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Things to Consider

An autumnal wreath on a door

The Benefits to Buying in Autumn

Most homebuyers think that the best time to purchase a home is in the Spring when lawns are green, trees have leaves, and flower beds are in bloom. Did you know that house hunting in the Fall comes with is own great set of benefits? Buyers will avoid the competition that comes with busy real estate seasons and could even have opportunities to save money if they shop in Autumn!

There is Less Competition:

One of the biggest reasons to buy a home in the Fall is because it is considered off season for real estate so there is less competition between buyers. According to RealtyTrace, over the past 15 years, October buyers paid on average 2.6% lower than estimated market value. With less buyers putting offers on homes in the Fall, it leaves more room for negotiation on price.

Tax Advantages:

If you close on your new home before the end of the year, you may be able to get a tax deduction next April. In addition, many sellers want to close by December 31st so they can take advantage of a tax break, which means that they may be more willing to cut a deal.

End of the Year Sales:

Fall is a great time to buy appliances and furnishings for your new home because of Black Friday and end of year sales.

The Focus is on You:

Since business is slower in the Fall months, Real Estate Agents, Loan Officers, Home Inspectors, etc. have more time on their hands to dedicate to helping you find and purchase your perfect home.

 

Don’t let the lack of green outside, shorter days, and gloomy weather stop you from finding your dream home. You will avoid competition and have some money saving opportunities while house hunting in Autumn.


Understanding Mortgages

Jumbo vs Conventional loans

Jumbo vs Conventional Loans: Which Should You Choose?

Throughout your homeownership journey, you'll need to make lots of decisions - none bigger than the property you ultimately wind up selecting, of course. But another major choice is the loan you take out.

Much like houses themselves, there are lots of loan products to pick from. Two of the more common options are conventional loans and jumbo loans. While they have a number of similarities, there are even more differences between them. And while you have probably heard of each, you may not know exactly how they work or what they are. And in the debate over jumbo vs conventional loan products, you may also be wondering which one is right for you.

This explainer should help you find the answer:

Should I use a jumbo loan or conventional loan?

Before you can decide which one is the better fit for you, it pays to know what they're all about. For starters, as the name implies, conventional loans are the most popular mortgage product of them all, largely because they offer the greatest variety of options to borrowers. This includes selecting the length of time you choose to pay off the loan - 30 years being the most common - the down payment amount, and the interest type. A fixed-rate loan means the interest rate stays the same for the life of the loan while an adjustable-rate changes over time, influenced by market dynamics and the terms of the mortgage provider. Interest rates on ARMs may be slightly higher or lower than market value, which makes them ideal for those who are comfortable with variability.

Conventional loans are also conforming loans, yet another term you've probably heard mentioned before. It essentially means that they conform to - or abide by - the terms and conditions established by Fannie Mae and Freddie Mac, which are government-sponsored entities that ultimately buy loans, and then package and sell them as mortgage-backed securities to investors.

That's a thumbnail sketch of what conventional loans are, but they have a number of advantages addressed further a bit later. 

As for jumbo loans, as the term "jumbo" suggests, they're for houses that typically sell for significantly more than the national median. Similar to conventional loans, jumbo loans come with options, as borrowers get to decide the term length - usually in five-year increments - and whether they'll pay interest on a fixed- or adjustable-rate basis. However, unlike conventional loans, these are non-conforming, meaning they don't abide by Fannie and Freddie guidelines and therefore are not backed by the GSEs.

One of those guidelines established by GSEs is how much money would-be buyers can borrow to pay for a home purchase, which is also known as the conforming limit. The maximum can vary depending on the state and county you live in, but generally speaking, the maximum is $484,350. In other words, if you're looking to buy a residence, but the selling price is $500,000 or more, a conventional loan wouldn't be your best option.

That's where a jumbo loan may be a better alternative because it allows you to borrow money above the limits established by Fannie and Freddie. Of course, there's a little bit more to it than price point when choosing between jumbo vs conventional loan products, and these aspects can also help you decide which is the better option.

What are the advantages of jumbo vs conventional loan options?

As noted by The Mortgage Reports, perhaps the biggest upside of conventional loans is that they're among the least restrictive in terms of qualification standards. The down payment is a classic example. Many people rightly assume 20% is a common amount put forward as a lump sum down payment. But that can be a difficult ask for first-time buyers who may be just graduating from college or are raising a family. Fortunately, the down payment can be for much less than this, as low as 3% in some cases.

Requirements for credit scores - which help lenders assess your ability to pay off bills - also tend to be looser. The minimum for conventional loans is a FICO® score of around 620, which is below the overall applicant average of roughly 720, according to estimates compiled by The Mortgage Reports.

Jumbo loans also have their highlights. None is more prominent than the high loan amount you may be eligible to borrow, above $1 million depending on your qualifications, which is determined in the application process. However, because these products involve more money - thus more risk for the lender - the approval standards aren't as lenient compared to conventional loans. For example, while jumbo loans allow you to select how much you want to
spend as a down payment, the minimum is usually 20%, which means you may not need to purchase private mortgage insurance as a result. Your FICO® score will also need to be slightly higher than with a conventional loan.

 

The same goes for your debt to income ratio, or DTI. This calculation is something lenders use to determine how much of your earnings go toward regularly occurring expenses, and is calculated by adding up your monthly debt payments and dividing that sum by how much you make over the same period before taxes are applied. The ideal is a low debt to income ratio - 43% or less, according to the Consumer Financial Protection Bureau. A DTI of 43% is usually the maximum to still be considered eligible for a jumbo loan.

Is a jumbo loan better than a conventional loan?

There's a common saying in the housing industry: All real estate is local.

In other words, what's considered the norm or the rule all depends on where you are, both in geographic location and financial circumstances. With this in mind, there's no such thing a jumbo vs conventional loan being better than the other. If you're in a comfortable situation financially and live in a city where the cost of living is high, a jumbo loan may be ideal. However, if you're just starting out, a conventional loan may be up your alley.

By talking it out with your mortgage loan officer, you'll discover together which mortgage is the best fit for you.


Helpful Tips

Hurricane as seen from a sattelite

Are You Prepared for When a Storm Hits?

Here we are in hurricane season, which will quickly be followed by winter! Make sure you and your home are prepared by doing the following when alerted for oncoming storms:

  • Bring in any outside furniture or toys that could be picked up by the wind
  • Make sure all your doors and windows are securely closed
  • Turn your refrigerator and freezer down to the lowest temperature so your food will last longer if the power goes out
  • Turn off your propane tanks and unplug any small appliances
  • Talk about an evacuation plan with your family
  • Fill your car’s gas tank
  • Have a collection of disaster supplies handy 

What disaster supplies should you have ready?

  • Water and food that is non-perishable to last you at least three days
  • Portable battery charging pack for your mobile devices
  • First-aid kit
  • Flashlight (with extra batteries)
  • Battery operated radio (with extra batteries)
  • Local maps
  • Whistle to signal for help
  • Wrench or pliers to turn off utilities

Weather can be unpredictable, but a storm doesn’t have to take you by surprise. Make sure you have what you need in case a storm hits so you and your family can weather it out together!


Understanding Mortgages

Rendering of a home with trees around it

Buying a second home: A brief primer on a long-term investment

If you are considering purchasing a second home, you may be wondering how the process works and if it's something you can actually pursue, based on your finances, credit score, existing mortgage rates and other factors that help determine your eligibility. Regardless of the purpose for which you seek to purchase a second home, you may be wondering how the process works.

 

By the end of this article, you should have a better idea on whether buying a second home is a worthwhile consideration for you and your family.

 

Before getting into the specifics, it's helpful to get a better lay of the second-home land, in terms of how many are in the nation's inventory and where they actually exist. According to data released by the National Association of Home Builders in December 2018, second homes in the U.S. total 7.4 million. That figure, of course, can change even on a monthly basis, depending on the level of construction activity going on at any given time, but it at the very least gives you a ballpark estimate as to their numbers.

Perhaps unsurprisingly, a large share of vacation properties are located in Florida. Indeed, the Sunshine State is home to 1.1 million second homes, which amounts to 15% of the nation's overall total. An additional 35% are found in California, New York, Michigan, Arizona, Pennsylvania, Texas and North Carolina. And from a county perspective, Maricopa - located in the Grand Canyon State of Arizona - is home to over 113,500 second homes, more than any other single county, with Florida's Palm Beach and Broward Counties rounding out the top three.

How do you qualify to buy a second home?

Now that you know the hard data, you may be curious about qualification and if it's fundamentally different from the steps involved with buying a primary home. The truth is no two home loan processes are identical. Every buyer has unique circumstances, which is why lenders prefer to have as much financial data on a borrower as possible so they can get a clear picture.

That said, there are a few rules of thumb to better determine your eligibility. For the most part, lenders view mortgages on second homes as not necessarily risky but still higher-risk loans. That's because, as the name implies, these mortgages are often taken out in addition to ones that are already in effect. As a result, qualification standards tend to be more stringent. Your credit score is a classic example. A higher FICO® score suggests borrowers are keeping up with their payments, which may enable them to obtain a lower interest rate.

Your debt-to-income ratio is something else your lender will want to check. This measure assesses how much of your gross monthly earnings go toward paying ongoing expenses. It's pretty easy to figure out if you don't already know it. All you do is take the sum of how much you spend on monthly debt and divide it by how much you make in earnings over the same period before taxes. The lower the resulting percentage, the better. Generally speaking, lenders prefer to see a DTI of 41% or less, but even here, you may have some wiggle room, depending on the size of the loan you're requesting and some of your other financial particulars.

Is a down payment mandatory for a second home?

Most loan programs require that a certain percentage of the house's list price be paid up front. There are some exceptions to this, such as if you're a first-time homebuyer and serve in the military, as VA loans typically do not necessitate a down payment. When buying a second home, though, down payments are mandatory. Generally speaking, expect the down payment to be at least 10% of the purchase price, although some lenders may require it to be larger, the most common being 20%. The amount may depend, in part, on your credit score; the higher it is, the lower the down payment requirement.

 

For many people, buying real estate is the biggest financial decision they'll make in their lifetime. So it's especially important to go into the second-home purchase process with your eyes wide open.

 

What else do I need to know about buying a second home?

If you’re considering renting out your vacation home to tenants, there are income tax implications. It’s important to consult with a tax or financial advisor beforehand so you know what to expect.

It's a lot to think about, but we're here for you. Whether looking at a second home as a vacation property or a second residence for the sake of work, or another reason entirely, it's a good idea to start a conversation with your favorite mortgage loan officer.

Second homes and investment properties
with Residential Mortgage Services

 


Helpful Tips

Fire fighters battling a blaze

Fire Safety Preparedness in your Home

A fire can become life threatening in just two minutes and will quickly produce black smoke making it extremely hard for you to see. That is why it is important for you and your family to not only take steps to prevent fires, but have a plan together in the worst should happen. Educating and preparing yourself can be a life saver.

  • Make sure that smoke alarms are on every level of your home and test them monthly.
  • Create a home fire escape plan for you and your family and practice it twice a year.
    • Every family member should know two ways to escape from each room in your house.
    • Inhaling smoke is very dangerous, so make sure you stay low as you escape from your house.
    • Practice feeling your way out of the house with your eyes closed.
    • Make sure you have a designate meeting area outside in the case of a fire.
    • Get out and stay out! Never go back in for people, pets, or things.
    • Make sure to time your fire drill and keep it under two minutes to escape.

There are precautions you can take to help decrease the risk of a house fire:

  • Don’t overload your electrical circuits.
  • Unplug hair dryers and other small bathroom appliances when they are not in use.
  • Do not run extension cords under rugs and carpets.
  • Replace frayed electric cords.
  • Stay in the kitchen anytime you are frying, grilling or broiling food.
  • Keep baking soda on hand for extinguishing kitchen fires.
  • Have portable fire extinguishers that are easy to access.

Get your family together and have a conversation about how to prevent fires and implement a plan in case there is a house fire in your home, it could save your lives.


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