Open Doors, Unlock Opportunities: VA Home Loans
Program History
The VA program was created with the signing of the GI Bill by President Franklin D. Roosevelt on June 22, 1944. This law provided veterans with federally guaranteed home loans with no down payment.
This benefit was intended to stimulate jobs in the housing industry, as well as providing assistance for veterans and their families. The maximum loan amount at the time was $2,000, 50% of that guaranteed by the government.
VA Loans — Veteran’s Best Friend
- No down payment required up to county limits: http://www.loanlimits.org/va/
- No monthly Mortgage Insurance – helps to qualify for larger loan
- Seller contributions allowed up to 4% of value…above and beyond payment of standard closing costs
- Fees that can be paid by the veteran are limited
- 100% gift funds allowed
- No minimum reserve requirements (conforming limits)
- Make sense underwriting
- Veteran can use entitlement multiple times
- Fixed rate assumable loan (as approved by VA/servicer)
- Assistance/counseling to veterans in default due to temporary financial difficulty
- Vets qualify for home loan benefits after 2 years of service (less if served prior to 1980), or 90 days active duty during the Persian Gulf era; Reservists and National Guard eligible after 6 years (or 90 days active duty in Gulf)
- Unmarried surviving spouse of a veteran who died while in service or from a service connected disability may use benefits
To Recap...
- No Monthly Mortgage Insurance
- 100% LTV Purchase or Refinance
VA Financing is on the rise, but still under-utilized.
- Only an estimated 5% of U.S. Veterans and qualified military
personnel have used their home loan benefits.
What does this mean to you? Home financing made simple!
VA Funding Fee
- Although there is no monthly mortgage insurance on a VA loan, the veteran does have a onetime Funding Fee. On loans below county limit, this can be financed into the loan over and above the appraised value/sales price, or can be paid in cash (or a combination of both).
- The Funding Fee may be waived in the following instances (as evidenced on the “Certificate of Eligibility”):
- Veterans receiving VA compensation for service-connected disabilities
- Vets who would be entitled to receive compensation if not receiving military retirement pay
- Loans for surviving spouses of vets who died in service or from service-connected disabilities
- Funding Fee is calculated as a percentage of the loan amount. For example, on a $400,000 loan with a 2.15% VAFF = $8,600. Total loan amount = $408,600
TIP: Ask the Vet to put down 5% to reduce the Funding Fee!
Down Payments & Loan Amounts
Loan Programs: 30, 25 & 20 Yr. Fixed (PERL – conforming); High Bal, 15 Yr. & 5/1
The VA will guarantee 25% of the loan up to the county limit. Because of this, there is no down payment at or below the county limit: http://www.loanlimits.org/va/
Above county limits, the borrower is required to make a minimal down payment in the amount of 25% of the difference between the sales price and county limit (see example below).
Example
$458,850 - VA Loan Limit for Chesapeake County
$550,000 - Sales Price
$550,000 Sales Price - $458,850 County Limit = $91,150 difference
$91,150 difference x 25% required down = $22,787 down payment
$550,000 Sales Price - $22,787 down = $527,213 max VA loan (a 95.8% LTV in this case!)Hint: If the borrower has 5% to put down, the Funding Fee will be reduced to 1.5%!
The Advantage - Selling the Seller
Overcome the seller’s objections about dealing with a VA buyer! With PERL Residential Lending, the seller does not need to pay all the “non-allowable” fees!
- VA allows the non-allowable fees to be paid by the borrower up to 1% if an origination fee is not charged.
- These fees include lender fees (processing, underwriting etc.), escrow fee, termite inspection (depending on state), notary fee, messenger fee and any other non-allowable fee.
- It generally costs the borrower less than the one percent so all parties benefit.
LTV/Credit
NOTE: The LTV/CLTV is exclusive of Financed VA Guaranty Funding Fees (Except for IRRRL)
1Minimum credit score for manufactured housing is 620
Underwriting — IRRRLs
A VA Interest Rate Reduction Refinance Loan (IRRRL) is a refi of an existing VA loan only. Rate and P&I must both be reduced, unless the existing loan is an ARM or the term is decreasing.
The new loan amount may include:
- Unpaid principal balance
- Prepaid expenses
- VA Funding Fee of .50%
- Allowable closing costs
- Max. 2 discount points
Perl IRRRL Guidelines
- Max 135% LTV w/ 620 credit; Max 100% LTV w/ 600 credit (based on total loan amount
- AVM from DataVerify determines LTV; if AVM not adequate, order conventional appraisal
- NEVER order a VA appraisal on a streamline!
- DTI is not calculated – no AUS
- The P&I on the IRRRL must be less than the loan being refinanced (unless going from fixed to ARM or reducing term)
- 0x30x12 on all mortgages
- Max $500 incidental cash back
Underwriting Basics - Credit
Bankruptcy:
- Chapter 7 – generally 2+ years is acceptable; possibly 1-2 years with extenuating circumstances
- Chapter 13 – all payments satisfied OK; possibly OK after 12 months of satisfactory payments with court approval
- VA Jumbos – no BK within past 7 years
Foreclosures:
- Follow same rules as Chapter 7 BK (VA Jumbos – no history of foreclosure within past 7 years)
- Ensure that borrower’s entitlement has been restored (or determine if there’s bonus entitlement)
- Develop complete information on the facts and circumstances of the foreclosure
Other Adverse Credit Items:
- Collections - Aggregate balance of $1,000 or greater must be paid (excluding medical)
- Judgments – Must be paid in full at or prior to closing
Underwriting Basics - Property
Conversion of primary Residence to Rental
- If the veteran is converting a current principal residence to an investment property:
- Evidences of cash reserves totaling 3 months PITI for each rental property must be provided.
- The borrower may qualify using 75% of the gross rental income to offset the mortgage payment.
- Borrower may use entitlement multiple times – Veteran must occupy the property as his/her primary residence
when purchased. - Income from existing rental properties claimed on the borrower’s Schedule E may be used. With 2 years, positive
net rents may be used as income. Less than 2 years, can be used to offset mortgage. - Unlike FHA, the VA has no “flip” rule or restrictions. Sales price appreciation simply must make sense.
Underwriting Basics - Liabilities
Need a boost? VA Underwriting makes sense!
VA Recommended Compensating Factors include (but are not limited to):
- Excellent Credit History
- Conservative use of consumer credit
- Minimal consumer debt
- Long-term employment
- Significant liquid assets
- Sizeable down payment (purchases)
- Significant equity (refi’s)
- Little or no payment shock
- High residual income (more info on next slide)
- Low DTI
- Tax benefits for home ownership
Compensating factors can be used to justify expanded DTI or payment shock, but CANNOT be
used to offset unsatisfactory credit.
Underwriting — Residual Income
Residual income is the amount of net income remaining to cover family living expenses (food, health care, clothing, etc.). All household members are included in family size, with the exception of: a) a non-borrowing spouse who has a stable, reliable income sufficient to support expenses, or b) a child for whom sufficient foster care or child support payments are received regularly.
Appraisals & Collateral
- Appraisals are ordered through the Veteran’s Information Portal and assigned by the VA.
- The subject property must meet VA Minimum Property Requirements prior to loan funding. This will affect properties being sold “as is.” Repairs noted on the appraisal must inspect the repairs and issue a clear inspection report prior to funding.
- All VA Purchases requires a clear termite report, excluding condos on the 2nd story or higher.
- Any required repair items or deficiencies will be noted on the appraisal report.
Most VA appraisals do not require repair work!
What Else Do I Need To Know?
- Borrowers must occupy the property. No Investment or 2nd Home purchases allowed (IRRRL OK).
- VA borrowers may own other property, as long as the subject property will be owner occupied.
- Non-occupant co-borrowers are not permitted to help qualify.
- Non-traditional credit is allowed on a case by case basis.
- Condos must be on the VA approved condo list. There are no “spot approvals.”
- Termite report and clearance is required (except IRRRL’s) on existing properties in areas where the probability of infestation has been defined as “very heavy” or “moderate to heavy” by the IRC. Check with VA Regional Loan Center for final determination.
- Clear CAIVRS is required for all borrowers.
- VA is often confused as a “First Time Homebuyer” program, but this is not the case.
- This program is open to all Veterans, active duty military, qualified reservists/National Guard, and un-remarried surviving spouses of service-connected death.
Summary of VA Advantages
- No down payment required. See County List for limits.
- Maximum seller contributions 4%+
- 100% gift funds allowed
- No minimum reserve requirements
- Make sense underwriting
- Citizenship is not required
- Veteran can use entitlement many times
- Not limited to First Time Homebuyers
- Fixed rate assumable loan
- Reservists/National Guard qualify for VA benefits
- Manufactured homes OK
- Quick closings
- Underwritten at PERL
Why PERL?
Experienced Realtors and Veterans trust and choose PERL!
- Purchase and Refinance specialists in VA, FHA and Conventional loans.
- We understand the demands and pressures of a Realtor driven purchase market.
- We know the importance of closing on time to the buyer, seller, and Realtor.
- Experienced, quality Mortgage Loan Originators who provide individual service.
- Dedicated Government Lending department and senior management team with decades of experience.
Resources
- VA Loan Guaranty Homepage
- General Rules for Eligibility
- Lender’s Handbook
- 2016 County Limits
- Appraisal Fee Schedules
- VA Regional Loan Centers
- VA Condo Search
- VIP (Veterans Information Portal)
- VA Forms
- Veterans Association of Real Estate Professionals
Derek Parent Helping Homeowners Realize Their Dreams
Cementing his place as a seasoned mortgage professional, Derek Parent and The Parent Team of USA Mortgage is leaving a mark as one of the top mortgage origination teams in the country.
via High Rise Life Magazine - July/August 2018
Over the years, Derek Parent and his team have gained the trust of the community at large with experience working with an array of clients, including first-time homebuyers, high net-worth individuals, veterans, teachers, and medical workers.
One of Parent’s biggest priorities is staying on top of market trends to protect, service and educate his clients to the best of his ability. Derek Parent alongside his team of experts have set out a mission to help clients realize their dreams. In our interview, Parent discusses everything from getting the perfect loan, first time buyer home tips, purchasing and financing a home in 2018, getting approved for high-rise condominium with little as 5% down, why refinancing may be good option, and everything in between. Here is what he had to say.
Q: Can you tell us a little about yourself and The Parent Team of USA Mortgage?
The Parent Team is built around a couple of very basic principles, and they don’t have nearly as much to do with the actual work environment as they do the people. I truly believe that–like a home–if you implement great habits and amazing people in your everyday life, you will build a foundation that can withstand any storm or capacity. From day one, I’ve always attempted to surround myself with people who represent those qualities. Personally, I am a strong believer in elevation, and what I embrace most about the mortgage industry is that it allows me to grow–not only in my career, but also in my personal development. It’s enabled me to do what I love; it’s given me the opportunity to be a stepping stone–and sometimes, a guide–for those looking to achieve something.
When you pair that with over 20 years of industry experience, there is very little that seems daunting. I’ve seen all different types of markets and needs, and it’s allowed me to work with clients from every side of the spectrum. We work in an extremely dynamic industry, and I believe that my duty is to always keep an adaptive perspective, and it’s this same mindset that has been the foundation of how my team and I have been able to fulfill a desperate need for mortgage options in Las Vegas. Whether someone is planning to purchase a single-family home, condominium, primary residence or investment, these wins–the difficult ones–are the scores that count and setting ourselves apart in a world where most are intimidated is something in which I continue to pursue daily, understanding that it will give my clients more opportunity, less stress and most importantly, trust in their mortgage advisor to always have their backs.
Q: What are some of the types of programs you offer or specialize in?
Depending on the type of property, we offer several different options, including Jumbo, Conventional, FHA and VA throughout Nevada, California, Texas, and Florida. One specialty is being able to provide traditional financing for high-rise condominium projects in Las Vegas with as little as 5% down payment.
Q: As an expert high-rise lender, is it difficult to get approved for high-rise loan?
Not at all. It is simple. We generally can tell very quickly whether someone can qualify or not. We analyze a few things like the applicant’s credit and income and the property’s value to determine whether the loan is possible now or in the future.
Q: What are some great options available for buyers currently looking to buy a high-rise condominium?
We have expanded our options to provide financing on condominiums ranging from $70,000 to $3 million, and a down payment can be as little 5% down. We want to help everybody. Some of the condominiums that are listed include: Veer Towers, Turnberry Towers, Turnberry Place, One Las Vegas, Metropolis, The Ogden, Park Towers,
and more.
Q: What are some core values that The Parent Team carries?
All our decisions and choices are based on the foundation of integrity, honesty, compassion and always keeping the client’s best interest in mind. Our clients are far more than just clients; they are friends and taking care of them is our #1 priority.
Q: What are your thoughts on housing market and recent developments in Las Vegas? Do you think it is a good time to buy?
I’m a strong believer that NOW is always the best time to buy. Why wait? Tomorrow is never promised.
Q: Can you give us insight into current interest rates and market projection?
With being an active Sponsor of the Las Vegas Global Economic Alliance group, The Parent Team is always up to date with what’s going on in today’s market. As the housing market is steadily growing, so will the rates.
Q: Why do you think refinancing is a good option for some clients?
There are several reasons why refinancing is beneficial to clients. Some of the benefits are paying off credit cards, financing a business, covering college tuition, managing unexpected expenses, making improvements to your home or taking advantage of potential tax-deduction benefits from interest paid on the loan. Refinancing overall gives our clients an opportunity to put more cash into their pockets rather than leaving it tied to a piece of property.
Q: What are some tips you recommend for new home buyers when shopping for a loan?
My recommendation is to work with someone of a high-caliber professional who you trust. Becoming a homeowner is one of the biggest purchases in someone’s life, so it’s important to go through this process with someone you know has your back.
Q: What makes The Parent Team different compared to other lenders?
Our mission is to help our community achieve homeownership, helping the maximum number of people in our community. One of the reasons why we invested in creating opportunities for homeowners that can purchase in any price range is to be able to provide options for every type of homebuyer. This process of purchasing a home, refinancing, and dealing with money can be sensitive, so our mission is to make sure every single one of our clients experiences a smooth transaction and an uplifting process.
Derek J. Parent NMLS# 182283
Is it Better to Pay Off Your Mortgage or Invest?
When it comes down to it, this is not a simple or straightforward question.
There are so many variables that you really need to whip out a calculator, talk to your CPA, visit a financial planner and/or retirement specialist, and so on and so forth.
It also depends on your mortgage rate, your tax bracket, how much you owe on your mortgage, what type of mortgage you’ve got, the term, how long it will take to pay it off, etc.
Does your employer provide a 401k match? Is your money better off in another type of retirement account? Do you have other high-APR debt? How much do you need to set aside for a rainy day?
Mortgages have a lot of desirable qualities that make them the best debt to carry. For example, very few loans come with extremely low fixed interest rates that are tax deductible and amortized over a long period of time.
So if there was ever a loan to hold onto, a mortgage would be it, especially with rates where they’re at now.
If we assume inflation picks up in coming years, your existing mortgage becomes even more attractive to hang onto, as opposed to paying down, seeing that the debt will be paid back in cheaper dollars from the future.
If rates happen to go down, you have the option to refinance to a lower rate, which also provides flexibility. And if you invest money early on instead of paying down your mortgage, your gains can be exponentially better.
Finally, there’s also the emotional element. Some folks like the idea of being debt-free, for better or worse, financially. Not everyone likes to invest in complicated securities or even seemingly benign blue chip stocks, so their goal might be to eliminate the debt overhang as quickly as possible.
In either case, it’s always smart to set aside some readily accessible funds in the case of an emergency, or even to replace your roof or handle some other household repairs.
The key is really finding a balance. There’s no rule for how much you need to pay other than your payment due. You can make an extra payment here and there or look into biweekly mortgage payments, or just pay on schedule and spread your money around as needed/desired.
Here are some pros of both options:
Pros of Paying Off the Mortgage
- Pay less interest
- Own your home free and clear faster
- Get rid of mortgage insurance
- Gain more home equity
- If rates fall and you refinance, lower LTV = lower interest rate
- You can sell your home more easily
- Less risk of losing money in the stock market or elsewhere
- Less work
- No debt at retirement
- Peace of mind
Pros of Investing Instead
- Mortgage rates will never be this low again
- Long-term low fixed rate a great deal
- Mortgage interest deductible
- Money remains liquid
- Investment gains can exceed return on mortgage
- Investing early can make for greater long-term returns
- Ability to diversify your investments
- Contributions to retirement account may be more beneficial
- Inflation makes mortgage balance cheaper in the future
- Home could lose value
- Avoid throwing good money after bad if underwater on your mortgage
If you're interested in refinancing or applying for a new mortgage, contact my office at 702.331.8185.
What Credit Score Do You Need to Qualify for a Mortgage?
If you’re thinking about purchasing a new home or refinancing your existing mortgage, you should know that your credit score is hugely important.
Banks and mortgage lenders use your credit score(s) to evaluate your creditworthiness, which translates to a higher or lower mortgage interest rate, and even determines eligibility.
Which Credit Score Do Mortgage Lenders Use?
First and foremost, you might be wondering which credit score mortgage lenders use, seeing that there’s no sense focusing on something they won’t actually look at to determine your creditworthiness.
The short answer is FICO scores, which are the industry standard and relied upon by just about everyone.
There are three FICO scores you need to be concerned with, including one from Equifax, one from Experian, and one from TransUnion, which are the three main credit bureaus.
Know Your Credit Scores Long Before Applying for a Mortgage
Before you actually head out to get a mortgage, it’s good practice to view your credit scores long before you apply. I’m talking several months in advance because any necessary credit score changes/improvements take time.
For example, any mistakes (or legitimate issues) holding your credit score down may take months to get cleared up. And you won’t want to leave anything to chance. Yes, the credit bureaus are bureaucratic, so nothing happens all that quickly.
Also, be sure to go with a service that allows you to see all 3 credit scores, as mortgage lenders typically pull a tri-merge credit report, which includes credit scores from all three bureaus.
The bureaus each report information a little differently, so knowing just one score won’t do you (or your lender) much good.
As far as lenders are concerned, it basically allows them to triple-check your credit before making the decision to hand over a large sum of money. They use the mid-score for pricing/qualification, so it’s imperative that all 3 credit scores are in tip-top shape.
For example, if your credit scores are 650, 680, and 720, a mortgage lender would use the 680 score, which is a decent but below-average credit score.
Lower Credit Score = Higher Mortgage Rate
Put simply, a lower credit score will lead to a higher mortgage rate, and vice versa. This all has to do with risk. The lower your credit score, the higher the chance you’ll default on your mortgage, at least that’s what the statistics say.
So if your credit score is too low, you probably won’t even get approved for a mortgage. Lenders simply won’t want your business. It’s just that risky.
Lately, banks and lenders have become even more stringent, requiring higher credit scores than they have in the past.
Credit Score Below 620 Considered Subprime
As far as conventional mortgage loans go, a credit score below 620 is typically considered subprime, meaning you’ll have a difficult time qualifying for a mortgage, and if you do, you’ll receive a subprime mortgage rate.
In general, you want a credit score above 720 to avoid any negative pricing adjustments, but a 760 credit score might be the new rule if you want the best possible terms and lowest rates. If you’ve got excellent credit, you can even get a reduced mortgage rate.
In summary, your credit score is probably the one thing you have complete control of, whereas things like job, income, and assets can be at the mercy of external forces. So do your best to strive for perfection in order to get the best deal on your mortgage.
Some Useful Credit Tips for Those Shopping for a Mortgage
- Credit scores are the single most important factor in determining your mortgage rate
- Aim for a 760+ credit score to get the best pricing and to avoid scrutiny
- Credit scores aren’t everything, what’s on your credit report matters as well!
- Know the contents of your credit report and what your scores are long before your lender does
- Any mistakes or missteps can be corrected, but take time, often several months!
- The FHA now requires a minimum credit score of 500, or 580 if you put less than 10% down
- Conventional loans generally require a minimum credit score of 620
- Credit scores below 620 are considered subprime and will be priced much higher
- Lenders pull all three of your credit scores and use the median score for qualification
- Low credit scores can also disqualify you for certain loan programs and/or limit your options
- Don’t mess with your credit before or during the loan application process!
Three Documents to Bring When Applying for a Conventional Loan
When you are planning to buy a home and need a mortgage, a conventional loan is one of the most common types of financing available. Make sure that you bring all of the necessary documentation when you apply for the loan.
Three Documents to Bring When Applying for a Conventional Loan
When you are considering the purchase of a home and are not paying cash for it, you will need a means of financing the purchase. Mortgage loans that are based on conventional loans in Las Vegas are a common way of financing the purchase of a house. When you head in to apply for the conventional loan, make sure that you bring these three pieces of documentation.
Proof of Income
You will need to bring proof of your income. This will include a pay stub and two of your most recent federal tax returns. If you work at more than one job, bring in a pay stub from each. If there is more than one adult applying for the loan, both people will need to bring these documents. These documents provide proof that your earnings will be enough to make the loan payments.
Social Security Card
Your social security number is used to run a credit check when you are applying for a mortgage backed by a conventional loan. A higher credit score means that you are a lower risk for defaulting. The higher your credit score, the lower the interest rate will be on your conventional loan.
Proof of Insurance
When you are applying for a conventional loan for the purchase of a home, the actual house is the collateral on the loan. In order to receive the mortgage, you are responsible for insuring the house. You will need to bring proof of homeowner's insurance from a legitimate insurance company. The proof will need to be on letterhead and contain the contact information of the agent offering the insurance policy. The insurance of the structure will ensure that the loan can be paid off in case of a catastrophic event such as a fire.
Looking for a seasoned mortgage professional?
Derek Parent and his team of professionals have the experience and passion you need to make purchasing your next home as stress-free as possible. We've had the opportunity to work with a wide diversity of clients, so we're ready for any situation!
What It Takes to Buy a Home
Understanding the many facets of buying a home allows you to avoid the mistakes commonly made by new homeowners.
Necessary Steps to Purchasing a Home
There are several options you can choose from when buying a new home. Along with your usual neighborhood house, condos and high rises can also be great options for your new home. Whatever your preference, purchasing a new home for you and your family may seem like a daunting process that's practically impossible to do right. It's certainly true that it's a lengthy process that can be tricky to fully comprehend. However, knowing more about the steps involved in this process and the order in which they occur will help dramatically with purchasing a new home.
Check Credit and Identify Affordable Payment Options
The first thing you need to do is check your credit score. You can receive one free copy each year. People with higher scores have the ability to receive better loans. It's essential that you ascertain exactly how much you can afford for monthly payments. An online mortgage calculator will assist with this. Additional costs may include the initial down payments, closing costs, and any other fees. Down payments can range anywhere from 0 percent to 20 percent depending on your loan, so make sure to check all your options for a home loan in Las Vegas.
Work With the Correct Lender and Real Estate Agent While Searching for a Home
The next thing you'll be required to do is locate the right lender and real estate agent for the job. The Better Business Bureau should have information on any lender or agent you're considering. Ask a lot of questions and make sure that you're comfortable before selecting a lender or agent. When you're searching for the right home, simply make a checklist of your utmost desires for what a home should have and set a budget. Find a home that fits as much of your criteria as possible at the price you can afford.
Make an Offer Before Selecting Mortgage and Closing
Once you've found the right home, it's time to make an offer. Start around 5 percent below the asking price. Negotiations often occur with these offers in order for both parties to be satisfied. You'll also need to obtain the right mortgage for your specific situation. After obtaining the mortgage, inspect the home and set a closing date. All that's left is for you to move in.
Looking for a seasoned mortgage professional?
The Derek Parent Team contains experienced and passionate professionals to help you with your home buying needs. We've had the opportunity to work with a wide diversity of clients - ranging from first-time homebuyers to high net-worth individuals to local heroes such as veterans, police officers, and firefighters. Contact us today!
2 Ways to Build Passive Income Streams in Different Markets
It's wise to build passive income streams in the young adult years and allow them to grow. Before long, you'll be earning significant money from your previous work.
Two Easy Ways to Build Significant Passive Income
Passive income is great because it's a way to earn income without putting in a lot of work on a consistent basis. Technically, passive income works because a person does an amount of work in the beginning, but the cash flow is reoccurring and provides financial health. This is especially beneficial for the older generations as they continue to age and desire to preserve their energy.
Invest in Real Estate: Condos, High Rises, Homes
For some people, the thought of owning multiple properties may sound daunting and almost impossible. However, there are many ways to earn money as a real estate investor. One of these ways involves rentals. You can purchase a home, condo, or high rise by researching various investment property financing options. Don't be deterred by the idea just because of the finances. When you prepare a house to put on the market as a rental, you'll be able to earn a lot of money on a monthly basis. A few years of rental income can easily pay off an entire mortgage without your help and the rest becomes profit.
Books, Music and Other Copyrighted Material
Books are great forms of passive income for building wealth. An author spends a significant amount of time writing a book. Once it's published and available for sale, the book will sell over and over. The same concept applies to music. The percentage that's paid to the creator is called a royalty. With the right marketing plan and a wide audience, anyone can experience royalty checks in the hundreds of thousands of dollars. There are also many celebrities who make a lot of money from their book tours and book signings. If you don't consider yourself a good writer, but you have a story to tell, hire a ghostwriter. They'll create the content and you'll be able to eloquently share the story with the world.
Finances and the Future
Passive income streams eliminate the process of exchanging time for money. When you free up your time and can still earn lots of money, this is a dream that most people long to experience. In the meantime, be intentional about creating passive income streams and you'll experience financial freedom in no time.
Preparing in Advance for Your Home Purchase
The home buying process is a fulfilling and gratifying one that requires financial acumen and discipline.
Preparing for Financial Planning and Home Ownership
Purchasing a home is a big deal. Whether you are looking to buy a high rise, condo, or house in Las Vegas, it takes a lot of dedication and patience to turn a dream of home buying into a reality. Once some people hit a certain age, they automatically assume it's time to purchase a house. While it's good to own a home, it's wise to be fully prepared to own that home. This mainly depends on what your financial situation is like and how well you can be disciplined with what you have.
Financial Status
Your finances play a major role in this process. While it would be ideal, most people don't have the money to purchase their home with cash. In this case, many people get loans to cover the mortgage. There are so many options to choose from such as first-time home buyer options and lending mortgage options. No matter what route you choose, it's best to have the money to make the down payment on the home. Some programs will allow you to only have 3-5% down to pay for a home. Many finance educators and experts encourage 20% down payment. You'll also want to consider the expenses outside of the home purchase such as furnishings, repairs, closing costs and relocation fees. If you prepare for a home purchase the right way, you won't need to deplete your savings to make it happen.
Discipline
It takes a high level of financial discipline to purchase a home. When the mortgage lenders take a look at your credit score, they want to know that your chances of paying back the loan are very high. This boils down to how you handle money and what your money mindset is like. If you're mindful and intentional about your savings and investment accounts, you'll be in great shape to experience the beauty of being a homeowner.
Consistency
It's one thing to gain all the information. It's another thing to make sure you remain consistent with the information you gain. If you make those baby steps with building discipline and apply those lessons you learn about handling your finances, you'll be in a dynamic position to purchase a home and handle all that comes along with it.
Derek Parent Team
Looking for a new condo or high rise to be your Las Vegas home? Contact us today! Derek is the only person in Las Vegas that offers down payment assistance and mortgage lending towards the purchase of high rise condos in Las Vegas.
6 Ways to Buy a Home Even if You Think You Can’t
There are many obstacles when buying your first home. It takes diligent work, and to say the least it is expensive. Especially when you consider the rise of real estate and interest rates. Here are six issues that I am sure you have heard will get in your way. However, I have good news for you, there are ways around them.
- The big 20% down payment
The standard in buying a home is 20 percent money down, which means a lump sum of 20% of the purchase price paid upfront. On a 300,000 house, the down payment would be at $60,000, which is definitely not pocket change. Putting down 20% will allow you to have a lower mortgage and monthly payments. However, according to the National Association of Realtors, 81 percent of Americans purchased their first home with less than 20 percent down to as little as 3 percent. Here are some alternative options to come up with a down payment that would get you near the 20% percent mark. One option is to go to your family and ask for a gift. You can get up to $14,000 tax-free money from your mom, dad, and even your grandparents. If all 4 of them decide to bless you with a gift, that is $56,000 tax free money that can go towards your down payment.
Another option that many people take advantage of is borrowing against their 401(k) or IRA. You are able to borrow up to $50,000, or 50% percent of your plan. First time homebuyers may qualify to take up to $10,000 from their IRA without having to pay early withdrawal penalties.
Now let’s say with all of that, you still don’t have enough money. If you have always dreamt of having a big lavish wedding as a child, you can always skip out on asking for that fancy blender and new 70-inch TV, and request money from your guests instead.
Another possibility is to completely skip on having the big wedding in general, and maybe opt to have something smaller and more intimate. This will surely save you a lot of money that you could be putting down on your first home.
- Bad Credit
This might be the biggest obstacle of all when buying a home. The lower a credit score, the higher the interest will be or you might not even qualify at all. The best thing to do is to clean up your credit as much as possible, pay your bills on time, and consult with a mortgage broker for suggestions on how to improve your score. A few things that a mortgage broker will tell you is to not incur more debt. Hold back on purchasing a new car and completely avoid opening up new lines of credit. Lastly, know your credit score inside and out. According to the National Foundation of Credit Counseling, 42% percent of Americans have not checked their credit score in at least 12 months. The two most important credit scores you need to know are 620 for the Federal Housing Administration for your insured loan, and 720 for a conventional loan.
- Knowing your price range.
A standard rule to determine your first homes price range is to figure out how much you can afford each month. Lenders say your PITI (principal, interest, taxes, and insurance) should not be more that 28% percent of your income before taxes. Some banks will go up to 33% percent which means if you earn $5,000 per month, the maximum PITI payment the lender will allow is $1,650 a month. Banks are looking for your back-end ratio; the sum of your PITI payment and all revolving debit (credit cards, car loans, all other loans you carry), which should be no higher than 41% to 50% percent of your gross monthly income.
- Fear of a bad loan
For many years a 30-year mortgage with a fixed interest rate was the only option. In recent years the industry has changed exponentially and developed new programs to help more people become homeowners. Some loans begin with a low interest rate and adjust upward by a certain percentage about every year. Many people choose to go with a low interest rates at the beginning of the loan and sell the house for income before the loan adjusts. Consult with your mortgage broker to find out what will be the best for you.
- Where to begin
Some first-time buyers think spending hours on Zillow and going to every open house is the best way to start; but its not. The best way to begin is to get educated. Fannie Mae and Freddie Mac both offer classes and a lot of information on their website that can support you through the process.
Some basics:
Real estate brokers work on a commission base, typically around 6% percent. There is no need to pay any fees upfront to an agent for them to help you walk into a house to check it out. If and when the property is sold they will get paid.
A house on the market for a long time does not necessarily mean it has any serious flaws. The seller may have an unrealistic expectation of the value of their home, or it could be something else. Don’t be afraid to offer lower and let your agent negotiate on your behalf.
You will see that every home will come with some type of issue large or small.
Unless you’re buying a brand new home, you should expect some fixing up to do. Now it’s up to you to decide the extra costs are worth buying the home.
- The offer is made and now I’m scared
You found the home of your dreams and you make your offer. This offer should come with at least two contingencies. 1. You’ve had the chance to have a private professional inspector come out and look at the property. If the inspector finds issues that are out of your budget to fix, you can always negotiate the purchase price or walk away. 2. Your offer is based on the ability to pay for the property. If for some reason you are not able to pay then you can simply walk away. After all negotiating is said and done, you and the seller will go into a process called escrow. That is where a third party will make sure all of the legalities are in excellence before completing the sale. Escrow will handle the money components, and seal the deal between you and the seller. Congratulations, you are now a first time homeowner!
Now that you know what it really takes to achieve the American Dream of homeownership, give us a call and we'll walk you through the process in no time! 702-331-8185