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Down Payment Gifts

Down Payment Gifts

Facts About Down Payment Gifts

Lenders have many rules and regulations when buying a home with down payment assistance. If you are considering giving or receiving any down payment assistance, here’s a breakdown of standard rules and requirements.

What Are Down Payment Gifts?

A down payment gift is money a buyer receives from someone else to use toward a down payment or closing costs during a home purchase. Down payment gifts do not need to be paid back.

Gift Rules

Each type of loan has different restrictions about how those gifts can be used, and how the gift should be documented, and who can provide financial gifts.

What Are Gift Letters

Most lenders require a gift letter that documents the details about how much is being given, who is gifting the money, and what their relationship is to the buyer. This letter also states that money does not need to be repaid and must be signed by the donor. Verification of sufficient funds and documentation of fund transfer is also often required.

Gift Types

Conventional Loan Gift Rules

Conventional loans rules often allow buyers to use gift money for down payments, closing costs, or financial reserves. Down payment gifts on conventional loans cannot be used for investment properties. Restrictions state that only romantic partners and family members can gift this money.

FHA Loan Gift Rules

Federal Housing Administration (FHA) loans allow buyers to use gift money to pay closing costs, mortgage expenses, or down payments. In addition to a gift letter, you must provide evidence of both withdrawal from the source account and evidence of the deposit to the receiving account. Friends, family, employers, and other entities can gift this money.

USDA Loan Gift Rules

United States Department of Agriculture (USDA) loans offer unique benefits to buyers in rural areas by requiring zero money down on the purchase of a property. As a result, gift funds aren’t often used toward a down payment. These funds can be used to pay for some or all of the loan’s closing costs. However, this money cannot be used as financial reserves to help you make mortgage payments. Gifts for a USDA loan can come only from family members, employers, a labor union, a charitable organization, or a homeowners assistance program.

VA Loan Gift Rules

Like USDA loans, you are not required to make a down payment when applying for a Veteran’s Affairs (VA) loan. Funds can be used for a down payment or to cover closing costs. This money can also be used to pay the funding fee often required with this type of loan. Almost any person can gift this money.

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If you are considering using a financial gift to purchase a home, speak with a lender about their gift rules before applying. This information was verified by one of my favorite lenders, Greg Giokas, Senior Loan Officer, Guild Mortgage, NMLS#1760. Contact Greg.

I hope this information is useful to you or someone you know. Please feel free to pass it on. Ask me your real estate questions anytime. I’m here for you. Contact Janet.

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Why You Should Use a Real Estate Agent When You Buy a Home

Why You Should Use a Real Estate Agent When You Buy a Home

If you’ve recently decided you’re ready to become a homeowner, chances are you’re trying to figure out what to do first. It can feel a bit overwhelming to know where to start, but the good news is you don’t have to navigate all of that alone.

When it comes to buying a home, there are a lot of moving pieces. And that’s especially true in today’s housing market. The number of homes for sale is still low, and home prices and mortgage rates are still high. That combination can be tricky if you don’t have reliable expertise and a trusted advisor on your side. That’s why the best place to start is connecting with a local real estate agent.

Agents Are the #1 Most Useful Source in the Buying Process

The latest annual report from the National Association of Realtors (NAR) finds recent homebuyers agree the #1 most useful source of information they had in the home buying process was a real estate agent. Let’s break down why.

How an Agent Helps When You Buy a Home

When you think about a real estate agent, you may think of someone taking you on home showings and putting together the paperwork, but a great agent does so much more than that. It’s not just being the facilitator for your purchase, it’s being your guide through every step.

The visual below shows some examples from that same NAR release of the many ways an agent adds value. It includes the percentage of homebuyers in that report who highlighted each of these benefits:

Here’s a bit more context on how the survey results noted an agent continually helps buyers in these situations:

  • Helped Buyer’s Understand the Process: Do you know the difference between an inspection and an appraisal, what each report tells you, and why they’re both important? Or that there are things you shouldn’t do after applying for a mortgage, like buying appliances or furniture? An agent knows all of these best practices and will share them with you along the way, so you don’t miss any key steps by the time you get to the closing table.
  • Pointed Out Unnoticed Features or Faults with the Home: An agent also has a lot of experience evaluating homes. They’ve truly seen it all. They’ll be able to pinpoint some things you may not have noticed about the home that could help inform your decision or at least what repairs you ask for.
  • Provided a Better List of Service Providers: In a real estate transaction, there are a lot of people involved. An agent has experience working with various professionals in your area, like home inspectors, and can help connect you with the pros you need for a successful experience.
  • Negotiated Better Contract Terms and Price: Did something pop up in the home inspection or with the appraisal? An agent will help you re-negotiate as needed to get the best terms and price possible for you, so you feel confident with your big purchase.
  • Improved Buyer’s Knowledge of the Search Area: Moving to a new town and you’re not familiar with the area, or you’re staying nearby, but don’t know which neighborhoods are most affordable? Either way, an agent knows the local area like the back of their hand and can help you find the perfect location for your needs.
  • Expanded Buyer’s Search Area: And if you’re not finding anything you’re interested in within your initial search radius, an agent will know other neighborhoods nearby you should consider based on what you like, what amenities you want, and more.

Bottom Line

If you’re looking to buy a home, don’t forget about the many ways an agent is essential to that process. Any hurdle that pops up, a negotiation that needs to take place, and more, your agent will know how to handle it while they make sure to minimize your stress along the way. Connect with a local real estate agent to tackle it together.

How To Turn Homeownership into a Side Hustle

How To Turn Homeownership into a Side Hustle

Does the rising cost of just about everything these days make your dream of owning your own home feel less within reach? According to Bankrate, many people are seeking additional income through side hustles, possibly to cope with those increasing expenses and save for a home. This trend is particularly popular with younger individuals who may be dealing with student loan debt (see graph below):

Here are two strategies that can not only make homeownership more affordable in the short term, but turn it into a lucrative side hustle that can pay off down the road.

Transforming the Challenge of a Fixer-Upper into an Opportunity

One thing you could do to help you break into homeownership is consider purchasing a fixer-upper. That’s a home that may be a bit less appealing and as a result has lingered on the market longer than normal. According to a recent article from U.S. News:

“The current state of the housing market may have you expanding your options to try to find a home that you can afford. A fixer-upper that needs some updating and a little love can feel like a welcome alternative to move-in ready houses that go off the market before you can even take a tour.

By opting for a home that requires some work, you may see two big benefits. For starters, you may find it’s easier to find a home because you’re not looking for that perfect option. Plus, it may also help you enter the housing market at a lower price point. This strategy provides a more affordable way to become a homeowner while also offering the potential for future profits.

Yes, the home may need a little elbow grease, but investing time and effort into gradually enhancing your house not only makes it a home but also increases its future market value. So, while you enjoy the satisfaction of turning a house into a home, you’re also building equity that can be unlocked when it’s time to sell.

Renting Out a Portion of Your Home To Make It More Affordable

Another savvy strategy is to purchase a home with the upfront intention of renting out a portion of it. According to a recent press release from Zillow, renting out a part of their home is already very important for most young homebuyers (see graph below):

This approach serves a strong purpose. As Manny Garcia, Senior Population Scientist at Zillow, says:

“For those first-time buyers navigating the ‘side hustle culture,’ where a regular 9-to-5 might not quite cut it for homeownership dreams, rental income can step in to help . . .”

Basically, it can help you afford your monthly mortgage payments. So if you’re open to it, renting out a portion of your home not only helps with affordability, but it also positions you as an investor and turns your home into a source of income.

Bottom Line

In the face of today’s affordability challenges, both of these strategies offer more attainable paths to homeownership, especially for younger buyers. If you want to discuss these options and see how they might play out for you in your local market, connect with a trusted real estate agent.

Is Owning a Home Still the American Dream for Younger Buyers?

Is Owning a Home Still the American Dream for Younger Buyers?

Everyone has their own idea of the American Dream, and it’s different for each person. But, in a recent survey by Bankrate, people were asked about the achievements they believe represent the American Dream the most. The answers show that owning a home still claims the #1 spot for many Americans today (see graph below):

In fact, according to the graph, owning a home is more important to people than retiring, having a successful career, or even getting a college degree. But is the dream of homeownership still alive for younger generations?

A recent survey by 1000watt dives into how the two generations many people believed would be the renter generations (Gen Z and millennials) feel about homeownership. Specifically, it asks if they want to buy a home in the future. The resounding answer is yes (see graph below):

While there are plenty of reasons why someone might prefer homeownership to renting, the same 1000watt survey shows, that for 63% of Gen Z and millennials, it’s that your place doesn’t feel like “home” unless you own it – maybe you feel the same way.

That emotional draw is further emphasized when you look at the reasons why Gen Z and millennials want to become homeowners. For all the financial benefits homeownership provides, in most cases it’s about the lifestyle or emotional benefits (see graph below):

What Does This Mean for You?

If you’re a part of Gen Z or are a millennial and you’re ready, willing, and able to buy a home, you’ll want a great real estate agent by your side. Their experience and expertise in the local housing market will help you overcome today’s high mortgage rateslow inventory, and rising home prices to find your first home and turn your dream into a reality.

Working with a local real estate agent to find your dream home is the key to unlocking the American Dream.

Bottom Line

Buying a home is a big, important decision that represents the heart of the American Dream. If you want to accomplish your goal, begin by talking to a local real estate expert to start the process today.

Is Wall Street Buying Up All the Homes in America?

Is Wall Street Buying Up All the Homes in America?

If you’re thinking about buying a home, you may find yourself interested in the latest real estate headlines so you can have a pulse on all of the things that could impact your decision. If that’s the case, you’ve probably heard mention of investors, and wondered how they’re impacting the housing market right now. That could leave you asking yourself questions like:

  • How many homes do investors own?
  • Are institutional investors, like large Wall Street Firms, really buying up so many homes that the average person can’t find one?

To answer those questions, here’s the real story of what’s happening based on the data.

Let’s start with establishing how many single-family homes (SFHs) there are and what portion of those are rentals owned by investors. According to SFR Investor, which studies the single-family rental market in the United States, there are eighty-two million single-family homes in this country. But how many of them are actually rentals?

According to data shared in a recent post, sixty-eight million (82.93%) of those homes are owner-occupied – meaning the person who owns the home lives in it. If you subtract that sixty-eight million from the total number of single-family homes (82 million), that leaves just about fourteen million homes left that are single-family rentals (SFRs).

Do institutional investors own all of those remaining fourteen million homes? Not even close. Let’s take it one step further. There are four categories of investors:

  • The mom & pop investor who owns between 1-9 SFRs
  • The regional investor who owns between 10-99 SFRs
  • Smaller national investor who owns between 100-999 SFRs
  • The institutional investor who owns over 1,000 SFRs

These categories show that not all investors are large institutional investors. To help convey that even more clearly, here are the percentages of rental homes owned by each type of investor (see chart below):

As you can see in the chart, despite what the news and social media would have you believe, the green shows the vast majority are not owned by large institutional investors. Instead, most are owned by small mom & pop investors, like your friends and neighbors.

What’s actually happening is, that there are people out there, just like you, who believe in homeownership, and they view buying a home (or a second home) as an investment. Maybe they saw an opportunity to buy a second home over the last few years to use it as a rental and generate additional income. Or maybe they just decided to keep their first house rather than sell it when they moved up.

So, don’t believe everything you read or hear about institutional investors. They aren’t buying up all the homes and making it impossible for the average person to buy. That’s just not what the numbers show. Institutional investors are actually the smallest piece of the pie chart.

Bottom Line

While it’s true that institutional investors are a player in the single-family rental marketplace, they’re not buying up all of the houses on the market. If you have other questions about things you’re hearing about the housing market, connect with a trusted real estate professional so you have an expert to give you the context you need.