Equity Is a Game Changer for Homeowners Looking To Sell

SOURCE: Keeping Current Matters
If you’re a homeowner, you might be torn on whether or not to sell your house right now. Maybe that’s because you don’t want to take on a higher mortgage rate on your next home. If that’s your biggest hurdle, understanding your equity may be exactly what you need to help you feel more comfortable making your move.

What Equity Is and How It Works

Equity is the current value of your home minus what you owe on the loan. And recently, that equity has been growing far faster than you may expect.

Over the last few years, home prices rose dramatically, and that gave your equity a big boost very quickly. While the market has started to normalize, there’s still an imbalance between the number of homes available for sale and the number of buyers looking to make a purchase. And it’s because homes are in such high demand that prices are back on the rise today. Rob Barber, CEO of ATTOM, a property data provider, explains:

“Equity levels were high even during the recent downturn, and now they are going back up and better than ever.”

How Equity Benefits You in Today’s Market

With today’s affordability challenges, that equity can be a game changer when you move. Here’s why. Based on data from ATTOM and the Census, nearly two-thirds (68.7%) of homeowners have either paid off their mortgages or have at least 50% equity (see chart below):

That means roughly 70% have a tremendous amount of equity right now.

Once you sell your house, you can use your equity to help with your next purchase. It could be some (if not all) of what you’ll need for your next down payment. It may even be enough to allow you to put a considerably larger down payment on your next home, so you don’t have to finance quite as much. And, if you’ve been in your current house for years, you may have even built up enough equity to pay in all cash. If that’s true for you, you’d be able to avoid borrowing altogether, so you wouldn’t have to worry about today’s mortgage rates.

How To Find Out How Much Equity You Have

The best way to learn how much you have is to reach out to a trusted real estate agent for a Professional Equity Assessment Report (PEAR).

Bottom Line

If you’re planning to make a move, the equity you’ve gained can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, connect with me so I can support you through the process.

SOURCE: Keeping Current Matters

The Passive House: What It Is and Why You Should Care

SOURCE: Houzz

If you don’t understand passive design, you could be throwing money out the window

The term “passive” is getting thrown around almost as frequently as the word “green” these days. But what does it actually mean? And how does the all-encompassing adjective differ from the measurable standards of the capitalized Passive House?

I’ve mentioned before that the truth of green building is in the details. Here’s how to understand the vocabulary and the implied meanings in the world of passive design.

Decoding What People Say

“This house was designed with passive solar principles” means the orientation of the house and the placement of windows have been used to gain heat through natural daylight. Perhaps shading for hot summers was also considered. These are the first and most fundamental steps toward reducing the energy consumption of a house.

“This house was designed to Passive House principles” means that the architect and builder, of their own accord, decided to pursue a set of measurable building standards that promote low-energy consumption. The term originated from Germany’s Passivhaus.

“This house is a certified Passive House” means that in addition to the house’s being designed and built to the Passive House standard, it has successfully undergone a certification process. Certification is managed by various entities all over the world. The original was the Passivhaus Institute in Germany, which is still widely regarded as the “gold standard” and most stringent set of performance metrics available. In the U.S. there is a second certifying institute, Phius, which has created a separate standard with similar and slightly less demanding criteria. Both of these certification paths require that project teams submit proof of performance and require third party accountability.

So, what is the Passive House standard, anyway?

Contrary to the impression the word may give, passive homes are anything but lazy. A house designed to take advantage of the solar heat streaming through a window is actively saving energy. Taking it a step further, and into the realm of the Passive House building standard, a house can be designed to work hard in every season to maintain a comfortable and healthy indoor living environment, without consuming superfluous energy.

A home built to the Passive House standard is one that remains comfortable through all seasons without employing an active heating or cooling system.

Depending on your country and the localized standards, a project must meet maximum annual energy consumption limits to be considered. Historically, and still in Europe, this was 15 kilowatt-hours per square meter each year. The U.S. standard has since made changes to that limit in an attempt to address specific climate zones.

However, as an order of magnitude, we’re talking about 60% to 70%, sometimes even more, in energy savings relative to conventional buildings.

How can that be possible? Well, in a Passive House, all of the energy that would be needed to heat or cool the building is no longer needed. Let me explain.

We Passive House architects start out with a compact building shape. You’ll notice that most Passive Houses are essentially a box in form. We can then add visual intrigue by using unconditioned outdoor rooms and covered spaces to break up the facade. This compact box core, however, is essential and is the basis of any concept of efficiency.

In the winter passive solar design takes as much heat as possible from the sun. This means orienting the house toward the sun’s path and making sure that the winter sun’s low angle is able to penetrate as much of the inside of the home as possible.

We add to that the heat that is created in the house just from people being there. (You’d be surprised at how much heat is generated from normal daily activities, like cooking, cleaning, using the computer and running home appliances.)

We use mechanical ventilation to keep the air fresh, heating the incoming air with the exhaust air. And we use dehumidifiers to maintain healthy moisture levels and prevent mold.

In the summer, we take advantage of shading devices and the high summer sun angle. In this way we can stop the sun from reaching windows, floors and walls, helping to keep them cool.

Then we make sure not to let heat pass through the building’s skin by designing a sealed and insulated building envelope.

This photo shows rock-wool insulation. Unlike LEED, the Passive House standard does not require that you use natural or recycled materials. Certification is based on energy performance alone.

Not only do the walls, slabs and roof need to be properly insulated, but so do all of the openings. High-quality windows are one of the biggest up-front expenses in a Passive House, but they contribute to a large portion of the energy savings.

We can insulate like crazy, but if we use subpar windows, all of the heat will exit through the glass. The building envelope, which is like its skin, is only as strong as its weakest point.

I often describe the building envelope as being like an inflated balloon. One hole in the balloon, and all the air will escape. It doesn’t matter how sturdy the rest of the balloon is.

So not only do we want to have a consistently insulated building envelope, but we also want to avoid any air leakages where hot air can escape in the winter or enter in the summer.

One way the Passive House standard verifies the absence of air leakages is with the Blower Door Test, in which the entire house is closed up and air is pumped inside. A gauge, shown here, then measures the air-flow rate relative to the volume of the house.

Tests like this, along with energy simulations, measure whether a home is built to the Passive House standard.

Whether or not a Passive House is valid without official certification is an ongoing discussion. Some professionals believe that certification is an added and redundant expense. Others say it adds transparency and verification to the whole process, keeping everyone accountable to goals. Some homeowners find it a necessary part of adding market value to their house. Others don’t see the point, especially if they are not intending to sell.

Above all, it is vital that you trust your project team and understand the entire situation. The word “passive” is not trademarked, as LEED is, so make sure you understand the context in which it is being used.

SOURCE: Houzz

First-Time Homebuyer Programs to Help You Afford a Mortgage

SOURCE: Realtor

Conventional wisdom says you need a 20% down payment to buy a house, but let’s face it: That sum can be daunting, particularly for first-time homebuyers who don’t have a pile of cash from a property they have just sold.

The good news is that the average down payment for first-time homebuyers can be as low as 3.5% depending on what type of mortgage you get or grants programs you are eligible to apply for.

Even still, coming up with a decent amount of cash when you’re first starting out can be tough. Thankfully, there are a number of first-time homebuyer programs aimed at helping you get a loan.

Don’t know where to start? No problem. To point you in the right direction, we’ve compiled a list of loan assistance programs you should check out if you qualify as a first-time homebuyer.

Who qualifies as a first-time homebuyer?

A first-time homebuyer is not just someone who’s never purchased a home before. You could qualify as a first-time homebuyer if you or your spouse haven’t owned a home in three years. The term also extends to recently divorced persons who have only owned a home jointly with a spouse.

There are some other limitations to who qualifies. You might not be eligible for one of these first-time homebuyer programs if your income exceeds a certain amount, you want to buy a more expensive property, or you plan to buy an investment or rental property.

Now that we have the fine print out of the way, let’s look into some first-time homebuyer assistance programs that might be perfect for you.

FHA loans

The Federal Housing Administration offers a program that allows first-time buyers to purchase a home with as little as 3.5% down. One caveat—and it can be a serious one—is the mortgage insurance requirement on an FHA loan.

Unlike a conventional loan, where you no longer have to pay mortgage insurance once you reach 20% equity in your home, FHA loans require you to pay mortgage insurance throughout the life of the loan at whatever the rate was when you first closed your loan, unless you refinance. Still, it’s hard to beat the low down payment for those who are short on ready cash.

VA loans

As a veteran or active service member of the United States military, you qualify for 100% financing with a VA loan, which means no down payment and no need to purchase private mortgage insurance. Most reservists, National Guard members, and spouses of military members who died while on active duty may also apply.

To qualify for a VA loan, you’ll need a certificate of eligibility and a good debt-to-income ratio, and you’ll have to meet VA and lender guidelines for credit score. Borrowers are responsible for paying a fee, but in certain situations (such as if you we disabled during your service) the fee can be waived.

USDA loans

Wait, the people who certify your beef can also help with your down payment? Yup! If you qualify for the U.S. Department of Agriculture’s Rural Development Guaranteed Housing Loan Program, you’ll receive 100% financing—no down payment necessary.

The properties must be in areas with a population below 35,000, so they are primarily rural areas, although some suburban areas could qualify.

These loans are available only to families demonstrating need—they are without current safe housing and have an adjusted income at or below the local limit. Keep in mind that the limit can be relatively high in pricey areas like California, where a $232,200 income (for a family of four) can get you a USDA loan in some counties.

National Homebuyers Fund

The National Homebuyers Fund provides down payment assistance in the form of a nonrepayable grant, for up to 5% of the loan amount. You read that right—you don’t have to pay back anything. The NHF offers two down payment assistance programs with different sets of requirements, but both are meant for low- to moderate-income earners.

The NHF Sapphire program is available in multiple states and has generous FICO score requirements (which is a good thing if you have a subpar credit score). Ask your mortgage lender if this program would be applicable to you.

Local programs

Many states and counties have a wide variety of down payment assistance programs for first-time buyers. For example, the Colorado Housing Finance Authority offers a portfolio loan that allows a consumer to pay only 3% down and has no mortgage insurance requirement. While this program is specific to Colorado, many other states have similar products.

While these programs provide only down payment assistance, David Hosterman, branch manager for Castle & Cooke Mortgage, in Denver, recommends checking with your real estate agent for assistance in getting seller concessions to help with closing costs.

“In many cases, consumers can get into a house with no money down,” he says, although he cautions that there are still out-of-pocket expenses associated with buying a property, such as an appraisal and home inspection.

Many of these local programs have specific requirements, such as for the buyer to complete a homebuying class before obtaining the grant.

To find more information about loan programs for which you are eligible, check with your lender to see what might be available in your area.

SOURCE: Realtor

Eco-Friendly, Energy-Efficient Homes Attract Buyers

SOURCE: Keeping Current Matters

Are you planning to sell your house? If so, you may be surprised to hear just how much buyers value energy efficiency and eco-friendly features today. This is especially true as summer officially kicks off.

In fact, the 2023 Realtors and Sustainability Report from the National Association of Realtors (NAR) shows 48% of agents or brokers have noticed consumers are interested in sustainability.

 So, if you’re considering selling your house, why does this matter to you? It helps you know what you can do to make your house even more appealing to today’s buyers. According to Jessica Lautz, Deputy Chief Economist and VP of Research at NAR: 

“Buyers often seek homes that either lessen their environmental footprint or reduce their monthly energy costs. There is value in promoting green features and energy information to future home buyers.”

Consider Upgrading Your Home To Make It More Appealing

If you want to upgrade your house in a way that maximizes its green appeal, you need to work with a local agent to understand what buyers in your area are looking for. The same NAR report identifies the following green home features as most important to buyers at a national level: 

• Windows, doors, and siding

• Proximity to frequently visited places

• A comfortable living space

• A home’s utility bills and operating costs

While you can’t change the location of your house, you can take action to make sure it’s as comfortable as possible while also setting up the next owners for lower operating costs. ENERGY STAR shares some suggested upgrades as ones that may be worth considering:

• Heating and cooling: Ensure your HVAC system is properly maintained and regularly serviced to maximize its efficiency. Consider upgrading to a high-efficiency model, if needed.

• Water heater: Your water heater uses a lot of energy. Upgrading to a heat pump water heater can significantly reduce energy consumption and appeal to environmentally conscious buyers.

• Smart thermostat: A big part of your energy bill goes to heating and cooling. Install a programmable thermostat to better regulate temperature settings. This not only enhances comfort but can also lower energy usage.

• Attic insulation: Proper sealing and insulation in your attic help prevent air leaks and maintain a comfortable temperature, reducing the strain on heating and cooling systems.

• Energy-efficient windows: Replacing old, drafty windows with energy-efficient ones can minimize heat transfer and lower your energy bills.

 It’s worth noting that you may be able to take advantage of tax credits and rebates for energy-efficient home installations and upgrades. These incentives could help offset a portion of the costs associated with eco-friendly home improvements.

As you prepare to sell your house, it’s important to recognize that real estate agents are valuable resources. They can help you determine which upgrades would be most appealing for buyers in your area and provide guidance on which green features to highlight in your listing. If you’ve already made these updates recently, tell your agent so they can feature them in your listing.

Bottom Line

Focusing on energy efficiency and eco-friendly features can help make your house more appealing to buyers today. Connect with me to ensure you’re choosing the right upgrades for your area.

SOURCE: Keeping Current Matters

Everything You Need to Know About Loan Estimates

SOURCE: Freddie Mac

Receiving multiple loan estimates gives homebuyers a better idea of the amount of money they can borrow to purchase a home. Learn more about what loan estimates are and what you need to do to prepare before seeking them out.

What is a loan estimate

A loan estimate is a standardized three-page document that outlines the terms of a proposed loan. Your lender will prepare a loan estimate for you based on information provided in your loan application. The purpose of a loan estimate is to give you the details of a loan before deciding if the loan is right for you.

Before requesting a loan estimate, you should also gain a better grasp of your finances to see how much home you afford.

What information should be on loan estimate?

The form uses plain language and is designed to present information clearly to borrowers. While the loan estimate is not a binding agreement, it should provide an accurate picture of the loan terms your lender intends to offer if you decide to move forward with them.

When reviewing your loan estimate form, you should carefully review the following sections:

• Loan Terms: Here you will find the total amount of the loan, the interest rate the lender is offering as well as the monthly principal and interest (the amount of money being borrowed in addition to the lender’s interest for lending out the funds, paid out monthly by the borrower).

• Projected Payments: This section will give you an idea of your monthly payment, calculated for the length of the loan. Along with the total monthly payment amount, you will see a breakdown showing what portion goes to principal and interest, mortgage insurance and estimated escrow.

• Loan costs and other costs: Loan costs include origination charges, application fee(s) and the underwriting fee. Also included are the other costs: taxes, mortgage insurance premiums, prepaid interest and property taxes.

• Calculating cash to close: This section breaks down the itemized list of costs that you will need to cover to close your loan. This typically includes down payment, deposits, fees and funds from the borrower.

• Comparisons: This section compares the loan terms to others and shows the potential savings provided by the lender’s loan offer.

• Other considerations: Included in this section are a few additional options that the borrower can opt in or out of, depending on their preferences. Topics covered include appraisals, assumptions, homeowner’s insurance, late payments, refinancing and servicing.

Shop Around and Compare Loans

Loan estimates will include their expiration date at the top of the first page and are good for ten business days from the original issue date. Given the brief window, we recommend that you request multiple loan estimates from different lenders and shop around to narrow down your lending options.

Borrowers who compare multiple loan estimates are more likely to save money in the long run. Getting multiple estimates will allow to make a more informed decision before selecting a lender and/or loan product.

SOURCE: Freddie Mac