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Refinancing a VA Home Loan

If you are a veteran with a current VA-backed home loan, you may be eligible for refinancing through the IRRRL program. IRRRL is an acronym for Interest Rate Reduction Refinance Loan. To refinance with this program, also called the VA Streamline, the loan must provide a net tangible benefit (NTB) which would be in the financial interest of the Veteran.

Obtaining a lower interest rate is usually the reason behind refinancing but there needs to be enough difference in the current and the new mortgage to justify the expenses incurred. Significantly lower payments or a shorter term are examples of acceptable benefit.

What You Need to Refinance

The Veteran must currently have a VA-backed home loan to refinance using this program. The Veteran does not have to currently live in the home as long as it can be certified that he or she did at one time.

In many cases, a property appraisal is not necessary. Additionally, fewer verifications are required. However, you will need a minimum 640 credit score. The borrower also must be current on their payments with no 30-day late payments in the previous 12-months. You must also have a two-year employment history.

The IRRRL does have some expenses associated with it. However, they can be rolled into the loan balance. The VA funding fee, required on new VA loans for purchases or refinances is lower on the IRRRL at 0.5%. Disabled Veterans and qualifying surviving spouses refinancing under this program are exempt from the VA funding fee.

Cash-Out Refinancing Does Not Qualify

This program is not available for a cash-out refinance. There is a $6,000 exception for additional funds to pay energy improvements completed 90-days prior to closing. Your lender can provide more information for you.

If you are a Veteran and considering a refinance, ask your mortgage professional about this program. Do you need help with refinancing a VA Home Loan? Give me a call at (510) 244-0081 or send an email message to rdwilson@soundnvest.com.

UNDERSTANDING PRICE TO INTEREST RATIO

Pricing your home above market value limits the number of potential buyers who will look at the property. Conversely, pricing below market value can increase the number of potential buyers who know about your property.

Understanding the price to interest ratio is crucial to optimizing the time your property spends listed before it is sold. Price too high and you may not get attract enough people. You won’t get a realistic idea of the available pool of buyers. Pricing below market value helps draw out perspective buyers. You can find people who were unaware of the significant value they can get by spending just a little more. But pricing too low may also undervalue your property.

YOU MAY NEED HELP

Of course all markets are different. And current local events also impact the ratio of interest to price. The situation in your neighborhood may dictate a specific pricing strategy. High demand and a low number of available properties for sale may increase the ratio of interest towards property priced above market value.

On the other hand, your personal circumstances may make it beneficial to price below market value. The increased number of potential buyers you get from pricing lower usually translates to a quicker time to sale. Sometimes it results in more offers being made and more competition between buyers. A professional realtor will have more information on current trends for your property. Tapping a professional for assistance in pricing often results in getting a better sale price, or shorter time to sell.

All of this revolves around your property’s market value. Market Value itself is a moving target affected by a number of variables. Click here to view an article from Investopedia on how Market Value determination.

Enlist Sound Investments, Inc. as your real estate agency, we will explain pricing options and the possible alternatives available. We will explain how the price to interest ratio affects selling in you area. We’ll also suggest which options are the most likely to meet your selling goals. CONTACT US now.

WHY CHANGE NAMES ON A LOAN?

There are some valid reasons why names are added or removed from an existing loan. When couples divorce, the spouse keeping the home usually will want to remove the other spouse from the loan. They often will refinance it to remove the other spouse from the loan. Also common, first-time buyers may not have enough income to qualify for a loan. They may then ask a parent to co-sign and must therefore add their name to the mortgage.

Another situation that requires removing or adding a person to a loan is to qualify for a better interest rate. The difference between a minimally acceptable credit score and a “good” credit score could result in as much as a 0.5% higher rate for the term of the mortgage.

IMPACT OF ADDING OR REMOVING A NAME

Consider a couple that is buying a home on a conventional loan. They have individual credit scores of 760 and 670. The underwriters will price the loan based on the lower of the two scores. A half percent interest on a $400,000 30-year mortgage could have close to $110 a month difference.

A possible solution to this dilemma could be available. Assume the borrower with the higher credit score has enough income to qualify for the mortgage separately. That person would be eligible for the lower rate. The property could still be titled in both names. In this case, the other person whose name is also on the title will be liable for the mortgage should the named borrower default on the loan.

In another situation, a couple has enough income to qualify for a mortgage. However, because one of the parties has a lower credit score, it will be priced higher. The borrower can have a parent or relative added to the mortgage as a non-occupying borrower to help with the credit score. Interest rates are determined on the lowest middle of three scores for the borrowers applying for the loan. Assuming the parent’s score was higher than the lower score of the couple, it could improve the rate applied to the mortgage loan.

BEFORE YOU ACT, CONSULT A PROFESSIONAL

The advice of a trusted mortgage professional is extremely valuable. They can offer alternatives to situations that confront you. This could be worth tens of thousands of dollars over the life of the mortgage. In some cases, their advice may be the difference in being approved at all.

Sound Investments can support your needs to help with your transaction. CLICK HERE to contact us with your questions.

Is a Home Warranty Necessary in a Sellers’ Market?

Some people consider incentives during a Sellers’ Market unnecessary. But offering a home warranty does have some significant benefits. The seller receives some coverage while the property is on the market and under contract. This usually covers major appliances or home systems. Want to know more about home warranties during the sales process? CLICK HERE for a discussion about home warranties during the sales process.

A home warranty alsoprovides an added level of “peace of mind” for a buyer. It increases the comfort level for the buyer because they have protection from unexpected “out-of-pocket” expenses. Furthermore, the buyer may be relieved that they will have access to a range of qualified repair vendors with a single call to the warranty company. This may help expedite the transaction.

And even when the property doesn’t sell more rapidly, a warranty can reduce negotiations and the need for multiple inspections. Warranty protection is like a vote of confidence for the property.

Additional Benefits of a Home Warranty During the Sales Process

Should there be any issues, the warranty company sends out a professional to address the situation. This relieves the seller from finding a service provider.

Having a “disinterested” third party handling the problem helps remove suspicion from buyers that the cheapest solution was used for any repairs.

You can set it up so any premiums come from the seller’s proceeds at closing. This negates any “out-of-pocket” expenses during listing and closing.

As you can see, having a home warranty in a sellers’ market has benefits for both buyer AND seller. Your real estate professional can recommend and arrange a home warranty provider for you.

What Would a Pro Do?

A well-known professional home stager, recently, decided to sell her own 4,000+ square foot home. It was certainly well maintained and by most standards, could have gone on the market immediately. However, she still went through a full staging effort before she listed the home.

Spending Money to Make Money

The work included painting inside and out especially, changing the kitchen cabinets from gray to white. The carpet was replaced along with a few dated light fixtures. The fence was re-stained and added minor landscaping to make it look fresh and inviting. They removed personal items from the home that might be distracting. They replaced some furniture that was too large and might have limited a buyer’s imagination.

The home looked, smelled, and was clean. It had great drive-up appeal. Each room looked like it belonged in a magazine. The professional photos of the rooms let potential buyers see the home before they visited it in person. When the home did come on the market, it sold in five days, above list price, with multiple offers, and for a considerably higher sales price than previous comparable sales had indicated it would.

The Critical Take-Away

The lesson to be learned is that even if a home is in good condition, do what this professional home stager did. Take the time to go through the steps to make it look its best. This will generate the kind of results that every seller hopes for when selling their home. Get the highest possible price, in the shortest time with the least amount of inconvenience.

Understanding the relationship between Equity, Sale Price and the Agent you select is critical to your success when selling your home. A Seller’s equity in their home is the difference between what the home is worth and what they owe. At any point in time, it is an estimation because value is a very subjective term. If you think your home is worth more than a buyer will pay for it, your estimated equity is too high. If a buyer is willing to pay more than the seller believes the home is worth, the estimated equity is too low.

Sale Price Validates Equity

A true determination of equity becomes more objective when the home is sold. The value is solidified by the sales price. That’s because the value is determined by negotiations between the seller and buyer. This eliminates speculation and conjecture because money and title are being exchanged.

Gross vs. Net Equity

The equity being defined above is more accurately referred to as Gross Equity. Take the ordinary and necessary expenses connected with the sale of a property. Deduct those from the sales price. Also deduct any mortgage balance and/or liens you have. The resulting amount is referred to as Net Equity.

Maximizing Sales Price and Net Equity

Like in business, the goal is to maximize revenue and minimize expenses, the same is true in selling a home. The goal is to achieve the highest possible sales price while keeping the expenses as low as possible.

Setting the price of a home is ultimately, the seller’s decision. Sales price is critical because it impacts the amount of proceeds the seller realizes. Moreover, it can affect the length of time it takes to sell. It also impacts how much activity it will generate from buyers, and eventually, whether it sells at all.

The cost of a home is what the seller paid for it and the improvements made. Cost has no relationship to value. Market value is the most probable price willing and informed buyers and sellers can agree upon in a competitive market in a reasonable period.

Price the home too low and the seller has unrealized proceeds. Price it too high and it eliminates interested buyers.

Sale Preparation Costs Important to Maximizing Net Equity

Preparing the home to go on the market has expenses involved. Things like painting the front door or adding landscaping to increase the initial appeal is an investment to attract the buyer’s attention. While it may not add value to the home, it is an important element.
Decluttering the home takes time and may even involve temporarily renting a storage facility for things that may make your home feel smaller or detract from making your home as visually appealing as possible.

There are obviously selling expenses involved in the sale of a home which can vary based on the price of the home, what is customary in your area and negotiations in the sales contract. The right real estate agent can advise you on these so that you don’t pay anything out of the ordinary and can provide you an estimate of what is to be expected.

Real Estate Agent’s Role

Your real estate professional can provide you the information necessary to decide on price. But you might want to price your home differently than what by the market indicates. The market determines the value, and the seller sets the price. But a good agent can help you know when to set the initial price higher or lower to get the best return. Select an agent based on trust, reputation, integrity, and the ability to execute a successful marketing plan.

In today’s market, on average, homes, are selling in 17 days and sellers are seeing an average of five offers. It is not uncommon for homes to sell for more than the list price. This assumes these homes are not priced dramatically over the market initially.

Call us at (510)-244-0081 or email us at riwilson@soundnvest.com to discuss professional pricing strategy. For example, sometimes “coming soon” promotion to encourage increased buyer interest and possibly, encourage multiple offers.

Moving to a Larger Home

An interesting homeownership cycle begins with a starter home and progresses to larger and smaller homes throughout a person’s lifetime. Within a few years after purchasing their initial home, they might move up to a little larger house. They could simply want a larger home and can afford it, or their increased family size may be motivating the move.

While the children are small, a homeowner can probably get by with less space. As the children grow or with the addition with more children, the need for more room becomes more pressing. Depending on the size of the family, this will last some time. But the cycle goes the other way too. As children leave for college or find their own living space, parents may find that they no longer need the larger home.

Moving to a Smaller Home

In the interest of saving money or possibly convenience, owners may migrate from a larger home to a smaller home. This occurs before they consider a move to an assisted living facility or possibly, a nursing home. Some homeowners even retro-fit a smaller home with equipment and safety devices that will allow them to continue to live independently, Another alternative, many homeowners are electing is to move in with their children or other family members.

How Many Times We Move In Our Lifetime

According to the US Census Bureau’s American Community Survey, a person in the United States can expect to move 11.7 times in their lifetime. When that person is 18 years old, they can expect to move another 9.1 times. By age 45, they can expect another 2.7 moves in their lifetime.

How the Homeownership Cycle Affects Available Home Inventory

One of the suspected reasons affecting the low housing inventory in America now is due to a change in the homeownership cycle. Homeowners who would usually move at this time don’t because of current constrained inventories. They are afraid their home will sell and they may not be able to replace it with what they want. Builders have not kept up with the demand in the past twenty years. This has been a major contributor to the low inventory that housing is currently experiencing. Estimates show that it will take two million new homes a year for ten years to meet current levels of demand.

There are also other factors involved like the fact that since 2007, the owner’s tenure in their home has more than doubled from five years to 10.6 years. People are staying in their homes longer which means the homes are not coming on the market for sale.
Another consideration is that sellers with extremely low mortgage rates are reluctant to buy another house which would have to be financed at a higher rate than they are currently paying.

Get Help When You Make Your Move

Sound Investments, Inc. can provide important information and has the experience essential to making a smooth move. We can help you – regardless of where you are in the homeownership cycle. Having the facts reduces the risk of unexpected outcomes. Click here to contact us now if you have questions about selling your home.

Pause Your Mortgage Payments

In 2021, some homeowners who can’t afford to make their mortgage payments could apply to have their mortgage servicer or lender to pause or reduce their payments for a limited period. We call this Mortgage Forbearance. While it does relieve the immediate financial pressure, it is a temporary remedy.

About 2/3 of the people who entered forbearance during the pandemic have exited the program. There are only a little over two million homeowners remaining in forbearance.

Act Quickly

It is important for owners who can’t make the payments on their mortgage to request a forbearance as soon as possible. Don’t stop making mortgage payments without a forbearance agreement. If you do, the servicer will report this information to the credit reporting companies. This can have a lasting negative impact on your credit history. Without going through that process, the lender assumes you are delinquent, and protections afforded under forbearance may not apply.

Temporary “Time Out”

Forbearance does not forgive the money that is owed. The borrower must repay any missed or reduced payments in the future. If forbearance was issued under the CARES Act, the lender cannot require payment in full at the end of the forbearance. According to Fannie Mae, you are not required to repay missed payments all at once following forbearance. But you have that option if you wish.

The forbearance agreement issued by the lender allows a borrower to avoid foreclosure for a period of time. Hopefully, the borrower’s financial situation improves. If the borrower’s hardship still exists at the end of the period, the lender may be able to extend the time frame.

Forbearance Vary based on Mortgage Type

The provisions of the forbearance vary based on the type of mortgage. The lender can tell you the specific provisions and options.

Fannie Mae and Freddie Mac require lenders to suspend “past due” reports to credit bureaus for borrowers in a forbearance plan. This means no penalties or late fees will be assessed. Furthermore, they mandate that the lender work with the borrower. They can create a permanent plan to help maintain or reduce monthly payment amounts or initiate a loan modification.”

At the end of the forbearance, there can be several options available to repay the suspended or paused amounts. One option is to resume your normal payment and establish a repayment plan for the missed payments. Perhaps you can start making payment but can’t afford additional payments. The missed payments may be added to the end of the loan. Other alternatives are a secondary lien that is due and payable when you refinance, sell or terminate your mortgage.

Loan Modifications

In cases where the borrower can’t afford to make the regular payments, an alternative is a loan modification. This could be with lower payments, but the term would be extended. While the CARES Act does not require borrowers at the end of the forbearance period to repay skipped payments in a lump sum, if a borrower is able, they may do so.

The purpose of this is to re-establish a payment plan that the borrower can repay the money owed. To be eligible for a loan modification, borrowers must show they cannot make the current mortgage payments because of financial hardship while demonstrating they can meet their obligations with the proposed restructured terms.

Under the CARES Act, borrowers with a GSE-backed mortgage get an additional 180-day extension. This would make it a total of 360 days. It is necessary to contact the servicer/lender for the extension.

There can be both legal and tax issues concerning forbearance. So we recommend that you seek professional advice. A list of U.S. Department of Housing and Urban Development approved Counseling Agencies are available.

Getting Professional Help

Even in the current, low inventory housing market, sellers are resisting the urge to sell it themselves and still seeking the help of a real estate professional. It may be more important than ever to choose the right agent for today’s market. There is just too much at stake to risk going it alone.

The number of people attempting to sell on their own has been in steady decline since 2003 from 14% to 8% in the latest Profile of Home Buyers and Sellers produced by the National Association of REALTORS®.

The most frequently mentioned difficulties that owners who decided to sell it without the benefit of an agent included preparing the home for sale, understanding, and performing the paperwork, getting the price right and selling it within the length of time planned. Another commonly cited challenge was having enough time to devote to all aspects of the sale.

Choosing the Right Agent

The other nine out of ten homeowners who are selling are many times faced with the question: “How do I determine which agent to use?” In some situations, owners know more than one agent and the dilemma becomes picking the right person for the job.

To get the answers that will lead to selecting the right agent, an owner needs to ask the right questions. Open-ended questions will give you a more descriptive answer that can bring clarity to your decision. Questions that begin with who, what, when, where, why and how will elicit a much more robust answer.

The following suggestions should be helpful for homeowners considering selling:

• How long have you been selling homes and is this your full-time job?
• What designations or other credentials do you have?
• How many homes did you and your company sell last year?
• What is your average market time compared to MLS and your top competitors?
• What is your sales price to list price ratio?
• When will you report to me on the progress of my transaction?
• Who can you recommend for service providers like mortgage, inspections, repairs, and maintenance?
• Why do you want to work with me?
• Where are the opportunities to expose my home to the largest market?
• What is your marketing plan for my home?

The Impact of Today’s Market

In today’s market, homes, on average, are selling in 17 days and sellers are seeing an average of five offers. It is not uncommon for homes to sell for more than the list price, assuming they are not priced dramatically over the market in the first place.

Specific to today’s market, additional questions to help you identify the best agent for the job could include:

• With the shortage of homes on the market, is it necessary to update in advance?
• In this competitive market, is staging the home important?
• What are your thoughts on professional photography and video?
• Is there a way to stimulate competition among to buyers?
• Explain to me range of pricing and how it applies to home search on the Internet.
• Can you profile the most likely buyer for my property?

Don’t think of these things as being an interrogation but more like an interview. That is exactly what it is; you are trying to find out how this prospective agent is going to handle some of the intricacies in the selling process that can affect the successful sale of your home.

After evaluating the answers you receive, you will either move forward to have this agent represent you or you move in a different direction. A third option, from our perspective, that occasionally develops is that we determine that we may not be able to manage the outcome that you are expecting.

Selecting the right agent to represent you, even in a Seller’s market, is an important decision and you need to have all the help you can get making the right one. We’re happy to provide the answers you want and need and will disqualify ourselves if we believe that it is not in your best interest. Our reputation depends on satisfactory results from every transaction we handle.

Download our Sellers Guide.

Pitfalls of Rejecting a Buyer’s Offer

Ask any real estate agent and they will tell you a similar sad story. The seller, whose home just hit the market, received an offer which was less than the list price, but felt secure their home would sell quickly and countered for more. For whatever reason, the buyer did not continue to negotiate and moved on.

After a week or two and no other offers, the seller instructed the listing agent to contact the buyer’s agent and say that the seller had reconsidered and would now accept their original offer. However, the buyer has already decided to look elsewhere. They no longer have their initial enthusiasm.

This is a story that frequently happens across America, in all price ranges. The tough lesson is that sometimes, the first offer is the best. Consider the rationale, a home is fresh on the market and buyers, especially the ones who have lost bids on other homes, act quickly to hopefully avoid some of the competition.

The original offer becomes void as soon as the seller doesn’t accept it. When the seller makes the buyer a counteroffer; the buyer can accept it, make a counteroffer, or walk away. Even if afterwards, the seller reconsiders and says that he will accept the original terms, the buyer is under no obligation to accept it.

The Value in Accepting an Offer

Alternatively, if the seller accepts the buyer’s original offer, the contract is created based on the terms within. The sale goes through once any contingencies such as financing and/or inspections have been satisfied.

Think of an example where a seller countered for an additional $5,000. Accepting the original offer means the home already sold. In essence, he bought the home back from himself in hopes of making an extra $5,000.

To put it in perspective, on a $350,000 home, the additional $5,000 would have been 1.4% of the value. As an investor, the risk involved in having to continue to own the property may not be justified by such a low rate of return. The value of the peace of mind and convenience of a completed sale often far exceeds the $5,000.

How Should a Seller React to an Offer?

Seller have three options:

• Accept the offer and the sale goes through once anycontingencies are met.
• Reject the buyer’s offer outright and wait for an acceptable offer.
• Counteroffer the buyer with terms that are agreeable to the seller.

Many agents feel that if the offer is not acceptable, the counteroffer alternative presents a greater likelihood of negotiating to an acceptable agreement between the parties. Every situation is unique, but compromise has brought buyers and sellers to agreement in many situations.

The Advantage of Objectivity

One of the valuable advantages sellers have is their agent’s experience and lack of emotional connection to the property. Your agent can provide objectivity and alternatives for you to consider in making you decisions. Contact Sound Investments today for help to negotiate effectively