage product.

Photo credit: iStock/FOTOGRAFIA INC.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

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In the dynamic housing landscape, having no rental history can often feel like a roadblock when seeking your ideal home. Whether you’re a first-time renter or moving to a new city like Albany, NY, the absence of a rental history might seem daunting. However, this unique situation shouldn’t deter you from finding a place that suits your needs and aspirations. 

If you’re in the market for apartments or unsure where to begin, this Redfin article is here to help. We’ll walk you through everything from building trust with landlords to proving your financial stability, giving you the tools you need to snag that perfect apartment, even if you’re starting from scratch. Get ready to navigate the renting journey with confidence.

What is rental history?

Rental history is like a report card for your time as a tenant. It records where you’ve lived before, how long you stayed, if you paid your rent on time, and how you treated the place. Landlords use this history to decide if you’re a reliable renter. If your previous renting experiences have been positive and you’ve maintained a good track record, it’s akin to receiving a vote of confidence from landlords.

Where to start with no rental history

When faced with a lack of rental history, beginning your housing journey requires a strategic approach. The initial step should involve assessing your financial standing and gathering relevant documentation demonstrating your reliability. Creating a comprehensive rental resume detailing your employment history, references, and other positive credentials can establish this credibility.

What are ways to get approved with no rental history?

Applying for an apartment without a rental history can be challenging. However, there are ways to increase your chances of approval.

1. Provide references

Getting people who know you well, like friends, coworkers, or bosses, to vouch for you can be essential if you don’t have a rental history. These references can tell landlords that you’re trustworthy, can manage money responsibly, and take care of places. Having these references can make landlords more confident about renting to you and improve your chances of getting the apartment.

2. Have a co-signer or guarantor

If you don’t have rental history, it’s a good idea to have a co-signer like a family member or a guarantor. They give the landlord extra financial security.

A co-signer pays rent if you can’t. A guarantor fulfills your lease responsibilities. This setup makes sure the landlord gets paid on time and things go smoothly, even if you don’t have a renting history.  As a result, you become a more reliable tenant. 

3. Show that you have financial stability

Demonstrating that you are financially stable is crucial when you lack rental history. This helps landlords feel confident that you’ll be able to pay the rent on time. Showing pay stubs, employment verification, or bank statements proves you have enough money to pay your monthly bills.

4. Pay a higher security deposit

A larger security deposit gives landlords a sense of financial security in case of potential issues. This extra money upfront shows you’re serious about taking care of the place and can ease their concerns about renting to someone without much history.

5. Explain your situation

Explaining your situation to the landlord is important, as it provides context and transparency when you lack rental history. Sharing reasons for your lack of history, such as transitioning from living with family or moving to a new area, helps landlords understand your circumstances. 

6. Offer prepaid rent

When you’re new to renting, putting down money for several months’ rent ahead of time can be really convincing. It makes landlords feel more at ease because it means they’re not taking as much financial risk. Plus, it shows you’re really serious about sticking to the lease agreement.

7. Highlight a good credit score

When you’re new to renting, having a strong credit score works in your favor. A high credit score reflects your history of repaying debts on time and managing credit responsibly. It’s a concrete way to show that you’re responsible with money and can handle financial commitments well.

8. Meet the landlord in person

A face-to-face interaction lets you showcase your professionalism, responsibility, and genuine interest in the property. This can be a big factor in their decision-making, as it helps them build trust and could even boost your chances of getting the apartment.

9. Apply to apartments with smaller landlords or private individuals 

These landlords often have more flexibility in their tenant selection process and may be more open to considering applicants without an established rental record. Their decision-making might be based on personal interactions, references, and other factors beyond rental history.

How to find an apartment: 8 steps for success 

Now that you know the process of securing a rental approval with no rental history, here are the steps you need to find an apartment.

1. Set a budget. Using tools like a rent affordability calculator will help you budget to find a rental that aligns with your financial capabilities.

2. Define your needs and wants. Prioritize the amenities that are essential for your comfort and lifestyle.

3. Explore different neighborhoods. Choosing the right apartment involves exploring various neighborhoods. Each area has its own vibe and amenities. Visiting different neighborhoods helps you find the right fit for your lifestyle and preferences.

4. Use online platforms to find rental properties. When you’re on the hunt for an apartment, online rental platforms are your best friend. Redfin and Rent.com allow you to browse through numerous properties, tailor your search according to preferences, and access specific information about each property.

5. Contact property managers and landlords. Ask questions about rental terms and requirements, and establish a direct line of communication to expedite securing your desired rental.

6. Tour apartments. Apartment touring gives you the chance to see the space in person, assess its condition, and envision yourself living there. During the tour, pay attention to details like layout, lighting, and storage space. Don’t hesitate to ask questions about maintenance, utilities, and the neighborhood.

7. Apply for your dream home. Submit your rental application, including necessary documents and contact information, to the landlord or property manager. They will run a background check and credit check to see if you qualify.

8. Sign the lease. Once you’ve been approved, make sure to review the rental agreement thoroughly before signing your lease.

Source: redfin.com

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Owning and managing vacation rentals is a dynamic endeavor, one that balances profit, experience, and community impact. Regardless of whether you’re managing a house in Oklahoma City or a condo in San Marcos, CA, you’ll encounter unique challenges specific to different markets. These are hurdles nearly all vacation rental managers have faced, especially in the early days.

However, navigating this terrain requires a careful avoidance of potential pitfalls that can hinder your success. From maintaining a balanced objectivity to perfecting market strategies, ensuring effective communication to building strong relationships with neighbors,

This Redfin article presents a comprehensive list of vital vacation rental issues to sidestep. Drawing on the expertise of industry leaders, you’ll gain valuable insights into these potential roadblocks and learn how to proactively avoid them. You can move onto orchestrating a thriving five-star vacation rental venture, as these experts illuminate the path to smoother operations, satisfied guests, and prosperous outcomes. Learn from their experiences to safeguard your investment, maximize your earnings, and cultivate a positive impact on the hospitality landscape.

1. Unbalanced objectivity and emotion

“It’s crucial to remember that your vacation rental is not merely a personal space, but a business asset designed to generate revenue,” recommends Matt Barbuzzi from Park Place Property Management  “While striving to host only the best guests is important, you must be prepared for the occasional mishap, as they’re inevitable in this line of business. Do not allow personal sentiments to cloud your judgment or emotional resilience. This is particularly crucial if your property carries sentimental significance or serves as a family space. Unless you’re renting it to close friends or relatives, we strongly advise against utilizing such properties for short-term rentals due to potential emotional distress.”

2. Neglecting proper screening

“Screening vacation guests presents unique challenges compared to screening conventional yearly renters, as you have limitations on the information you can request, such as contacting and verifying employment history and previous landlords. Nevertheless, implement various techniques to ensure the security of our properties,” shares Maximilian Kostyashkin and Carlos Pena from MAK Realty Group. “These techniques include:

  • Utilizing advanced guest screening software such as Autohost, Chekin, Superego, or Authenticate. These platforms conduct credit checks, background checks, official ID verification, and require damage deposits. Additionally, they provide comprehensive short-term rental agreements for guests to sign.
  • Implementing a minimum stay requirement: During peak seasons, we request a minimum stay of three days. This measure helps prevent individuals from renting your property for a one-time event or party.
  • Noting the usage of noise monitoring technology, which effectively deters party-oriented renters.
  • Employing device monitoring software: All of our properties are equipped with software that tracks the number of devices in use. A sudden spike in device count, such as reaching 20, is often indicative of a potential party being hosted by your guests.”

3. Underpaying housekeeping

“Don’t settle for the lowest cost – invest in your cleaners, and your guests will undoubtedly notice the difference in the quality of your vacation rental,” stresses Realty Street.

“I can’t stress enough how crucial it is to pay cleaners. By offering fair compensation, you not only maintain a high standard of cleanliness but also enhance their motivation and dedication to delivering exceptional service. Skilled cleaners are attracted to good pay, and this directly impacts the guest experience, contributing to a positive reputation, and ensuring a comfortable and welcoming environment for your guests.”

4. Overcomplicating your guest’s experience 

“Don’t impose excessive check-out procedures on guests. Tasks such as initiating a load of towels, disposing of kitchen trash, and running the dishwasher are optimal. It’s essential to communicate to guests that these chores contribute to minimizing cleaning fees and encouraging early check-ins,” says HAVEN Property Management.

“Offer instructional videos for any intricate features in your vacation rental. Videos that guide guests through operating the hot tub, using smart devices, or navigating other complex equipment can be conveniently provided in video format.”

5. Setting bad pricing

“Many hosts lack market knowledge about rates and set their prices based on their emotional attachment to the specific property. This often leads to rates that are excessively high for the market, resulting in a lack of bookings,” shares Oliver Albrecht from Valibera. “Then after a while, they significantly reduce the rates, leading to more bookings, but these rates may only cover the house’s costs without generating any profit for the homeowners. This cycle continues for a while until they eventually give up, having to either rent the house on a long-term basis or even sell it due to their inability to meet the mortgage payments.”

6. Communication problems

“The foremost error in vacation rental management is failing to communicate with property owners. Their investment properties, often among their most valuable assets, rely on generating income or covering their costs,” says Port Aransas Airbnb Vacation Rental Property Management by Grand Welcome. 

“Entrusting management to others necessitates trust, and trust thrives on communication. Without it, owners concoct narratives, eroding trust, leading to misunderstandings and unfulfilled expectations. Communication is the bedrock of vacation rental partnerships, ensuring both parties thrive. A proactive approach, balancing issues and successes, fosters deeper trust. Regular, strategic personal calls build trust, deepen partnerships, and facilitate owner-to-owner referrals that surpass marketing efforts in expanding business.”

7. Having a bad relationship with your neighbors 

“Some owners become concerned about potentially upsetting neighbors with their short-term rental (STR) properties, and rightfully so—no one wants to create adversaries,” recommends Long Beach Airbnb Vacation Rental Property Management by Grand Welcome.

“Provide owners with the following anti-nuisance tactics:

  • Communicate with the neighbors before launching your short term rental (STR) and provide them with a contact number to call if any issues arise.
  • Be available 24/7 for communication or property visits to ensure a peaceful environment.
  • Communicate with guests—through the listing, pre-arrival emails, and arrival-day texts—that events and parties are prohibited, and violating this rule will result in eviction. Be polite but firm.
  • Consider only renting to guests who stay for more than two nights (three or more nights are even better). One-night stays tend to attract “party” people.

Here is an example from a standard email I send to my STR guests:

I wanted to let you know that there is a long-term tenant living above the garage (separate building) and neighbors on both sides in close proximity, which means the back patio closes at 11pm sharp. The Belmont Heights Retreat is the perfect place for peace and serenity.  

If you have any issues during business hours – my contact information can be found below, and we have a Guest Services line available 24/7 at 888.XXX.XXXX”

8. Neglecting feedback 

“Feedback is the lifeblood of your vacation rental. How do you know what guests do or don’t like, or where you’re missing the mark on certain things? Without actively seeking, tracking, and implementing feedback, you’re vulnerable to operational blind spots that will impact your bottom line,” suggests Michael Skinner from Savvy VRM. “If guests don’t leave a review, nudge them by politely asking for one. Or send them a text asking if they’d be open to discussing their experience with you on a quick phone call.”

9. Poor market strategy

“At Grand Welcome Nashville, we don’t just rely on traditional platforms. We amplify our reach by promoting on over 120+ websites, social media marketing campaigns, and our community ensuring our homeowners get unparalleled exposure and guests taste authentic Nashville,” suggests Nashville Airbnb Rental Property Management by Grand Welcome.

“Nashville is more than just a city; it’s an experience, a melody that lingers long after the song ends. I think that capturing this essence in your marketing is crucial. Highlighting local attractions, events, and the unique Nashville vibe can magnetize guests, drawing them into the city’s embrace.”

10. Skimping on professional photos

“I believe the top mistake to avoid is not hiring a professional photographer to take listing photos. This can differentiate you from your competition and make you stand out instantly, as first impressions are incredibly important,” recommends Gabe Chase from Brentwood Property Group.

11. “Set it and forget it” pricing

“One of the most common mistakes is adopting the ‘set it and forget it’ approach to pricing. Each day holds its distinct market value, and overlooking this fact can result in either foregoing potential income or struggling to secure bookings,” says Garret Ham from Weekender Management. “While using pricing tools like Wheelhouse and PriceLabs is a positive step, they are not a universal solution. These tools still rely on the property manager’s insights and knowledge, and should be complemented by your own market research.”

12. Unclear check-in, check-out times

“It’s good to remind the guest in a friendly way what time check-out is, especially the day before to check-out. Also, place it in a visible space in the house and in a friendly ‘hope you liked your trip’ text,” suggests Michael B. Emerick, Co-Founder of Oversee. “If the guest gets a little spacey and leaves late, it can cause a poor experience for the next guest by pushing back their check-in time. Be as hospitable as possible, but don’t let a guest infringe upon another guest’s vacation.”

13. Lack of adequate property insurance

“Not having property insurance leaves vacation rental owners vulnerable to potential financial losses and liabilities in the event of accidents, damages, or unforeseen circumstances,” warns  Nomadness Rentals. “Proper insurance coverage, such as vacation rental insurance, is crucial to safeguarding your investment and protecting against risks associated with short-term rentals.”

14. Not setting house rules and policies for guests

“Whether it’s a chic apartment in the heart of Austin or a secluded cabin in Hill Country, clarity is key. Clearly defined house rules, from pet policies to quiet hours, ensure guests know what’s expected,” recommends Alexander Buchanan, owner of Austin Airbnb Rental Property Management by Grand Welcome. “A comprehensive guest manual, with guidelines on appliance usage, emergency contacts, and local tips, ensures a hassle-free stay. This proactive approach minimizes misunderstandings and ensures guests can fully relax, knowing they’re in good hands.”

15. Incapable of juggling roles and meeting demands

“As vacation rental managers, we wear many hats, skillfully handling both property owners and their assets – encompassing furnishing, maintenance, upkeep, updates, pricing, marketing/advertising, accounting, and more,” says Blue Pacific Vacation Rentals

“We also navigate the world of guests – marketing/advertising to secure bookings, administering paperwork/contracts for owner and guest protection, overseeing maintenance, managing access/technology/information, arranging cleaning/maintenance, and meticulously curating guest experiences to foster repeat patronage, among other responsibilities. This multifaceted role underscores the distinct and demanding nature of vacation rental management, far exceeding the misconception that it merely involves posting property images on Airbnb.”

“There are myriad mistakes one can make while managing a short-term rental venture. Drawing from my experience in the current market, the most prevalent errors involve not assigning sufficient importance to gaining a competitive edge. This entails investing in elements such as furnishing, decorations, high-quality linens, bedding, and amenities, all of which are essential in an already saturated market. 

16. Not differentiating yourself

“It’s imperative to set yourself apart amidst this crowded landscape,” suggests Tampa Airbnb Vacation Rental Property Management by Grand Welcome. “Furthermore, the significance of a well-planned pricing strategy, maintaining cleanliness, and ensuring effective communication and responsiveness in guest services cannot be overlooked in terms of common mistakes. 

Make sure to differentiate yourself. With numerous short-term rentals available, standing out is crucial. Highlight what makes your property unique, whether it’s a specific theme, design, or location. Don’t ignore offering local insights. As a host, you can provide valuable insights about the local area. Recommendations for nearby attractions, restaurants, and services can enhance the guest experience.”

17. Skipping local laws and regulations

“Begin by thoroughly studying the local laws and regulations that pertain to STRs,” recommends MyTripify. “Ensure you grasp all the pertinent regulations, or enlist the expertise of a property manager who does. Non-compliance, such as violating HOA restrictions or listing an STR with an occupancy exceeding septic tank limits, can lead to hefty fines. The potential consequences far outweigh any initial gains.

That being said, don’t underestimate the importance of insurance coverage for STR hosts. Investing in insurance products is a cost-effective means of mitigating the risk of property damage. By securing insurance, you regain control over potential damages and maintain your property’s excellent condition, all the while upholding high levels of guest satisfaction.”

18. Forgetting systems and setting expectations as you grow your business

One of the biggest mistakes vacation rental managers make that’s costing you time and money is hiring additional people on your team without systems,” warns Pink Cash Cow Property Management. “As your business grows, you can’t do everything yourself, so you hire someone to help you with tasks at the property or remotely. However, the person may not do it right, not getting the results you’re looking for, or you’re getting negative reviews and guest complaints. 

You end up doing the work again yourself or spending time trying to find someone else. The best way to efficiently operate and grow your business without taking more time or effort is creating systems and processes that people can follow for consistent results, like getting five-star reviews without you doing the work. Have a process and system for maintenance, cleaning, staging, linens, etc.”

19. Not being persistent enough 

“One of the most, if not the most, important steps in ensuring successful vacation management for your home or business is to ensure that you are overly communicative with your guests, both before and during their stay,” shares Emily Bishop, Communications Manager for Brightwild. “Lay out check-in instructions clearly, while also making sure that any preemptive questions guests may have are already answered. It seems overly simplistic, but you’d be surprised to know that this isn’t always a priority for some vacation management companies.”

20. Not learning and resolving problems quickly

“One observation I make regarding most vacation rentals is the absence of established, repeatable systems geared towards success. This translates to encountering hard challenges, even if these issues were addressed just six months prior. Consequently, the team finds itself retracing steps to unearth solutions for guests or risk leaving them discontented,” says Cody Wood from STR Accommodations.

“Similarly, another prevailing issue frequently encountered in the vacation rental industry pertains to the swiftness with which guest concerns are tackled. At times, these concerns revolve around maintenance matters, indicating a deficiency in the property’s upkeep schedule, or worse, its nonexistence. 

Alternatively, the problems might stem from malfunctioning amenities or depleted supplies due to a lack of efficient restocking systems on the part of the owner or manager. The remedy for both aforementioned concerns involves implementing a quarterly or monthly maintenance regimen supplemented by a 24/7 emergency helpline dedicated to property support. Diligent tracking of inventory levels post each turnover clean at the property level is essential. Speed assumes paramount importance in the realm of vacation rentals, as our physical absence from the property necessitates possessing a clear grasp of effective troubleshooting procedures. This approach not only facilitates swift responses but also leaves guests content with the prompt resolution of their issues.”

21. Keeping up with maintenance needs

“One common mistake is underestimating the ongoing maintenance needs of a vacation rental property. Failing to address maintenance issues promptly can lead to negative reviews and dissatisfied guests,” Bend Airbnb Vacation Rental Property Management by Grand Welcome advises. “To avoid this, we recommend creating a thorough maintenance schedule, conduct regular inspections, and request that the homeowner set aside a portion of their rental income for unforeseen repairs.

Sameway, using poor-quality or outdated photos for your vacation rental property can deter potential guests. Ignoring the importance of professional photography can lead to decreased bookings and interest. We highly recommend investing in high-quality, well-lit photos that accurately showcase the property’s best features. Always hire a professional photographer who specializes in real estate to capture the property’s appeal.”

Source: redfin.com

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DirectOffer, a marketing and lead generation tool using AI and machine-learning to enhance property listings, has recently reached an agreement with the Arizona Realtors. This partnership aims to provide the Association’s 55,000+ members with discounted access to DirectOffer’s DO AudioTours, a patented technology that transforms static property listing photos into guided multi-language tours of homes.

DO AudioTours offer two methods for listing agents to add audio voice overs to property photos. They can either personalize the AudioTour by recording a 30-second voice over for each listing photo they choose, or they can rely on AudioTours’ natural language processing capability to automatically generate and add descriptions in over 20 languages, both in voice and closed captions. By incorporating multi-language and closed captioning features, the technology enables agents to reach a broader audience while supporting accessibility initiatives such as ADA and DEI.

Dan Pemberton, Arizona Realtors Director of Business Technology and Communications, expressed the organization’s motivation behind partnering with DirectOffer. He stated that the innovative technology aims to break language barriers, cater to a diverse market, and create a more inclusive and immersive home-buying experience for potential buyers. This approach aligns with the Association’s commitment to promoting equal opportunities and greater engagement in the real estate industry.

This content was generated using AI and was edited by HousingWire’s editors.

Source: housingwire.com

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You’ve found the perfect place and can’t wait to move in. You’ve already envisioned what the apartment will look like once you get all moved in and how you’re going to decorate.

But before you get too excited, you’ll want to check out the landlord. Even the prettiest of apartments are a pain to live in if you’ve got a landlord that negatively affects the living arrangement. You’ll want to avoid potential issues with the landlord, so it’s necessary to do a little digging to find out if living in their apartment is worth dealing with them or not.

So, how do you go about finding a great landlord? What methods and resources will tell you how good or bad a landlord actually is? Here’s how to check out a potential landlord before signing a lease so you can tell if you’ll like living in their rental.

What makes a good landlord?

While saying a landlord is “good” will vary from person to person, there are some things that generally make a great landlord. Things like obeying rental laws, maintaining the property so it’s habitable and being good about communicating with tenants are key characteristics of a good landlord.

On top of that, you can get more granular and look at individual items, like if they make repairs in a timely manner, give even more than the 24-hours required notice for any date they plan on visiting the property, have an effective method of collecting and tracking rent money, stick to the terms of the lease, etc.

Talk to current tenants

It may seem a little weird at first, but simply knocking on a door or two to chat with current residents when looking into a location is the most helpful way of finding out what a landlord is like. Other people understand what it’s like to have a terrible landlord, so people are typically pretty happy to help out and talk about the landlord.

Make sure you have a few questions ready to ask other tenants about the landlord, apart from “is the landlord good?” Be specific and ask about things like how long it usually takes for the landlord to make repairs, how much notice the landlord gives when they plan to stop by and how responsive the landlord is when issues arise. Asking specific questions about the landlord can help you understand crucial aspects of living in the apartment and it will weed out the bad landlords.

Read reviews on Rent.

When you search for apartments on Rent., there are reviews for each listing you can read. These reviews are mostly from people that have lived at each property, but there are also times that interested parties leave a review about the landlord, which you also may want to pay attention to.

For those that have lived in a listed apartment building, you’ll likely get a good idea of what they liked and didn’t like about living there. While not every review will mention the landlord, there are some that will specifically mention the landlord or property management company that you’ll want to pay attention to.

The reviews from people who were looking into an apartment, but didn’t actually live there, are helpful since they can tell you what it was like just looking at the apartment building and if they had a bad experience with the landlord on their search. Some of these potential residents filled out applications or toured the property and had such a bad experience with the landlord that they felt the need to write a review about it. This might be a sign. If there are lots of bad reviews from people who didn’t even give living there a chance because of their experience with the landlord, it’s probably best that you steer clear, too.

Read reviews on third-party sites

Similar to Rent., there are other sites where you can read comments about landlords to get an idea of what type of landlord they are and if you’ll like living in their rental property. A few of the best third-party review sites are WhoseYourLandlord, ApartmentRatings and Rate My Landlord.

These sites are free and make it easy to filter through different cities and areas you’re interested in so you can find landlords and property managers in the area. Keep in mind that when you’re reading them, there might be a few negative reviews about the landlord written by bad tenants. So, look at reviews as a whole — if there are lots of great reviews and only a few bad ones, the landlord is probably pretty good. On the flip side, if there are lots of bad reviews and only a few good ones, make the assumption that the landlord isn’t one you want to deal with.

Look at property management company ratings

If you’re looking into apartments managed by entities larger than a singular landlord, you can check out property management company reviews. Since most of these companies manage multiple properties and buildings, they usually have a lot more reviews to look at.

Sites like Yelp can help you look into property managers and how they handle things, not to mention most of these companies have their own websites you can check out to learn about their management style and which properties they manage.

Check out social media

Apartment complexes often have their own social media accounts, such as Facebook, where they create a community for their apartment residents to share events, observations, etc. These groups are very telling since you can see what individuals are saying and what issues about the landlord are constantly being brought up.

Multiple residents may post about the same issue, which is a red flag. However, if there are no negative comments, it’s a good sign and you can probably assume that the landlord isn’t having a negative effect on most other tenants’ living experiences.

Keep in mind that you may come across a few crazy community members with strong opinions, but it’s pretty easy to decipher those from the good tenants.

Look into public records

If you’re curious to see how frequently a landlord evicts tenants, you can check public records from the city. In most states, eviction records are public and you can look at them online or request them from the city. You’ll typically need the landlord’s name and the address of the unit you want to look into.

There are times when a landlord needs to evict a resident — the tenant stopped paying rent, let friends move into the property without notice or approval or was participating in illegal activities. After all, renting out properties is a business for the landlord and it’s how they make money to live and provide for their family. They need to make tough decisions at times so things don’t negatively affect their source of income and evicting a bad tenant doesn’t make the landlord a bad person.

However, if you find that a landlord has evicted lots of other tenants, it might mean there’s a problem and a possibility of getting evicted yourself should you decide to sign a lease.

Seek out past tenants

This one is a little more difficult as it’s not easy finding an old tenant to talk to. However, some asking around might help you find previous tenants to talk to. You can see if any other renters currently in the building are in contact with old tenants and if they’d be willing to put you in touch.

Once you find an old tenant, ask them why they moved and what issues they had with the landlord (if any). They may seem a little more honest than current residents since they no longer have to deal with the landlord and they aren’t as worried that saying something negative will come back to bite them.

Build a good landlord-tenant relationship

Building a good relationship with your landlord can affect whether or not you think they’re a good landlord or not.

Good landlords will typically do things that some people simply don’t like, such as hold a security deposit, impose fees if you don’t pay your rent on time and require that you keep the place clean while living there. Renters that don’t like these things will probably have negative things to say about the landlord when in reality, the landlord hasn’t done anything wrong.

So take what you hear with a grain of salt and use your better judgment by building your own relationship with a potential new landlord. If you’re a good tenant, chances are that you won’t have issues with your landlord in most scenarios.

Avoid a bad landlord

There’s no such thing as a perfect landlord and many of them will likely make mistakes or do things you don’t like at some point. Really, an ideal landlord is one that manages the apartment reasonably and makes sure it’s a comfortable and habitable place to live, communicates well and ultimately, lets you live in peace.

Remember that finding a good apartment to live in comes from finding a good landlord. You don’t want to sign a lease and regret it later on due to the landlord, so do your research on the landlord and the living situation before signing and you’ll be just fine!

Source: rent.com

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Government-backed mortgages can be easier for potential homebuyers to qualify for as these loans are insured by the federal government, which brings down the risk for lenders. There are three main types of government-backed mortgages that can help consumers — and especially first-time homebuyers — reach their goal of homeownership.

Let’s take a closer look at these different types of government-backed mortgages and how these government-backed insured mortgages work.

What Is a Government-Backed Mortgage?

Essentially, a government-backed mortgage is a mortgage loan that a federal government agency insures. These types of mortgages are typically easier to qualify for than conventional home loans, as the lender takes on less risk due to the government insurance that forms the safety net underpinning the loan.

Of course, consumers can also apply for non-government-backed mortgages, so it’s important to do your research before applying for home loans to see which mortgages best suit your financial needs.
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How Do Government-Backed Mortgages Work?

Let’s take a closer look at how government-backed home loans work. To start, they are insured by one of three different federal agencies.

•   Federal Housing Administration (FHA loans)

•   U.S. Department of Agriculture (USDA loans)

•   U.S. Department of Veterans Affairs (VA loans)

The way this works is that if the borrower defaults on the loan, the government repays the lender instead. This greatly reduces the risk that the lender faces, which means they can in turn extend more favorable interest rates to borrowers who may not normally qualify for low interest rates. Many government-backed loans also don’t require a down payment.

Most of these loans are not issued by the government. Consumers still have to apply with private lenders and it’s a bit hit or miss which (if any) types of government-backed loans a private lender might offer.

A government-backed loan works differently than a conventional loan. To start, conventional loans don’t have any government backing and therefore have stricter eligibility requirements. Typically, government-backed loans also have different mortgage insurance requirements than conventional loans and may charge more upfront fees.

Borrowers who choose a government-backed loan also have to meet different eligibility requirements than borrowers who choose a conventional loan. For example, only members of the military or select family members can qualify for a VA loan.

Different Types of Government-Backed Mortgages

There are three different types of government-backed mortgages: FHA, VA, and USDA loans. Each type of mortgage is designed to meet the unique needs of different borrowers. Some consumers may qualify for all three loan types or they may meet the requirements and qualify for just one type of mortgage-backed loan. In some cases, a borrower may not qualify for any of these loans.

•   FHA loans This loan type is backed by the Federal Housing Administration and it tends to be much easier to qualify for than USDA and VA loans. FHA loans are popular with first-time homebuyers. Having a credit score of at least 580 is a must and a down payment of 3.5% is necessary. Those with a credit score in the 500 to 579 range can still qualify, but only if they make at least a 10% down payment. The main disadvantage of FHA loans is they require mortgage insurance initially. If the borrower makes a downpayment of 10% or more, after 11 years the lender can remove the mortgage insurance requirement, but many borrowers need to refinance to escape this insurance.

•   USDA loans Low- or moderate-income borrowers looking to buy a home in a rural area or select suburban areas may qualify for the USDA’s Rural Development Guaranteed Housing Loan Program. There are a few different types of USDA loans and which one a borrower can qualify for depends on their credit score and income. There are no down payment requirements with USDA loans, but there are mortgage insurance requirements. There is no way to remove mortgage insurance from the loan, however the insurance payments are typically lower than those for conventional or FHA loans.

•   VA loans VA loans are only available to active-duty service members, veterans, reservists, National Guard members, and certain surviving spouses. There are no credit score requirements for VA loans or down payment requirements, although some lenders may have their own credit score requirements. There are no mortgage insurance requirements for VA loans, but there are some extra closing costs that can equate to 1.4% to 3.6% of the loan amount.

Pros and Cons of Government-Backed Mortgages

There are some unique advantages and disadvantages associated with government-backed mortgages:

Pros

•   Can be easier to qualify for than conventional loans

•   Lower down payment requirements (or no down payment at all)

•   Lower credit score requirement (or no requirement at all)

•   Potentially lower interest rates

Cons

•   VA and USDA loans can be hard to qualify for

•   You may need to pay mortgage insurance for the life of the loan

•   Not all lenders offer government-backed mortgages

Examples of Government-Backed Mortgages

There are three types of government-backed mortgage. They are USDA loans, VA loans, and FHA loans. Here is how a USDA loan might work: Let’s say you are home-shopping in an area with a population under 20,000. If you have an average or only slightly above-average salary for the area and a credit score of 640 or higher, you might qualify for a USDA loan. (So, for example, if the median annual income in the area is $62,000, you could qualify with a salary of $71,300 or less.) If you borrowed $100,000, you would have a $1,000 mortgage insurance cost upfront, and you would pay about $29 per month for mortgage insurance after that.

If your military service history makes you eligible for a VA loan, you would likely need a credit score of at least 580 to go with a VA loan. You wouldn’t need a down payment or mortgage insurance, but you would pay an upfront funding fee of between 0.5% and 3.6% of the loan amount unless exempt. Your purchase would need to be a primary home, but unlike with the VA loan, there are no restrictions on where that home could be located or what your annual income might be.
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Is a Government-Backed Mortgage Worth It?

Whether or not a government-backed mortgage is worth it depends entirely on the borrower’s other home loan options. It’s generally a good idea to shop around with different lenders for the best possible deal. Spend some time comparing potential interest rates, fees, and mortgage insurance requirements to see which loan will cost the most in the long run. First-time homebuyers often find government-backed mortgages especially attractive, in part because it can be difficult to come up with a down payment for a first home.

The Takeaway

Government-backed mortgages can be a great option for borrowers, especially those who don’t qualify for a conventional mortgage. While these government-backed mortgage loans can be hard to qualify for if the borrower doesn’t meet unique requirements (like being a military member or buying a home in a rural area), they can have more relaxed credit score and down payment requirements than those of conventional mortgages.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.

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FAQ

What are government-backed mortgages?

Government-backed mortgages are mortgage loans insured by a select federal government agency. There are USDA, FHA, and VA loans available to eligible borrowers. Because these loans are insured by the federal government, the private lenders who issue them take on much less risk and can work with borrowers who wouldn’t traditionally qualify for a home loan.

What are the benefits of a government-backed mortgage?

Often, government-backed mortgages are much easier to qualify for than conventional mortgages. They typically have lower credit scores and downpayment requirements. Because these loans are insured by the federal government, lenders can work with “riskier” borrowers to whom they may not normally offer a conventional home loan.

What are the three types of government-backed loans?

The three main types of government-backed loans are FHA, VA, and USDA loans. The Federal Housing Administration offers FHA loans, the U.S. Department of Agriculture backs USDA loans, and the Department of Veterans Affairs is responsible for VA loans.

Photo credit: iStock/Prostock-Studio

*SoFi requires PMI for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOHL0323018

Source: sofi.com

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Carrying student debt, whether for themselves or someone else, limits potential home buyers’ budgets by $92,440, leaving fewer homes on the market they can afford.

The average monthly student debt payment for renters who plan to buy a home in the next year is $388, according to the latest Housing Aspirations Report from Zillow. The maximum priced home a buyer with student debt could afford is $269,400, if they spend no more than 30 percent of their income on combined housing and student debt. At this price point, they could buy 52.3 percent of homes currently listed for sale.

For a buyer with no student debt seeking to spend the same share of income, the buying limit would increase to $361,800, and they could afford to buy 66.4 percent of available homes nationwide.

Student debt reached record levels this year, with the total amount at $1.56 trillion in the third quarter of 2018. Paying off student loans also makes it harder to set aside money for a down payment, which is one of the top barriers to homeownership. And saving for that down payment takes longer than it did for previous generations.

“Higher education pays off when it comes to lifetime earnings and the long-term odds of homeownership, but carrying any kind of debt limits how much home buyers can afford. For today’s generation of young home buyers, who came of age in a period of rapidly rising education costs, student debt payments can delay the pace of down payment savings and put a dent in their max price point once they do decide to buy,” said Zillow Senior Economist Aaron Terrazas. “With for-sale supply still tightest for the most affordable homes but increasingly available at higher prices, even a small reduction in a buyer’s target price point can result in substantially fewer options.”

Nationwide, about one third (33.9 percent) of renters who are planning to buy a home in the next year have some form of student debt, whether it is for themselves or someone else.

Student debt plays the biggest role in housing affordability in Las Vegas, where buyers with no student debt can afford a much larger share of the homes for sale than those with student debt (57 percent versus 29.3 percent, respectively).

It makes the smallest difference in San Jose, California, where buyers with student debt can afford 11.7 percent of homes, compared with the 18.3 percent of homes that shoppers free from student debt can buy.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
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Source: realtybiznews.com

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AG Mortgage Investment Trust, Inc. entered into a definitive agreement Tuesday to merge with Western Asset Mortgage Capital Corp., beating its competitor Terra Property Trust, Inc.

AG Mortgage, a pure-play residential mortgage REIT controlled by Angelo, Gordon & Co. and owner of mortgage lender ARC Home, made a stock-and-cash offer for its peer Western Asset, managed by Franklin Resources, Inc. As a result, Western Asset terminated its previously-announced acquisition agreement with Terra Property. 

The AG Mortgage deal includes the payment of $10.11 per Western Asset common share and $1.12 in cash per share, representing a transaction value of $11.23 per share, a 34% premium on Western Asset’s closing stock price on the NYSE on July 12, 2023.

“Combining these highly complementary portfolios will help scale our platform, generate greater operational efficiencies, cost synergies, and accretive earnings growth, and benefit all stockholders,” T.J. Durkin, president and CEO of AG Mortgage, said in a statement. 

Last year, Western Asset, a non-qualified-mortgage player, announced it was exploring a potential company sale or merger after posting a $22.4 million net loss for the second quarter of 2022.

The dispute between AG Mortgage and Terra Property began two months ago. 

On June 28, Terra Property, managed by Mavik Capital Management, and Western Asset announced that they entered into a definitive agreement to merge in a book-for-book deal. The transaction valued Western Asset at $17.30 per share, but the REIT’s stocks traded down after the deal became public. Investors were skeptical about Terra Property’s share value since it’s a non-traded REIT. 

On July 13, AG made its first offer for Western Asset at $9.88 per share, including $0.98 in cash. The bid included an implied value of $8.90 per common share ($54.5 million in total) and $0.98 per share in cash to shareholders ($6 million in total). AG Mortgage waived $2.4 million in management fees in the first year after closing.

Terra Property then enhanced its proposal, offering an implied share price of $15.96 per share, including $1.43 per share and $8.75 million in cash, but Western Asset declined. 

Vik Uppal, chairman & CEO of Terra Property and Mavik Capital Management, expressed disappointment with the response to its proposal that he felt demonstrated “superior value.” “

“[Western Asset] requested additional changes that we were unwilling to make because they would not have been in stockholders’ best interests, ” Uppal said in a statement.  

Bonnie Wongtrakool, Western Asset CEO, said the merger with AG Mortgage delivers immediate cash value to Western Asset  stockholders and will let them continue to participate in the upside of the combined company.  

Source: housingwire.com