What Are The Different Types of Loans for Homes?

Buying a home is an incredibly exciting experience, but it can be stressful to figure out how you’re going to finance such a large purchase. There are several different types of loans for purchasing homes, and it can be difficult to decide which one is right for you.

 

From conventional mortgages to government-insured mortgages, here are a few of the main types of home loans you’ll be able to choose from when purchasing a home.

 

Conventional Loans

A conventional mortgage is simply a loan that is not insured by the government in any way. Conventional loans include both conforming and non-conforming loans.

 

A conforming loan is a loan that meets the guidelines established by Fannie Mae or Freddie Mac. These are two government-controlled corporations that buy and sell mortgage-backed securities. Conforming loans conform to the criteria established by these two corporations. Alternatively, non-conforming loans are simply loans that do not meet these standards.

 

Conventional loans are best suited for people with strong credit, a stable income, and the ability to put down a relatively significant down payment.

 

Fixed-Rate Mortgages

Fixed-rate mortgages are loans that maintain the same interest rate over the life of the loan. This means that your monthly mortgage payments will always be the same. Typically, you can expect to get a fixed-rate loan in terms of 15, 20, or 30 years.

 

Generally, you’ll end up paying more on fixed-rate mortgages if you have a longer term. However, these loans make it much easier to budget your income as your monthly payments don’t change.

These loans are typically best for people who plan to live in their homes for at least 10 years as they provide more stability than adjustable-rate loans.

 

Adjustable-Rate Mortgages

Whereas fixed-rate loans offer unchanging interest rates, adjustable-rate mortgages offer interest rates that can increase or decrease over the life of your loan. Often, with these types of loans, your interest rates will remain constant for the first few years before changing to variable interest for the rest of your loan.

 

With these types of loans, it is important to ensure that your monthly payments won’t become unaffordable towards the end of the loan as your interest rate reaches its peak.

Adjustable-rate loans are typically best for people who don’t plan on taking too long to pay off the loan as you could potentially save a significant amount of money due to lower beginning interest rates.

 

Government-Insured Loans

There are three different types of government-insured loans: FHA loans, USDA loans, and VA loans.

FHA loans are typically for individuals with low credit and who aren’t able to afford significant down payments. FHA loans require you to pay two mortgage insurance premiums.

 

VA loans offer flexible and low-interest rates for members of the military. VA loans don’t require down payments but do require a funding fee to help offset the cost to the taxpayer.

Lastly, USDA loans help low or moderate-income individuals and families buy homes in rural areas. To get a USDA loan, you have to meet certain income requirements and buy a home in an eligible area.

 

Jumbo Mortgages

Jumbo mortgages are conventional, non-conforming loans, meaning that the home being purchased exceeds federal loan limits. Jumbo loans are exceptionally common in high cost-of-living areas. 

Jumbo loans tend to offer competitive interest rates, but require expensive down payments. Borrowers must also generally have an exceptional credit history.

 

Due to these requirements, jumbo mortgages are generally only ideal for affluent borrowers who are purchasing an expensive home.

These types of loans are likely what you will be choosing from before purchasing your home, so it’s important that you become familiar with the terms of each and decide which one suits your needs.

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How To Prevent Snow Damage On Your Home

Snow has the power to create a winter wonderland or a snow-apocalypse. The buildup of too much snow can damage your property and if you’re not ready can cost you loads of money. Knowing what to look for is key to preventing major damages to your home. Whether you’re new to experience snow or not it’s always great to know the signs.

 

 

Roof Snow

The snow that sits on your roof can give your home that gingerbread home look but if it sits there too long things can start to turn south.This threat can cause significant damages to your house if you don’t start removing it from your roof. This needs to be done when there’s a major buildup of snow.

 

If you wait too long then what’s called an “ice dam” can form. An ice dam happens when the heat from inside your home melts the snow on the roof which causes the draining water to refreeze at the edge of the roof. The ice wall blocks the water from draining away. The trapped water can then steadily leak into your home, causing substantial property damage.

 

Some ways to prevent this is to constantly remove snow from your roof as frequently as you can when you know a major storm is coming. Also, make sure before that your gutters are clean and clear so that water can flow easily. 

 

Pipes

When water freezes it expands which can cause pipes to burst in your home. Once the ice melts it can create a major leak in your home which will lead to major damages. There are a few steps you can take to prevent this.

 

Make sure your pipes have adequate air circulation. If you know it’s going to freeze then open up the doors below your sink so that warm air can reach. Running water takes longer to freeze so turn your faucets steadily drip. Be sure to disconnect exterior faucets and drain any water they have remaining. 

 

Maintain the Snow

Snow buildup in your driveway can sit there for weeks if you don’t shovel it away. If you wait too long then that snow will become frozen together, creating a painful situation to haul. Clear snow off your cars but make sure you use something safe so that you don’t scratch your car. Any snow left behind can damage your car or if you park on top of it can weaken your tire. 

 

Take a look at your property and know the weak spots where damage is most likely to occur. It’s never too late to start winterproofing your home. It takes work but you’ll thank your past self when you can easily leave your driveway and there are no leaks to deal with. All you’ll have to do is drink warm cocoa and sit by the fire waiting for the snow to melt.  

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What is Affordable Housing & How Do You Know If You Qualify?

There aren’t many things that are more important than having somewhere to sleep at night. Unfortunately, for many people, most housing options are far beyond their means. For this reason, the United States government offers a few affordable housing options for low-income individuals and families. 

 

So what exactly is affordable housing and do you qualify?

 

What is Affordable Housing?

Affordable housing is a general term that includes a few different government-subsidized housing programs. These programs are meant to help provide reliable housing to low-income families, disabled individuals, and seniors. These programs include:

• Government Public Housing:  This could include anything from an apartment to a single-family home. Currently, this is a very popular affordable housing program in the United States; however, this option is actively being replaced by private affordable housing options.
• Private Affordable Housing:  Private real estate investors can also build low-income housing options in exchange for government tax credits. Often, apartment complexes will be built with only a certain amount of units set aside for affordable housing.
• Section 8: Section 8 is one of the most common and the oldest affordable housing program in the country. Landlords participating in the Section 8 housing program are reimbursed by the government for a portion of their tenants’ rent.

Now that you know the main options for affordable housing, you probably need to figure out whether or not you are able to qualify for any of these programs.

 

Do You Qualify?

The requirements for affordable housing programs are fairly straightforward and easy to understand.

 

Eligibility

To be eligible for government-subsidized affordable housing, you need to be classified as a low-income individual or family. According to the federal government, the low-income classification includes people whose combined family income is less than 80% of the median income in your area. For example, if the median income in your area is $50,000, and your household makes $39,999 or less, you might qualify for affordable housing.

Unfortunately, however, just because you qualify doesn’t necessarily mean you’ll be able to move in any time soon.

 

Waiting Lists

Due to limited government funding, affordable housing is only able to be provided to a certain amount of families – under five million. As a result, certain areas have incredibly long waiting lists for families waiting to be placed in affordable housing. Highly populated areas with large low-income populations like Los Angeles can have waiting lists up to 10 years long. If you’re fortunate enough to live in a less densely populated area, however, you might be lucky enough to be placed in an affordable housing program relatively quickly.

Government-subsidized affordable housing programs are one of the ways that low-income individuals and families can put a roof over their head without going further into poverty. Hopefully, this article has given you a better understanding of what is included under affordable housing and how you might qualify for one of these programs.

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Why You Should Buy a Home at The Beginning of the Year

When thinking about buying a home, you need to be strategic. Believe it or not, the best time of year to buy a home is actually in the winter, despite the cooler weather and close proximity to the holiday season. There are a lot of unspoken perks that make the first few months of the year the best time to purchase a home, whether this is your first home or your last. 

 

If you want to land a good deal, better value for your money, and beat the competition, you need to start your home search at the beginning of the year. What better way to start your year off than with the excitement of home shopping? 

 

Why Choose the Beginning of the Year

First, let’s address what’s so special about the beginning of the year. If you’re familiar with the housing market cycle, you know that starter home listings increase and even peak during the fall months. This means there are more homes on the market that are considered “starter homes,” or homes ideal for first-time buyers. 

With this logic, you’d think fall is the best time of the year to buy a house. While this isn’t necessarily untrue, the early bird doesn’t always get the worm when it comes to these listings. Yes, there is a wider selection during the fall months in most regions, but that might not be a good thing depending on your goals. 

 

Unfortunately, in most parts of the United States, first-time buyers have to put an average of 40% of their income towards mortgage payments and this number is only on the rise. Finding a bargain is more important than ever, and that’s where the start of the year comes in. 

Yes, the number of listings increases in the fall, but by the time the clock strikes midnight on New Year’s Eve, things have shifted. Prices for all categories of homes drop just like sales on Christmas merchandise. You’ll find the best deals during the months of January and February, and this makes it prime shopping time for smart home buyers. 

 

The Benefits of Buying a Home in January and February

Now that you understand why the beginning of the year is the perfect time to buy a home, let’s discuss the primary benefits. Besides getting a better deal on all types of properties, you’ll also face significantly less competition. There’s nothing worse than falling in love with a property only to have your offer beaten by the competition. 

Getting the run around on an endless number of properties is tiring, and you’d rather spend your time shopping smart. When you look for a home at the beginning of the year, you don’t have to worry about getting in your offer first or outbidding the competition. 

 

Those homeowners who weren’t able to make a sale in the summer or fall are eager to find a buyer, and they’ll usually accept a lower price. Skip the crowds and the big price tags and opt for the best time of year to find your dream home. 

While you should always conduct your own local research and work with a qualified real estate agent, there’s a lot to be gained by shopping early for your home. There might be fewer homes on the market, but those available will be better equipped to match your budget. Ultimately, you can’t go wrong choosing winter as the time to buy your next home. 

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Top 10 Questions to Ask a Home Seller Before Buying

Buying a home is a big purchase. In fact, it’s probably the biggest purchase you’ll ever make. Over 5.5 million homes were sold in the U.S. in 2018, and that number is only expected to grow in 2019. However, you don’t want to rush into buying a home that isn’t right for you. 

 

It’s easy to get excited by quality photos in the real estate listings. When you’re facing steep competition, you might feel rushed to make a purchase. It’s important to learn as much as you can about the house before you buy to avoid any surprises when you move in. Prepare yourself with these 10 questions to ask your home seller.

 

 

1. Why are you moving?

First, it’s important to get the reason why the homeowners are selling their home in the first place. While there are many reasons to move that are perfectly understandable, you want to make sure they aren’t relocating because of a problem with the home. Most people move because they’re relocating, they are downsizing or upsizing, or they’re facing a big life change. If they don’t have a clear reason for moving, this might be a red flag. 

 

2. What are the average expenses?

You can’t always know how much things like utilities will cost until you move in. For some homes, these can be a substantial monthly expense. Most home sellers are comfortable sharing what they usually spend on things like sewer, water, and electric every month. 

 

3. How are the local schools?

If you’re planning to raise a family, you’ll want to look into the quality of the local schools. The current homeowners might have kids of their own in the local public schools, and they’re a great source of information. Talk to them about the pros and cons of the local school system and if they have any recommendations. 

 

4. How much did you pay for the home?

It’s helpful to know just how much the seller originally paid for the home (and when). It will let you know if you’re in a rising housing market or if local prices have recently lowered. Plus, you’ll also have more room for negotiation if you learn the seller paid significantly under market price. If the seller isn’t open to talking about how much they paid, this information is public record and can be discovered at your local deed office. 

 

5. How old are the A/C unit, water tank, and roof?

Next, you want to ask about some of the more expensive aspects of the home. The A/C unit, water tank, and roof can be big repairs if something goes wrong. Learning how recently they were installed or repaired will help you understand what you have in store once you’re the homeowner. The last thing you want is to move in and discover the A/C unit hasn’t been repaired in a decade!

 

 

6. Have there been any major repairs?

Similarly, you’ll want to ask about any major repairs done on the home. Depending on your state, home sellers need to be upfront about any current problems on the property. This doesn’t usually extend to past problems, so see if they’ll be willing to discuss these things with you. 

 

While a past problem doesn’t mean there’s anything currently wrong with the home, it might indicate that another problem will arise in the future. In addition to asking about repairs, confirm these repairs were completed by a professional. 

 

7. Were there any structural changes?

Structural changes like adding a room, patio, or changing the layout of a home can have a lasting impact on the property. Not only should you be aware of these additions, but you’ll also need to make sure they were approved by the county. Once again, a structural change doesn’t necessarily indicate a problem, but it’s something to be aware of. 

 

8. How long has the home been on the market?

Houses usually stay on the market because they weren’t priced well when they originally listed for sale. In most cases, they were listed too high. These listings will become stale over time and might turn off other buyers. The longer a home is on the market, the more negotiation power you have as a buyer. 

 

9. What’s included in the home sale?

While you might think everything in the home is included in the sale, that’s not always the case. Anything that is permanently attached is usually included but not always. There is sometimes a gray area when it comes to things like faucets, window blinds, or even cabinets. Talk to the buyers about what’s included in the home sale so you aren’t caught off guard. 

 

10. How are the neighbors?

Finally, ask about the local neighbors. There are a lot of reasons why a great home can be tainted by poor neighbors. Frequent speeding on local roads, persistent traffic, and loud neighbors might be a reason to consider another property. Aside from researching local crime statistics, talk to the current homeowner about their experience in the neighborhood. 

 

You can also see for yourself how the neighborhood is. Check for potential red flags like litter, poor maintenance, and signs of crime. Aside from this, trust your gut when talking to the home seller about any neighborhood nuisances. 

 

As you can see, there are a lot of key questions to ask the home seller before you make a purchase. The more you can learn about the home before you close on the sale, the better. These 10 questions above will ensure you’re ready to make this big decision with confidence. 

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How Bad Credit Can Prevent You From Qualifying for a Home

Credit is an incredibly important aspect of your financial history which can, unfortunately, prevent you from qualifying for a home. Credit allows potential sellers and mortgage lenders to review your financial history and determine if you’re a reliable borrower.

Having bad credit can make it much more difficult to qualify for your dream home due to these reasons.

 

Prevent You From Getting a Loan

First and foremost, bad credit can make it incredibly difficult to convince banks, credit unions, or other institutions to lend you money. In order to qualify for a traditional mortgage, you typically need a credit score of at least 620, likely higher for first-time homeowners. 

Without a credit history that shows your financial responsibility and ability to commit to a long-term payment structure, lenders will be wary of letting you borrow large amounts of money.

 

Higher Interest Rates

Even with bad credit, you still might be able to find a lender willing to lend you money to purchase a home. However, it will almost definitely have a much higher interest rate than normal.

As a bad credit score generally indicates that lending you money is a high-risk decision, lenders will offer higher interest rates to counteract the risk. As a result, you might find that the interest rate you’re offered makes it impossible for you to afford the mortgage in the long-term.

 

Larger Down Payments

Additionally, lenders might require you to put forth a much larger down payment before they are willing to lend you money. This is another way lenders minimize their risk when dealing with borrowers with poor credit history.

For many individuals, the down payments required to qualify for a loan may be out of reach as they can be fairly significant. As a result, this is one of the many ways that bad credit can prevent you from qualifying for a home.

 

High Insurance Premiums

When you take out a mortgage, your home is the asset that is used to secure the loan. As a result, mortgage lenders typically require borrowers to have homeowners insurance to protect the home in question.

Unfortunately, bad credit can make it difficult to qualify for the insurance you need to protect your home and satisfy the requirements of your loan. Even if you are able to qualify for insurance, the premium may be too expensive due to your bad credit.

 

Not Able to Qualify for a Large Enough Mortgage

Lastly, while you might be able to find a suitable lender, and you might even be lucky enough to qualify for reasonable interest rates, you might not be able to borrow as much as you need to pay for your desired home. Due to the risk of lending to you, lenders might only let you borrow up to a certain amount just in case you default. As a result, you might not be able to afford the price of homes in your local real estate market.

Your credit history is incredibly important as many financial institutions will rely on it to determine whether or not you are a reliable borrower. As a result, bad credit can prevent you from qualifying for a home in your local market.

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The Average Spending Costs for Living in California

As the most populous state in the country, California is an extremely popular destination for people to call home. However, California can also be one of the most expensive states in the country to live in.

From increasing housing costs to high income tax, there are a lot of costs to consider when calculating how much it costs to live in the Golden State. Hopefully, this short guide will give you a good understanding of the average living costs in the state.

 

Housing Costs

Housing is the highest living cost that almost everyone has to account for. Of course, depending on where you choose to live in California, housing costs will fluctuate. For example, according to Zillow, the median two-bedroom home price in the state’s poorest county is just over $150,000. Alternatively, Santa Clara County has a median two-bedroom home price of over $600,000.

If you plan to rent instead of buy, you can expect to spend about $1,600/month for a studio and upwards of $2,000/month for a two-bedroom apartment.

 

Transportation Expenses

California’s many crowded cities like Los Angeles and San Francisco are notorious for their traffic. If you live in an area where you need a car, you can expect to pay approximately $3.30 per gallon of gas.

Alternatively, California offers many public transportation options, depending on where you live. For $100/month, you can get access to LA public transit and $83 gives you access to San Francisco’s public transit and BART systems.

 

Utilities

If you’re lucky, your apartment’s rent will include utilities. However, most people are responsible for paying for their own utilities.

Fortunately, California’s utility costs are relatively low. California residents pay an average of about $91/month on energy compared to the U.S. average of over $100/month.

 

Food Costs

Food is a significant living cost no matter where you live. While food costs vary throughout the state, you can expect to spend approximately $300/month on food if you are an adult with no children. Of course, this amount could easily increase if you plan on taking advantage of the amazing cuisine found throughout the state.

 

Taxes

California is known for its extraordinarily high income taxes. In fact, California has the highest income taxes in the entire country. However, depending on your tax bracket, tax rates vary significantly. For individuals in the highest tax bracket, the tax rate is 12.3% with an additional 1% surcharge used to fund mental health programs. On the other hand, individuals in the bottom tax bracket only pay 1% in California income taxes.

 

Moreover, California has a base sales tax rate of 7.5% with some cities, like LA, charging up to 10% in sales tax.

While California has high tax rates in certain areas, it actually has relatively low property tax rates. The average effective property tax rate in the United States is nearly 1.2% compared to California’s 0.8% rate.

 

As moving to California is an incredibly attractive option for many people, it is important to consider the true cost of living in the Golden State. Hopefully, this guide was able to give you a better sense of the average living costs in California.

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