Mortgage loans are like power tools: You get the best results by using the right one for the job at hand. For many borrowers that may mean bypassing the conventional route to find the one that fits your budget today and is the least likely to cause financial stress in the future.

Affordability and the Federal Housing Administration (FHA) Program

For a borrower having trouble pulling together a down payment or who may have a weak credit history—or no credit history—an FHA mortgage effectively levels the playing field. The program was designed to open up homeownership to as wide a group of borrowers as possible, even those who may have experienced some financial missteps, like a foreclosure or bankruptcy, in their recent past.

What most borrowers don’t realize is that the FHA doesn’t actually issue mortgages. The agency provides insurance on the payments for the issuing lender. This insurance helps make an application more attractive for a lender to approve since it addresses any concerns the lender might have regarding repayment.

Why You Might Want to Do This

It’s natural to think a government program would result in more paperwork and hassle than going the conventional route. FHA loans do require extra forms, but on the lender’s side of the transaction, not yours. Better yet, qualifying for an FHA loan is only slightly more cumbersome than applying for a conventional mortgage.

Here are some other things you should know about FHA mortgages.

Previously, FHA mortgages offered the added advantages of lower down payments and higher borrowing limits over conventional mortgages. Today, conventional mortgages can be made with as little as 3 percent down, and borrowing limits are now the same for both loan types at $625,500. Another advantage FHA mortgages offer is that they are still eligible for a “streamlined” refinancing at a lower interest rate. Now that regulatory changes have greatly lengthened the refinancing procedure for conventional mortgages, this aspect can save time and money. FHA mortgages can also make a property more attractive on resale since they are assumable by the new owner, unlike a conventional loan.

Never Assume

The impact FHA insurance premiums have on the overall cost throughout the life of mortgage usually makes a conventional mortgage cheaper in the long run. Even when a conventional mortgage carries insurance, more commonly referred to as “private mortgage insurance (PMI),” PMI is only required until the borrower’s equity in the home reaches 20 percent. If you are only expecting to stay in your home for a few years, the FHA mortgage can be the better bet, even with the insurance.

With so many moving parts making up each loan, always have your lender run a comparison across all of the mortgage programs available to you. There is no reason your mortgage shouldn’t provide a custom fit to your current circumstances and your long-term plans.  

Real estate has always been about location, location, location. That hasn’t changed. What defines a good location, however, may have changed as features like walkability, proximity to coffee houses, and accessibility to public transportation have become more important to many buyers.

The way buyers access information about potential neighborhoods and homes has also changed. Millennials in particular, who account for 67 percent of today's homebuyers, are used to having a world of data at their fingertips. Unlike their parents, who may have relied on Real Estate Agents to cull through the data and select the homes to be viewed, these infocentric adults are more likely to prefer sorting through the specifics themselves before selecting the homes they want you to show them. This is why having a collection of apps to refer them to is becoming just as important as a fistful of listing sheets.

To help you direct your clients to resources that can refine the search for that one, perfect home in the best neighborhood for each buyer’s lifestyle preferences, we created a list of some of the most useful tools available. All of these apps may be accessed online or downloaded to a mobile device.

Tools for Happier House Hunters

#1 Walk Score®

Many Real Estate Agents have already added scores from this company to their websites due to the importance of what is nearby holds for today’s younger homebuyers.

#2 AroundMe

How close is the nearest Starbucks? This app maps it out, giving potential buyers a sense of their prospective home’s proximity to the places and services they are most likely to want to frequent.

#3 dwellr

Reminiscent of a dating app, dwellr uses U.S. Census Bureau data to match users to areas that are most likely to appeal to their lifestyle preferences and interests.

#4 Homefacts®

This app provides data on specific areas and addresses, including the likelihood for specific natural disasters and environmental risks to the names, proximity, and photos of any offenders in the area.

#5 NeighborhoodScout®

Like other sites offering demographic information, this search engine allows for a deep dive into an area’s composition and historical home appreciation rates and provides links to properties that are currently on the market.

#6 GreatSchools Finder

Although packed with information about an area’s public and private school options, the best part of the site is that it provides access to parent reviews. Being able to read about actual experiences with the schools is highly desirable, especially for younger buyers who have grown up relying on and communicating with others through user reviews.

There is no substitute for the knowledge a Real Estate Agent brings to each transaction. By equipping buyers with the tools they need to confidently make what could be the biggest purchase of their lives, you can easily enhance your ability to bring it all home for them and for you.

The summer of 2016 is shaping up to be one of the best seasons for home loans in years. The average interest rate on a 30-year fixed mortgage is at 3.52 percent as of July 7. That's significantly lower than what could be found just a year ago, and among the lowest rates seen since 2013. In a survey of economists, more than half said they expected average rates to continue falling in the days and weeks ahead.

For homeowners currently paying a mortgage, this is terrific news. For prospective borrowers, it may be even better. Even though many expect interest rates to remain at historically low levels for a while, it's impossible to know for sure. Therefore, frugal mortgage borrowers should be aware that time is of the essence.

What's causing low rates?

Anyone paying attention to the news in the first days of July has probably become very familiar with a recently made-up word: Brexit. The U.K.'s unprecedented decision to leave the European Union sent shockwaves throughout the global economy when the results of the vote were announced June 24. Investors and financial institutions the world over reacted negatively to the vote, not just because it was unexpected, but also from sheer uncertainty. No country has ever left the EU since it was created in 1971, and as one of the biggest players in international finance, the implications of Great Britain's move are still not fully known.

After #Brexit, mortgage rates in the U.S. have approached record lows https://t.co/9y3FagAB0H pic.twitter.com/9BNE6EkWO8

— Bloomberg (@business) July 7, 2016

What does this mean for consumers?

Although the stock market took an initial hit from the Brexit decision, most Americans don't need to worry too much about the situation in the short term. In fact, many stand to benefit from the lower interest rates on loans now being seen everywhere.

With the cost of a fixed-rate mortgage now at the lowest level in three years, it makes sense that applications for such products have also risen to their peak in the same timeframe. Much of this is being driven by current homeowners looking to refinance their current mortgage. Indeed, applications for refinancing are now almost double what they were in July 2015.

Clearly, it's in a borrower's best interest to get the best deal possible on their mortgage. But Realtor.com cautions against making big decisions without doing the requisite research. Refinance-seekers should calculate their savings with the up-front refinancing fee in mind. This initial fee can often exceed $2,000.

For those who are in the market for a new home altogether, patience and diligence pays off in the end. A mortgage is a vital financial asset that will stick around for a long time. Although refinancing may be an option down the road, it pays off in the long run to make an informed choice the first time around. By finding a lender you can trust, dealing with one of the most important decisions in life will get a whole lot easier.

VA loans have a number of incredible benefits, including no requirements for down payment or primary mortgage insurance. Before applying for a VA Loan, however, it is vital to confirm your eligibility.

Servicemember VA Home Loan Eligibility

There are a few different ways to be eligible for a VA home loan.

First, you can be a veteran. Depending on the war in which you fought or the time period in which you were on active duty, there are different minimum active-duty service requirements that make you eligible for a VA loan. For example, the  requirement for those who fought in the Vietnam War is 90 total days. If you were active during the period known as post-Vietnam War (from May 8 1975 to September 7, 1980), your minimum active-duty service requirement is 181 continuous days. Check out this chart to determine whether you are eligible based on when and how long you served.

The second way to be eligible for a VA loan is to currently be on active duty. The minimum requirement for current active duty is 90 continuous days.

The third group of eligible borrowers consists of those in the National Guard or Selected Reserve for at least six years who are now retired, were discharged honorably, continue to serve today or are now part of an element of the Ready Reserve (other than the Selected Reserve) or Standby Reserve after honorable service.

Under any of these three eligibility conditions, the military member or veteran cannot have been discharged under dishonorable conditions.1

VA: Gulf War Vets Most Likely To Use VA Home Loan Program https://t.co/4mXa5FQjbd

— Brett Synicky (@BrettSrealtor) May 4, 2016

VA Home Loan Eligibility for Spouses

There are three conditions under which a servicemember's spouse would be eligible for a VA loan without the veteran or servicemember:

1. The servicemember is a prisoner of war or missing in action.
2. The veteran died while in service or from a disability as a result of service, and the spouse has not remarried.
3. The veteran was totally disabled and has died, though the disability was not necessarily the cause of death.

Other Ways to Be Eligible 

It is possible to be eligible for a VA loan if you have served in organizations like the Air Force, Coast Guard Academy, National Oceanic & Atmospheric Administration, the Department of Public Health Services, and more.

Another way to qualify is by having served in an army that was allied with the U.S. during World War II.

Anyone who is eligible for a VA loan must obtain a Certificate of Eligibility to present to lenders.

There is also something known as "restoration of entitlement," which allows those who have sold their home that was purchased with a VA loan or paid the loan off in full to qualify for another one. The entitlement for a loan can also be transferred to another eligible borrower. 

VA loans close up to two day days quicker than traditional loans.

VA Loan Misconceptions

Sellers can be hesitant about accepting an offer involving a VA loan because they believe they take longer to close. In reality, VA loans actually close up to two days quicker than traditional loans. Urgency shouldn't be a reason for a seller to turn down a VA-backed offer.

Another misconception is that VA loans don't offer enough financing for ample affordability in many neighborhoods. There are actually not many neighborhoods for which a VA loan would not be enough.2

In most areas, $417,000 is the VA loan limit, but in higher-cost areas it the limit can increase up to as much as $1,094,625.3

Getting Approved for a VA Loan 

Once you've determined that you're eligible for a VA loan and have obtained a Certificate of Eligibility, you still have to qualify. You will, however, have an easier time qualifying for a VA loan than a conventional loan, as lenders' requirements are more flexible because the loans are guaranteed by the U.S. Department of Veterans Affairs.

To qualify for a VA loan, you must intend to live in the property you want to purchase. In general, the borrower must agree to move into the home within 60 days of closing, but these rules are flexible based on whether the borrower is deployed in a location far away from the property. If so, he or she will be able to move in within 12 months of closing, rather than 60 days. In addition, the servicemember's spouse can satisfy the move-in requirements in his or her place.

You must also verify the property you want is eligible to be financed through a VA loan. Fortunately, there is a wide variety of property types a VA loan can finance, like single-family homes, multi-family homes with up to four units per borrower, townhouses and certain approved condos. 

The final qualification requirements are a solid income, a good credit score and a low debt-to-income ratio. Again, these requirements will be less rigid than for conventional loans and will depend on the lender.4

If you are interested in a VA loan, contact New American Funding. Our Loan Officers will help you gather everything you need to apply. We can make sure you obtain the best possible VA loan based on your current personal and financial situation, and we can even help you find a Real Estate Agent. We will take care of the home appraisal utilizing a VA-assigned appraiser, and we don't have to wait for the VA to review your credit application before approving and closing your loan. 

Contact New American Funding today to make one giant step toward owning your own home. 

Sources 

1U.S. Department of Veterans Affairs
2Chicago Tribune
3Bankrate
4Military.com

For the third year in a row, millennials comprise the highest share of homebuyers in the U.S.1 As millennials continue to enter young adulthood and flood the housing market, New American Funding is dedicated to making sure its Loan Officers know exactly how they can best appeal to and work with this very unique generation.

New American Funding is here to serve the needs of its borrowers, and right now, many of those borrowers are millennials. We understand that when it comes to the mortgage loan process, millennials have varying preferences in how they select a lender as well as how they want to communicate with that lender. It is vital that Loan Officers shift their marketing and customer service strategies when working with this tech-savvy, inquisitive generation.

There are many steps Loan Officers can take to make millennials excited about working with them:

1. Educate, Educate, Educate

Millennials are the most educated generation in history. As a whole, they don't like jumping into things they don't understand, especially when they have grown up in a world where any information they seek is just a click away. Millennial homebuyers want to be informed, and Loan Officers who take the time to educate potential borrowers on the mortgage loan process are going to come out on top.

The best way to educate millennials is through online content. Millennials live for their screens, and whenever they have a question about something, they are going to Google it. These homebuyers are likely to become loyal to the lending brands they find online – particularly those that provide helpful guidance through articles, videos and how-tos before they have even become customers. Increase your focus on Search Engine Optimization and other digital marketing techniques so when millennials Google questions about mortgages, your page is the first thing they find.

Once potential customers have been turned into actual customers, make sure to continuously update them on every aspect of the process and walk them through anything they do not understand. Keep them in the know, and they will keep wanting to work with you.

2. Build a Social Media Presence

If you aren't on social media, you're already falling behind. Places like Instagram, Facebook, Twitter, YouTube and Pinterest are where you'll find millennials, who are out there searching for brands that will engage them. The more channels you join, the more customers you will reach. Just make sure you research the best way to leverage each social channel, as each one requires distinct marketing and engagement tactics.

Engagement is the key word here. Social media is not the place to obsessively advertise your products and services. Millennials are turned off by direct advertisements and become more loyal to brands that make them feel like they are part of a conversation. Social media is a place to offer more educational content and spark discussions about various industry-related topics. Loan Officers who establish themselves as engaging thought leaders on social media will appear trustworthy and like they truly care about these homebuyers' needs, not only about getting their business. This marketing technique will attract more millennial customers.

Because millennials came of age during the economic recession and witnessed their parents' immense financial struggles, many are wary of the home buying process and have difficulty trusting Loan Officers.2 These kinds of engagement tactics will encourage millennials to trust you. Transparency and warmth are keys. Millennials want to feel like they are interacting with human beings rather than faceless businesses.

"Loan Officers should give borrowers the option to electronically sign documents."

3. Invest in New Technology

Efficiency is a millennial buzzword. If they can't complete easy loan application tasks online, they may decide to find a lender who will allow them to do so. The more steps millennials can complete online, the happier they will be. Whenever possible, Loan Officers should give borrowers the option to electronically sign documents. Even more, they should be able to access a web portal that allows them to fill out their entire application online. If you want to improve your online services even more, offer online tools that help millennials calculate various costs based on their wants and needs.3

Millennials grew up with the Internet, so in their eyes these kinds of services are not extras. They are simply an expectation.

4. Text Them

Texting may feel unprofessional to someone in an older generation, but it is millennials' preferred method of communication. They will appreciate Loan Officers sending them a quick text when the information they need to provide is not substantial enough to necessitate a phone call. To millennials, texting is actually good customer service.

Millennials are a force in real estate, and at New American Funding, we are prepared to meet their needs.

Sources

1 National Association of Realtors 2016 Home Buyer and Seller Generational Trends Report
2 DataTree
3 Accenture

Buying a home is often considered a milestone in life as well as in a relationship. According to the National Association of Realtors, 67 percent of homebuyers were married couples, up from 58 percent five years ago. However, many couples are reversing this order, opting to join together in homeownership before matrimony.

Unmarried Homeowners

The NAR's 2015 Profile of Home Buyers and Sellers found 7 percent of homebuyers were unmarried couples¹. While this sounds like a small fraction of homebuyers, this is a growing trend among younger buyers. The median age for this demographic was 33 years old, while the median age for married couples was 36 and those for single females and males even higher, at 50 and 45, respectively.

According to the U.S. Census Bureau, the number of people living with a partner, as opposed to living alone, with family, with a spouse or another arrangement, has grown steadily since 1996². In 2010, more than 16,000 homeowners lived with a partner, about double the amount of just a decade before.

There are plenty of reasons millennials are opting to buy a home before tying the knot. More than half of unmarried homebuying couples were first-time homebuyers and the majority of them did so because they wanted to own their own property, as opposed to wanting a bigger space or because of a change in their family situation. However, these aren't the only reasons to buy a home together.

Financial Reasons

GOBankingRates reported that increasing costs of both weddings and rentals could be contributing to the trend³. As weddings become more expensive, millennials hoping to save money for future events choose to hold off. Meanwhile, rent is becoming more expensive and, on a long-term time frame, owning a home makes more financial sense. Rather than paying a monthly bill only to be granted one month's worth of housing, a monthly mortgage payment means a couple is growing their home equity. Once the mortgage is paid off, they have something to show for all those payments.

Forbes contributor Lucy Mueller explained that buying a home as a financial decision has also led millennial homeowners to view the purchase differently⁴. They aren't looking to buy a forever family home; a house is an investment. They plan to sell it after a few years. Nela Richardson, Redfin's chief economist, told Mueller that this mindset affects the type of homes millennials are drawn to.

"We know that a lot of millennials want to live in the city, they want to live close to work, they want to live in walkable neighborhoods and guess what? These neighborhoods are great investments," Richardson explained. "The millennials I'm profiling are typically not the ones buying large McMansions in the suburbs that will take longer to pay. Many of them are buying condos in the center of cities."

According to the NAR, more than half of these homebuyers listed a convenient commute to work as a main factor in the homes they chose. As more unmarried millennials begin to become homeowners, real estate agents will want to seek out properties that will appeal to them: affordable, single-family homes and condos in walkable neighborhoods.

Source:

¹ National Association of Realtors
² U.S. Census Bureau
³ GOBankingRates
⁴ Forbes 

As March comes to a close and the final remnants of winter melt away, it's time for homebuyers to start thinking about jumping into the exciting spring housing market. Historically, spring is one of the most popular times to buy, and it's looking like this year will be no exception. In fact, Realtor.com predicted this spring will be the busiest housing market since 2006.¹

Buyers will be coming out in droves this spring for a reason. It's a great time to buy. If you have been planning to purchase a home sometime within the next few years, it could be in your best financial interest to do it now.

Here's why:

1. Mortgage Rates are Still Low

With the December announcement that the Federal Reserve would begin to raise interest rates, many Americans feared that mortgage rates would begin to rise in 2016. Instead, the country has been shocked to see mortgage rates drop week after week to reach historic lows.

At the end of February, Realtor.com's Chief Economist Jonathon Smoke told the National Association of Realtors that based on the 30-year fixed-rate mortgage rate that week, buyers had about 5 percent more buying power than they did at the end of 2015.²

Keeping Current Matters, a real estate analytics company, discussed how The Mortgage Bankers Association, Freddie Mac and NAR have all predicted that mortgage rates will be higher by spring 2017.³

Purchasing a home now could lock you in to a lower mortgage rate. The longer you wait, the higher your rate may be.

2. Home Prices Will Continue to Appreciate

NAR reported that due to the small amount of inventory currently available, home prices are rising and are projected to keep on going up.

KCM discussed data from CoreLogic, who predicted that prices will appreciate 5.5 percent over the next 12 months. Using that data, KCM calculated how much a homebuyer could save by purchasing a home now versus next year when both prices and interest rates will be up:

A home today costing $250,000 at a 3.62 percent interest rate would probably cost $263, 750 at a 4.6 percent interest rate by the first quarter of 2017 (the interest rate is based on predictions by Freddie Mac). Purchasing the home now would save the buyer about $212 per month, which equates to an incredible $76,565 in savings over the 30-year life of the loan.

3. It is Still Cheaper to Buy than Rent

In November 2015, HousingWire reported that 88 percent of property managers raised their rent prices in the last year.4 Sixty-eight percent of these property managers said they would probably raise it again during 2016. Renting is becoming increasingly less affordable compared to owning.

In fact, KCM reported that in the current market, you need about 30 percent of your income to afford the median rent, whereas you only need about 15 percent of your income to afford the median home. There is no reason to help pay off your landlord's mortgage when that check could be going toward gaining equity in your own property.

You're probably thinking, that monthly payment may be cheaper, but what if I don't have enough money to cover the down payment? Well, you may be more prepared to cover one than you think. Remember, it is possible to find a loan that allows you to make only a 3 percent down payment, and if that is the case you could have enough to buy a home right now.

But Isn't it a Seller's Market?

It is true that demand is high and supply is low, but that doesn't mean you should avoid the market. What it means is you need to be extra diligent when shopping for a home. Make sure to hire a fantastic Real Estate Agent who understands the competition in your local market, knows how to negotiate and will really fight for you.

Having a lender's mortgage pre-approval letter to show sellers is a powerful tool. You won't waste time shopping for homes out of your budget, sellers will take your offer seriously, and you will greatly improve the likelihood of winning the bid for your new home.

Other options include getting a pre-inspection. Doing so could make you feel comfortable removing the home inspection contingency from your offer, a very appealing move from a seller's perspective. The Post also suggested expressing flexibility based on the seller's needs. If the seller wants to move quickly, be willing to move in right away, and if the seller needs more time, show that you can wait.

Research shows that homeowners are happier and healthier than renters. Why wait? Now is always the right time to invest in your happiness.

Sources

¹ Realtor.com
² The National Association of Realtors
³ Keeping Current Matters
⁴ HousingWire