Quick Finance Lesson: FHA Loans

This week we are focusing on a little finance -- always a great way to spend some time! The FHA loan is quite popular in our local market, and since it is government-insured, it often seems confusing for many buyers, so we're going to break it down today. It's a great option for many buyers which is why we need learn a little more about this type of home loan. And remember, like other home loans, it has its pros and cons.

The FHA loan -- FHA meaning the Federal Housing Administration -- is actually the largest insurer of residential loans in the world. The Federal Housing Administration has been around since 1934 and has insured tens of millions of loans in the decades since in the United States and its territories. As a division of the U.S. government's Department of Housing and Urban Development, the FHA doesn't actually lend the money to borrowers. Its purpose is to insure the loans issued by approved banks. As a home buyer, your financing is still being provided by your local bank, but the FHA loan gives that bank extra insurance in the form of mortgage insurance, which ultimately is paid for by the borrower over the life of the loan.

This extra insurance from the FHA allows banks to lend to borrowers with less stringent guidelines to qualify for financing, and FHA loans often have attractively low interest rates as well. Initially, the purpose of the FHA loan was to provide a way for low-income and first-time buyers to purchase a home they couldn't otherwise afford with traditional financing. As long as borrowers met the qualifying requirements of employability, job stability, and reliability, they could get an FHA loan to purchase their home.

In today's market, there are more specific guidelines to qualify for FHA financing. Current requirements cover items like mortgage lending limits, debt-to-income ratios, and even closing costs for a particular property. The FHA determines the amount the buyer qualifies for because it reduces the risk for lenders who issue the loan, a very real concern for many banks who have dealt with borrowers defaulting on their payments over the past 5-7 years. If you are interested in pursuing FHA financing, be prepared to provide a hefty amount of financial and employment records that will be used to determine the loan terms. Additionally, FHA loans only cover single family and multi-family units up to 4, so borrowers would need a special loan to purchase a condo or apartment housing more than 4 units. Of course, in our market those are a bit more rare and specialized type of purchase, so you would just want to get additional guidance from your lender.

While there are some extra tasks associated with applying for an FHA loan, if you qualify, it could very well be worth your effort. For borrowers with great credit, you can get a mortgage with a down payment of as little as 3.5% of the purchase price, and the down payment funds can even be a gift from an approved source. This is a huge benefit for buyers who may not have a five-figure nest egg to put down on a house. Another attractive feature of the FHA loan is that it provides some avenues of relief for borrowers who experience a major financial trauma and suddenly have problems paying their monthly mortgage. Should that situation arise, homeowners need to get in touch with their loan officer immediately to work out the details. 

Current FHA rates with Excellent credit score according to Lending Tree:

30 year fixed: 3.875%

15 year fixed: 3.375

The bottom line is that this form of mortgage financing is a great option for many types of buyers, and while it may be a bit of an inconvenience to provide the detailed records and documentation initially required by the lender, the excellent terms of the loan and option for a low down payment make the effort worthwhile. Our advice? If you're preparing to buy a home, ask your ERA First Advantage agent for some local FHA-approved lenders to meet and discuss all your options. You mortgage officer is your best resource for accurate, current information regarding loans, FHA and others. Let him or her help you determine your best fit as you prepare to buy your new home.

Ready for Spring! Get a Head Start on Your Garden

What is happening with this weather today? We are definitely getting a taste of spring and all the warmth, sunshine, and outdoor activities that we will enjoy soon. We have been discussing yards and gardens a lot lately in the offie and with clients as we (im)patiently wait for brighter days, so it seems like a good time to discuss our early garden planning. We all know that nice gardens add tremendous curb appeal to a home, so if you're thinking of selling or are getting ready to buy a home that lacks plant life, today's post will be very helpful for you.

It is definitely not too early to begin preparing your garden arrangements now, especially if you want to make some significant changes to your landscape. You need to consider your budget, new/existing plants, when to buy & plant, plus any relocating of plants.

The first item to consider in your planning is your budget. We only note this first because costs can get out of hand very quickly in the gardening world, even at places like Lowe's and Walmart that are very reasonably priced. Landscaping and gardens are an investment, but we want to be careful to keep resale and long-term maintenance cost in mind as well.

• Plan for your largest investments first. Are you buying any trees or having any new rocks or beds made in the yard? Those will incur the most costs.
• Next, how many plants will you need? When you map out your landscaping areas, always note how large each item will get. Your yard will fill up quicker than you think.
• Other than shrubs/flowers, what else do you need to buy? Do you need to put down fresh mulch or rock this year? How many bags of potting soil and fertilizer do you need for freshening the flower beds?
• Are you going to do a vegetable garden? There are some extra costs associated with building a raised bed and building scaffolding for the vegetable plants.
• Check around for pricing on your chosen plants. We are lucky to have an abundance of nurseries, landscapers, and grocery stores that carry garden supplies, so you can shop around a bit.

After you have a budget in mind, begin researching what you want to plant.

If you're starting from scratch, this might be a challenge. If you are able, schedule a consultation with a landscaper or friend who is a gardening veteran to get some help planning what you will need. The right landscaping can completely change the way your home looks, so you want to think through your plants & invest right. You don't have to pay a professional to install everything for you, but it might be nice to get their input on what you should do. If you are not able to work with a professional, this guide from Martha Stewart is the best help we've found! You can't go wrong with Martha, right?

If you've got some existing plants and just want to freshen and liven up for spring, you can simply start researching what grows well in our region. The Tri-State is in Hardiness Zone 7, so be sure you set your sights on trees, shrubs, and flowers that will be happy in our area. Those will be the easiest to grow and will fare best in our climate.

Next, if you want to scatter some seeds, the next few weeks will be a good time to do that. Many seeds actually need a period of cold before they sprout. If you aren't comfortable putting the seeds outside, most will do well growing in containers in a sunny area of your house until early spring. This would be a great project to try with school-age kiddos, and it would give everyone some ownership over what is being planted in the yard. A few fun options to try are:

• Flanders or Corn Poppies
• Larkspur
• Foxglove
• Hollyhock
• Dianthus
• Snapdragon

Before you actually plant flowers or new shrubbery, keep our last killing frost date in mind, which is April 1-30. If you plant during the month of April, you do risk losing some plants to that last frost we tend to have in our area. Our meteorologists are typically really good about warning local gardeners of a spring frost, so you can always place blankets over the plants if you just really want to plant early. Let's hope for a warm April this year!

Finally, if you're thinking of beginning a compost bin, now is the time to get started on that. Use this guide to make your own compost; it is a little gross when you think about what goes into the mixture, but we promise your plants will love it! You will enjoy bigger blooms, greener leaves, & faster growth because of all those nutrients.

What else are you looking forward to doing with your garden this spring? Share with us, and please also share any gardening tips you've picked up! Enjoy this first taste of spring-like weather! It is a bit short-lived, but warmer days are coming!

Embracing Top Home Trends

Is anyone else getting just a bit stir-crazy and ready for the freshness and new life of spring? We are, and we think this is the perfect time to think about implementing some fun updates around the house. This time of year is always exciting because the approaching spring season means a fresh start, whether that means a big move or simply changing some things up around your current home. This week's blog is a fun one because we are sharing 5 of our favorite trends for 2018. There are a lot -- just check out Pinterest or some home design websites if you want to peruse them all -- but the ones we want to share appear to be the easiest to implement in updates, renovations, and new construction.

We chose these particular trends because they will help you create a cozy, updated, stylish, and livable home that will attract buyers should you decide to move.

Here are a few of our favorites:

1. Natural Elements - This is not the terracotta tiles from the 80s! The new natural stone look has a matte, very natural finish. Picture the look of a coastal California home that features the limestone, natural brick, and cobblestone finishes. It will be big for use as an accent wall, flooring, and to surround fireplaces. This is a beautiful range of materials that adds warmth and character.

2. Bold Hues -- especially green - This hue is going to be seen a lot in bedrooms and living rooms. While we continue to see a great deal of hunter shades of green, olive is going to be everywhere this year. Use it on your walls as a backdrop for tan, rich leather, weathered brass, and linen finishes. It adds depth and sophistication to a room otherwise adorned with neutrals and a little rustic edge. Your resident blogger has also been scoping inspiration for olive green kitchen cabinets. Stunning!

3. Warm Color Palettes - This just looks cozy, right? The warmth and neutrality of this space is so soothing and inviting. While we will see some bold color choices this year, warm neutrals still reign supreme, especially in bedrooms where we want to keep things classic. However, don't be afraid to use some patterns and colorful accents. The bedspread or a cushy rug is the perfect way to add some personality.

4. No Space Left Behind - We all know how expensive a new home can be, so one trend we are really embracing is creative use of space. You don't need a 3,000 square foot home to have all the spots you need to live and work. Try to think of news ways to utilize the space in your home or a home you're building. Carve out a reading or work nook, add some built-ins, and consider finishing out that attic or basement to add usable space in your home.

5. Lavender - This color is definitely not just for use in nursery decor. It is admittedly a bit feminine, but with updated finishes it is modern and fresh. Adding lavender to a room will completely change its vibe, adding softness and sophistication. Use it on your walls (personally love it for a powder room), rugs, or upholstery. It is soft and inviting, so it will add instant impact wherever you incorporate it.

So, what do you think? Will you use any of these in your home or new construction in 2018? Share some other upcoming trends that you love as well!

Bouncing Back from a Low Appraisal

One of the worst feelings a seller (and agent) can experience during a real estate transaction is the gut-punch delivered by a low appraisal. I have worked through this situation both as a realtor and homeowner, and I can attest that neither “side” has the easier task to get back on track after this setback.

 As an agent, I can think of two or three separate occasions in which the appraisal from the buyer’s lender came back lower than the purchase price. I can assure you that your ERA First Advantage agent will do everything in his or her power to prevent  lowering the price and losing a lot of money as a result of the appraisal. And of course, we never want the sale to fall through and potentially lose a sale or new home for our clients. Often, we can try to make some strategic fixes and adjustments. As a result, in some transactions, we can manage to bridge the gap between the appraisal value and purchase price. It's always worth a try.

Personally, your resident blogger experienced a low appraisal as the homeowner, or at least as a very involved and interested party. Shortly before my husband and I got married and bought our home in Evansville, he had to sell his house in another town. He had lived there for about two years. He had gotten a great deal when he purchased the home, and made some nice updates while he was there. When the appraisal value came back at about $20K less than the buyers’ purchase price, we were stunned. That’s a truly significant difference! We were planning to use the money from the sale for a down payment on a home in Evansville. Imagine our fear of losing twenty thousand dollars in our budget. It was quite troubling and stressful.

 We were much younger and less savvy at that point, so I deeply appreciated the advice the listing agent provided for us. In this post, I’d like to share a few ways you can help “right the wrong” of a low appraisal. As an agent, I, nor any ERA First colleague, can make no guarantees, as we are not the professional appraiser assessing the home. That said, these are some steps homeowners and agents can take to potentially get that value increased. It’s a discouraging situation, but doing as much as possible to fight back is well worth the time and effort.

Request a copy of the appraisal report. If you have the report in-hand, you can see exactly what criteria was checked to determine the value of the home. The report should also provide the comparable homes the appraiser referenced as well. Be sure to double check all the measurements for square feet and the numbers of bedrooms and bathrooms to ensure accuracy.  If you see anything that doesn’t look right in the report, tell your agent and the lender immediately.

Go over the comps with a fine-tooth comb. Appraisers use comparable homes as a significant factor in determining your home’s value. Look carefully at the size, age, condition, location, lot size, and amenities for your home and the comps. Also look at when each home sold because market values tend to fluctuate even over just six months. This is really the best tool you have to use as proof that your home is worth more. What does your property have that others don’t? Why is it worth more in this sale?

Compile data on improvements and updates. This is something my husband and I did for his home when we dealt with the low appraisal. What updates have you made to the home that have increased its value? List everything, even small updates like improvements to the landscaping. It all matters in this situation. It’s even more helpful if you can provide receipts or invoices for work that was done to prove cost added into appreciation of the home. Be thorough and as detailed as possible in this task.

Get a second opinion. My recommendation is to have your realtor tackle this step, especially if he or she is gutsy and tactful enough to make the appraiser question some of the conclusions in the report. It’s a bit risky but can be tremendously effective if approached professionally and back-up data to support higher value.

Whatever you decide to do, fight for your home’s value and the work and care you’ve put into it. Do not settle for a low appraisal, whether you’re refinancing or selling. Oh, and in case you were wondering how that personal situation I mentioned was resolved… that list and a second opinion worked! We provided a typed, detailed rundown of everything he had done to improve the home throughout his two years as owner. Fortunately, the Realtor worked well with the buyer’s agent and they worked together to take the case to the lender. The outcome was an appraisal value of just $1,000 less than the purchase price. We were, of course, willing to negotiate with those terms.

 While you must be objective and understand why the appraiser is adjusting value a certain way, remember that you still have some power as a homeowner and can challenge a report you deem inaccurate. It’s worth every penny!