Category: Home Buyer

VA Loan Appraisal Requirements, Process, Cost and Fees

woman working on paperwork for a va loan appraisal

VA loan appraisal requirements are not like a lot of the VA requirements you hear about. There’s no getting around this one. The VA loan system won’t give you their blessing for your VA loan mortgage without it. The good news is they have a large network of VA-approved appraisers and one of them will be assigned to your case. You don’t have to do much, but understanding the ins and outs of the appraisal will help you navigate the VA loan process.

We want to stress that the VA loan appraisal requirement is not optional. There are a lot of so-called VA requirements out there: credit scores, loan limits, etc. A lot of those requirements do not come from the VA but rather from the private lender who will be approving your loan. This is not one of those. The VA home appraisal process is required, so here is what you need to know.

VA Loan Appraisal Requirements Are Not an Inspection

It’s easy to mix up the two, but a property appraisal is not the same as a home inspection (though there might be some overlap). The appraisal is a financial look at the home and tries to establish how much the property is worth.

It does that by looking at comparable homes, nearby houses and coming up with a dollar figure. It also looks at the house to make sure it’s in good shape, i.e. that it is worth what the seller is asking for in terms of price.

Home inspectors look at the property in terms of functionality, and not financially. The inspection goes deeper and looks at every part of the house to determine if it’s move-in ready. It doesn’t look at what the property is worth.

It looks at what might need fixing or changing before the buyer moves in. The inspection protects the buyer from surprises that might cost a lot in the near future. For example, is the roof at the end of its useful life and will it need replacing soon? Or is the plumbing on the verge of bursting? Or is the foundation cracked and threatening the stability of the structure of the house?

To be sure, the VA appraisal looks at those things too because they affect the home’s value. A VA appraiser will look at roofs, electrical systems, HVAC units, as well as features of the house that increase the value such as number of bedrooms, number of baths and square footage. But the appraisal is there to protect the lender – and in this case the VA.

The home inspector is there to protect the buyer.

How Much Does a VA Appraisal Cost?

Generally, the VA appraisal fees can run between $525 and $1,500, depending on where you are purchasing your house.

In high demand real estate markets such as California or Hawaii, the prices are on the high end. The average price of a regular, non-VA, appraisal in the U.S. is $339, but it can be as high as $1,000 in cities and high demand counties.

You don’t have to guess. The VA has a list of the appraisal fees, separated by regions, so you can look them up for your region. In many cases, the seller will take responsibility for paying the VA appraisal fee, so consider that as part of your negotiation.

VA Appraisal Process

When using a VA loan, the VA sets up the appraisals. If you are wondering what you need to do to begin the VA appraisal process, the answer is: not much. Once you start the process of getting a VA loan, your lender and the Department of Veterans Affairs (VA) will work together to set up the appraisal. The VA itself has a nationwide list of professionals, and they will assign a VA-approved appraiser to the new home you are looking to buy. So you don’t have to go online, find one near you, contact them and set up the visit. That’s the VA’s job.

How Long Does the VA Appraisal Take?

For a VA appraisal, the timelines are between 7 and 21 business days to complete an appraisal. The more remote your property is, the longer the appraisal will take; therefore, appraisals for homes in Alaska and Wyoming and Guam take the longest. The list mentioned above will tell you how long appraisals will take in your area.

In terms of the average time it takes for non-VA conventional appraisals (2 days to 2 weeks), the VA appraisal does take a bit longer. Location is one factor in getting an appraiser on site, but it can also take longer in volatile or competitive real estate markets.

What Are VA Appraisers Looking For?

The short answer to that question is “livability.” That means they are looking for a home that is ready to be lived in as soon as you move in. They also use the term “move-in ready.” The appraisers are looking at the VA’s Minimum Property Requirements (or MPIs). They have published a full list of those requirements if you want to dig deeper into the process.

In addition to the MPIs, the VA also has a downloadable document that is the VA appraisal checklist which their appraisers use. Both are long documents, so here’s a summary of the elements of a property VA appraisers are looking for.

Structure

The bones of the house, including the roof, need to be solid and in good condition. The VA appraisal also includes a leaking basement or leaky windows, costs that add up if you must make repairs. The roof needs to have at least three years of life left. They will also look for any signs of dry rot, mold or fungus. They will report any paint peeling or chipping and missing siding.

Hazards

Lead-based paint and asbestos top the list for hazards in an older home, but radon is getting increasing attention. Is the home in danger from natural disasters like floods, mudslides or sinkholes? If so, that will go on the appraiser’s report.

Access and Space

In this evaluation, the appraiser will judge whether the property has enough space for the number of people moving in (square footage, bedrooms, bathrooms) as well as making sure it has year-round access to local roads. They will also check the property lines to make sure the structures and driveway are not on a neighboring property.

Utilities

This includes a lot. The appraiser will evaluate the property’s connection to water and the sewer system. In addition, they’ll evaluate gas, electricity, internet and everything else that makes the house livable. The plumbing, HVAC systems, electrical work, and water heater must all be up to code to meet the appraiser’s standards. They will also check for proper venting in the attic and crawl spaces.

Pests

This is a big deal and the VA loan appraisal guidelines are clear. It’s not universal and some states are exempted. But mostly the appraisers want to ensure wood-eating or wood-destroying pests don’t live in the house you want to buy. That means the VA loan appraisal requires you to get a pest inspection. Either the buyer or the seller can pay for a pest inspection, but this one is not optional.

Drainage

Water must drain away from the foundation. Plus, any pooling of water on the property will be reported by the appraiser.

Pools

If the property has a swimming pool, the VA loan appraisal will include it in the value of the home. It will need to be evaluated for functionality, defects and any hazards.

What Happens If the Property Meets VA Loan Appraisal Requirements?

Sometimes, the VA loan appraisal report is going to come back and show the property does not meet the requirements. That can be for a couple of reasons:

Finances Don’t Add Up – If the VA appraisal comes back saying the house and property are worth less, and you have agreed to pay for it, you’ve got trouble. Many of the VA benefits (such as no down payment, low interest rates and no private mortgage insurance) are based on the math that the property will be worth the home sales price.
Too Many Repairs – The necessary repairs for the property are very extensive (and expensive).

If the appraisal comes back and it’s not going to be approved for the mortgage, consider these four possible solutions:

Pay Difference in Cash – If the amounts don’t add up so that the appraised value equals or exceeds what you are going to pay for it, you can pay the difference in cash. For example, if the appraised value is $390K and the asking price is $400K, you might might make up the difference from savings. Unfortunately, a lot of home buyers, especially first time home buyers, don’t have that kind of money to access.
Renegotiate with Seller – You can go back to the seller and renegotiate the price. That may be a tough row to hoe if the current real estate environment is very competitive, i.e. there’s a lot of demand for houses and low inventory.
Make Repairs, Get 2nd Appraisal – If repairs are the issue, make the repairs and then get another appraisal. This is traditionally a case where the seller may agree to get certain repairs done. Or, they can cut the price so that the buyers can pay for the repairs. If problems arise during inspections or appraisals, the negotiations for repairs are often a bit easier than simply asking for the seller to reduce the price.
Walk Away – Walk away from the property. No one likes that option, but sometimes that’s the best choice. Stepping away may hurt. But it won’t hurt as much as having a too expensive house or one that turns into a money pit.

VA Appraisals When Refinancing Your Home

Why are we talking about refinancing here? Because if you have been in your house for a while, and you are eligible for the VA Loan Program, they have two refinancing loans you should consider. They do, however, each have different VA appraisal requirements.

VA Interest Rate Reduction Refinance Loan (VA IRRRL) – This is a VA refinance loan you can use to reduce the interest you pay on your mortgage. That typically becomes an option if interest rates are falling. But if you can successfully refinance, it can reduce your monthly payment in the short term, AND your overall mortgage payments in the long term. This is also considered a streamlined refinance, so you do not need a VA appraisal to go forward with this.

VA Cash Out Refinance – This option lets you refinance your mortgage and turn the equity you’ve developed in the property into cash. You can use this cash to repair your home, renovate it, install energy efficient elements, pursue your education and take care of emergencies (for example, medical bills). This refinance requires more paperwork, is not streamlined, and must go through a VA appraisal.

Receive an Average $3,000 with Homes for Heroes

Homes for Heroes assists firefighters, EMS, law enforcement, active military and veterans, healthcare workers and teachers; buy, sell and refinance their home or mortgage. But if you work with their local real estate and mortgage specialists to buy, sell or refinance; they also provide significant savings after you close on a home or mortgage. They refer to these savings as Hero Rewards. The average amount received after closing on a home is $3,000, or $6,000 if you buy and sell!

“Overall great experience. I was able to use the Homes for Heroes program along with my VA Loan and purchased the home of my dreams.” – Stephen, Navy, bought a new house in Texas.

Simply sign up to speak with a member of the team. There’s no obligation. After you sign up they will contact you to ask questions and help you determine the appropriate next steps. When you’re ready, they will connect you with their local real estate and/or mortgage specialists in your area to assist you through every step and save you money when it’s all done.

It is how Homes for Heroes and their local specialists thank community heroes, like you, for your dedicated and valuable service.

Fill out this form to get started or learn more about Homes for Heroes, and we’ll reach out.

Down Payment Assistance Programs and Grants for Each U.S. State

learning about down payment assistance programs

Down payment assistance (DPA) programs come in a wide array of options. But for a segment of the home-buying population, they can be helpful way to put a down payment together. If you’ve tried to save and still can’t get enough cash together, there may be help for you. We’ve put together a list of DPA programs in each state to help you in your search.

Why state-by-state? Because to better understand your options, most DPA programs are local, at the county and city level. And, the best advice on these initiatives tends to be specific, not general.

Home DPA programs offer financial assistance to homebuyers struggling to come up with the funds needed for a down payment. Consequently, these programs can take many different forms, including grants, loans, and forgivable loans. They are often available to first-time home buyers, low- to moderate-income borrowers, and those purchasing homes in certain geographic areas.

There are other programs that can help with your down payment, but they are government-backed mortgage loan guarantees and they are technically different from the down payment assistance programs that are located throughout the U.S. With two of these programs you can eliminate the down payment: VA loans and USDA loans. There are also ways to reduce your down payment through FHA loans.

Instead, here we are going to focus on specific down payment assistance initiatives.

General Qualifications for Down Payment Assistance Programs

couple looking at computer, searching for down payment assistance programs online

DPA programs are designed to aid potential homeowners, especially a first-time home buyer who might struggle to save the necessary funds for a down payment. These programs can reduce the upfront financial burden and make homeownership more accessible.

For those who owned a home before but have not owned one in the last three years, many programs see these individuals as first-time buyers too. If you are in this group and just beginning to think about a home, a mortgage and your down payment, we have a blog article dedicated specifically to you.

Other factors that may, or may, not be part of the eligibility requirements include:

Credit Score – You will see a lot of numbers, but minimum credit scores are about 620, give or take.
Primary residence – Most DPA program requirements want you to live in the house you are buying. That usually means no second homes, no investment properties and no vacation homes.
Income limits – Since these programs are designed for lower and middle income families, there are often caps on how much household income your family can earn per year and still be eligible. You can make too much money for many of these programs.
Debt to Income ratio – This is a common number in the world of mortgages, and it is a measure of your monthly income and how much (as a percentage) of that income is dedicated to debts. For example, this could include debts like rent, credit cards, or car payments, etc.
Time in residence – Some down payment assistance programs want you to stay in the house you buy for a number of years. In a New York City program, for example, you need to stay in your house for 10-15 years, but the assistance can be upwards of $100,000.
Mortgage loan limits – Many local DPA programs will have upper limits on the mortgage they are helping you with. If you are looking at million dollar McMansions, you may not get down payment assistance.

A lot of the factors that affect your eligibility for DPA programs mirror the kinds of things a bank or mortgage lender would require of you if you were getting a conventional loan.

Not a DPA, but instead another potential source of savings is Homes for Heroes. They assist firefighters, EMS, law enforcement, active military and veterans, healthcare workers and teachers; buy, sell and refinance their home or mortgage. If you close on a home using their local specialists the average savings received is $3,000, or $6,000 if you buy and sell! AND, the savings offered by Homes for Heroes would potentially be in addition to the down payment assistance programs you may qualify to receive.

Simply sign up to speak with a member of the Homes for Heroes team. There’s no obligation.

Types of Down Payment Assistance Programs

Down Payment Grants

Grants are gifts of money that do not need to be repaid, making them an incredibly appealing option. They’re usually offered by state or local government agencies, and nonprofit organizations. A down payment assistance grant may come with certain conditions, such as living in the home for a specific period or attending homeowner’s education classes.

An example of one grant program is the National Homebuyers Fund.

Forgivable Loans

These are loans that don’t need to be repaid if you fulfill certain requirements, such as living in the house for a specified period of time. However, if you sell the home before the end of the life of the loan, you may have to repay part or all of the DPA loan.

The Maryland Mortgage Program is a good example of a forgivable loan.

Deferred Payment Loans

These loans, also called second mortgage loans, require no payments until the homeowner sells, refinances, or pays off the house. While attractive, these loans often have a cumulative interest, which could lead to a significant payment down the road. The idea here is that once you build up some home equity, you will be able to easily pay off the loan and its accumulated interest. This is a get-your-foot-in-the-door strategy for funding your down payment.

An example of one of these loans is the Minnesota Start Up program.

Low-Interest Loans

Low-interest loans provide funds at a reduced interest rate, making repayments more manageable. However, keep in mind that even a low-interest loan is still a conventional loan, and it adds to your overall debt and monthly payments. These low-interest loans typically come from private mortgage lenders or banks.

Remember to check with your mortgage lender before you decide to pursue this path. How much debt you take on in order to get the down payment, and eventually, the mortgage loan will be one of their concerns.

Matching Savings Plans

These are programs where the agency matches the amount of money you save towards your down payment. While encouraging savings, these programs often have strict criteria for qualification and limits on the match amount.

The FDIC, for example, offers Individual Development Accounts that are matched savings accounts. In this case, the one drawback is the matching plan can take between 12 and 36 months to complete, so if you are in a hurry, this might not work.

Down Payment Assistance Programs by State

In this section, we’ll provide a comprehensive list of down payment assistance programs available in each state, including details on the types of aid. In most cases, through our research, we have tried to list some of the aid in actual dollars or percentages.

It’s important to remember that for many programs, these funds can run out before the end of the year, so they encourage you to apply early. There are also states that have multiple DPA programs running at the same time, so it pays to dig deeper (e.g. at the county or city level) if you don’t find something right away.

Alabama: The Alabama Housing Finance Authority offers house down payment assistance to eligible buyers through its Step Up program. The Step Up program offers a 3% down payment assistance for those with income less than $97,300 and buying a house that doesn’t exceed $250,000.

Alaska: The Alaska Housing Finance Corporation offers several DPA programs, including the Closing Cost Assistance Program and the Home Opportunity Program. The down payment assistance is for low income or to moderate income individuals and families.

Arizona: The Arizona Department of Housing offers down payment assistance through its Home Plus program. The program provides a 30-year fixed-rate mortgage and up to 5% of the loan amount in down payment assistance.

Arkansas: The Arkansas Development Finance Authority offers DPA through its Home to Own program. The program provides up to 6% (up to $10,000) of the home purchase price in down payment assistance and closing costs.

California: The California Housing Finance Agency offers several DPA, including the MyHome Assistance Program and the School Teacher and Employee Assistance Program. The MyHome Assistance Program provides applicants with a deferred-payment junior loan up to 3.5% of the purchase price or appraised value to assist with down payment and/or closing costs.

Colorado: The Colorado Housing Assistance Corporation offers help through its CHAC Down Payment Assistance Program. The program provides up to $7,500 in down payment assistance. Another Colorado program, the CHFA Advantage program provides down payment assistance up to 4% of your first mortgage, with no mortgage insurance required.

Connecticut: The Connecticut Housing Finance Authority offers DPA through its Homebuyer Mortgage Program. Their DPA offers a second mortgage loan for up to 3.5% of the sales price to eligible first-time eligible homebuyers.

Delaware: The Delaware State Housing Authority has its Preferred Plus program. In addition, the program provides up to 4% of the purchase price in down payment assistance.

Florida: The Florida Housing Finance Corporation provides DPA through its Florida Assist program. The program provides up to $7,500 in down payment assistance and closing cost assistance in the form of a grant that does not need to be repaid.

Georgia: The Georgia Dream Homeownership Program offers up to $5,000 in down payment assistance.

Hawaii: The Hawaii Home Ownership Center offers DPA through its Down Payment Assistance Loan Program. The program provides loans up to $75,000 in down payment assistance. Another program, the Honolulu Down Payment Loan Program provides applicants up to $40,000 in assistance funds in the form of a zero-fee, zero-interest loan with a 20-year amortization term.

Idaho: The Idaho Housing and Finance Association provides a down payment assistance program and gives homebuyers up to 10% of the sales price of the home to use towards the down payment and/or closing costs. The help is in the form of a second mortgage which is forgivable down payment assistance.

Illinois: The Illinois Housing Development Authority offers DPA through its Access program. The program provides up to 4% or $6,000 in down payment assistance. The assistance is a recorded forgivable 2nd mortgage.

Indiana: The Indiana Housing and Community Development Authority offers down payment assistance through its Next Home program. The program provides up to 3.5% of the purchase price in down payment assistance.

Iowa: The Iowa Finance Authority offers DPA through its First Home program. The program provides up to $5,000 in down payment assistance; because the assistance is a grant, the borrower does not need to repay it.

Kansas: The Kansas Housing Resources Corporation offers down payment assistance through its First Time Homebuyer Program. It offers homebuyers a 0% interest loan in the amount of 15 or 20% of the home’s purchase price. So if the homebuyer remains in the home for 10 years, the loan is forgiven.

Kentucky: The Kentucky Housing Corporation offers DPA through its Homebuyer Tax Credit program. The program provides up to $10,000 in down payment assistance in the form of a low interest loan, which the borrower needs to pay back in 10 years.

Louisiana: The Louisiana Housing Corporation offers down payment assistance through its Market Rate GNMA program. The program provides up to 4% of the purchase price in down payment assistance (including closing costs).

Maine: The Maine Housing offers DPA through its First Home Loan program. The program provides up to $3,500 in down payment assistance and closing costs.

Maryland: The Maryland Department of Housing and Community Development offers down payment assistance through its Maryland Mortgage Program. The program also provides up to 4% of the purchase price in down payment assistance. This aid is in the form of loans, some of which can be forgiven.

Massachusetts: The Mass Housing Down Payment Assistance program provides between $30,000 and $50,000 in assistance. In addition, the down payment aid can be in the form of a deferred payment second mortgage or 15-year low interest loan.

Michigan: The Michigan State Housing Development Authority offers DPA through its MI Home Loan program. The program provides up to $7,500 in down payment assistance.

Minnesota: The Minnesota Housing Finance Agency offers down payment assistance loans that range from $3,000 to $10,000.

Mississippi: The Mississippi Home Corporation offers DPA through its Home Saver program. The program also provides up to $6,000 in down payment assistance.

Missouri: The Missouri Housing Development Commission offers down payment assistance for first-time homebuyers. They can receive a forgivable second mortgage of 4% percent of the loan. A borrower can use it for down-payment and closing costs.

Montana: The Montana Board of Housing offers DPA through its Homebuyer Assistance Program. The program provides a loan of up to $15,000, or 5% of the home’s price, in down payment assistance.

Nebraska: The Nebraska Investment Finance Authority offers down payment assistance through its First Home program. The program provides up to 5% of the home’s purchase price in down payment assistance. This assistance is low interest loan and the borrower must pay it back.

Nevada: The Nevada Housing Division offers DPA through its Home is Possible program. The program provides up to 5% of the loan amount in down payment assistance.

New Hampshire: The New Hampshire Housing Finance Authority offers down payment assistance through its Home Flex Plus program. The program provides up to $15,000 in down payment assistance.

New Jersey: The New Jersey Housing and Mortgage Finance Agency offers DPA through its Smart Start program. The program provides up to $10,000 in down payment assistance, which is second mortgage and is forgiven in full after four years.

New Mexico: The New Mexico Mortgage Finance Authority offers down payment assistance through its First Home program. The program provides a loan up to $7,000, with a 0 percent interest rate and the loan may be forgiven after 10 years.

New York: The State of New York Mortgage Agency provides up to 3% (maximum $15,000) of the home’s price in DPA. In summary, the loan is 0% interest rate, requires no monthly payments, and is forgiven after 10 years.

North Carolina: The North Carolina Housing Finance Agency offers down payment assistance through its NC Home Advantage Mortgage program. The program provides up to $15,000 (or 3%) of the loan amount in down payment assistance.

North Dakota: The North Dakota Housing Finance Agency offers DPA through its ND Roots program. The program provides up to 3% of the purchase price in down payment assistance.

Ohio: The Ohio Housing Finance Agency offers down payment assistance through its Your Choice! Down Payment Assistance program. The program provides 2.5% to 5% of the purchase price in down payment assistance. Then, this assistance is forgiven after seven years.

Oklahoma: The Oklahoma Housing Finance Agency offers DPA through its OHFA Advantage program. The program provides up to 3.5% of the loan amount in down payment assistance.

Oregon: The Oregon Housing and Community Services offers down payment assistance through its Oregon Bond Residential Loan Program. A borrower can use funds for up to 100% of the cash requirement to close, including down payment, closing costs, and more.

Pennsylvania: The Pennsylvania Housing Finance Agency offers DPA through its Keystone Home Loan PLUS program. The program provides up to 5% of the home’s purchase price in down payment assistance. The loan is also forgiven on an annual basis over ten years at a rate of ten percent (10%) a year.

Rhode Island: The Rhode Island Housing offers down payment assistance through its First Down program. The program provides a grant up to $17,500 in down payment assistance.

South Carolina: The South Carolina State Housing Finance and Development Authority offers forgivable DPA to all qualified borrowers. A borrower can use DPA towards a down payment, closing costs, and/or prepaid items. It also provides $10,000 down payment assistance through its Palmetto Heroes program, which serves the same hero groups that we serve at Homes for Heroes.

South Dakota: The South Dakota Housing Development Authority offers down payment assistance through its First-time Homebuyer program. The program provides from 3% to 5% in down payment assistance through a loan that is 0% interest rate, due-on-sale or satisfaction, with no payments.

Tennessee: The Tennessee Housing Development Agency offers DPA through its Great Choice Plus program. The program provides either up to 6% of the loan amount, or $6,000, depending on which program you choose.

Texas: The Texas Department of Housing and Community Affairs offers down payment assistance through its My First Texas Home program. The program presently provides up to 5% of the loan amount in down payment assistance.

Utah: The Utah Housing Corporation has its Down Payment Assistance program. Therefore, you may be able to borrow your entire minimum required down payment plus all or a portion of your closing costs on a 30-year fixed-rate second mortgage.

Vermont: The Vermont Housing Finance Agency offers DPA through its ASSIST program. Altogether, the program provides up to $15,000 in down payment assistance.

Virginia: The Virginia Housing Development Authority offers a DPA grant that you don’t have to pay back.

Washington: The Washington State Housing Finance Commission offers DPA through its Home Advantage program. The program also provides up to 4% of the loan amount in down payment assistance.

West Virginia: The West Virginia Housing Development Fund offers DPA through its Homeownership Program. Accordingly, the program provides between $5,000 and $10,000 in down payment assistance, depending on the program and purchase price of the home.

Wisconsin: The Wisconsin Housing and Economic Development Authority offers DPA through its WHEDA Advantage program.

Wyoming: The Wyoming Community Development Authority offers its Home Again program. Furthermore, Wyoming provides a low-interest down payment loan of up to $15,000.

More Savings Potential: Receive an Average $3,000 with Homes for Heroes

In addition to these down payment assistance programs in your local market, Homes for Heroes assists firefighters, EMS, law enforcement, active military and veterans, healthcare workers and teachers; buy, sell and refinance their home or mortgage. But if you work with their local real estate and mortgage specialists to buy, sell or refinance; they also provide significant savings after you close on a home or mortgage. They refer to these savings as Hero Rewards® savings. The average amount received after closing on a home is $3,000, or $6,000 if you buy and sell!

The savings offered by Homes for Heroes would be in addition to the DPA programs you may qualify to receive. However, there are specific qualifications for DPA programs that may impact whether you can receive the additional Hero Rewards savings. The best way to find out is to speak with a local Homes for Heroes specialist.

Simply sign up to speak with a member of the team. There’s no obligation. After you sign up they will contact you to ask a few questions and help you determine the appropriate next steps for you. When you’re ready, they will connect you with their local real estate and/or mortgage specialists in your area to assist you through every step and save you money when it’s all done.

It is how Homes for Heroes and their local specialists thank community heroes like you, for your valuable service.

Fill out this form to get started or learn more about Homes for Heroes, and we’ll reach out.

Important Disclaimer:

Luke Feldbrugge last updated this post in September 2023. However, many of these programs change and can be discontinued every year – without notifying Homes for Heroes. This is the best information we had when we posted it, so we hope it provides insight about potential DPA programs in your area. As always, conduct your own independent research and contact the DPA program directly to determine if these programs fit for your needs.

down payment down payment assistance down payment grants first time home buyer grants home buyer assistance home buyer assistance programs home buyer grants home buyers homes for heroes real estate veterans

Teacher First Time Home Buyer Programs | Save with Homes for Heroes

Teacher first time home buyer programs deliver a variety of benefits to educators who are beginning their journey into finding a home. Some deliver financial benefits, some provide rewards, some provide help at different stages and some deliver resources. When you are looking at your first home, the blizzard of details can be daunting, partly because so much of it is new. Don’t let that stop you, because there are professionals and friends who can help you.

Teacher First Time Home Buyer Programs

When you begin to sort through the programs out there they fall into three categories:

Programs that provide support
Programs that provide discounts
Programs that provide mortgage loan help

Let’s take a look at all three.

1) Support for a First Time Home Buyer Teacher

Homes for Heroes has been helping first time home buyer teachers find their first home, and save them significant money in the process for more than 20 years.

If you are a teacher, you are a hero. You play a crucial role in serving your local community. Homes for Heroes recognizes the importance of your role in the community and is dedicated to providing support, valuable services, industry expertise, and local market knowledge through their network of more than 4,400 real estate agents and loan officers. They specifically joined Homes for Heroes to serve teachers and other local heroes, and to help teachers like you save money on your first home. That’s the best part, teachers like you save an average of $3,000 when you use Homes for Heroes local real estate and mortgage specialists to buy, sell or refinance a home.

“Our real estate agent was fantastic to work with! She made every step of the home buying process simple and helped keep our minds at ease. Her dedication to helping others was very evident – we highly recommend Homes for Heroes.” – Eric and Taylor are teachers who purchased a house in Wisconsin.

Simply sign up online. There’s no obligation. A company team member will follow up with you to answer your questions, and when you’re ready to proceed, they will connect you with their local real estate and mortgage specialists.

If you choose to work with Homes for Heroes local specialists, after you close on your home, Homes for Heroes will send you a Hero Rewards® check. The average amount is $3,000 if you buy or sell a home, however if you do both, the average savings doubles to $6,000! After closing on your house, you can use the money to purchase new furniture or appliances, replace the carpet or re-paint the exterior of your new house. It’s yours to do what you want.

BONUS: the Hero Rewards savings offered by Homes for Heroes can often times be received IN ADDITION to the other savings outlined in this post. That’s why you’re able to save more with Homes for Heroes than other teacher first time home buyer programs who do not go above and beyond the benefits offered by federal and state programs.

2) Discount Teacher First Time Home Buyer Programs

It’s a little hard to believe, but there is a program that is a wonderful option for a first time home buyer teacher from the U.S. Department of Housing and Urban Development that will sell you a house for 50% off.

The Good Neighbor Next Door is a national program. One of its goals is to make the home purchase more affordable for community heroes such as:

Teachers, educators and school employees
Law Enforcement officers and employees
Firefighters and first responders
Emergency medical technicians and other workers in the emergency medical services field

The eligible homes in the Good Neighbor Next Door program are in locations identified by HUD as revitalization areas. That means they are in locations where:

Household incomes are low.
Homeownership is low.
Foreclosure activity is high.

These neighborhoods need both economic and community development, and a good way to encourage that is to make foreclosed properties available to heroes at a half-off. If you get one of these deeply-discounted homes, you must agree to live there for at least three years.

With the Good Neighbor Next Door program, the properties that are available are offered first to the Good Neighbor eligible applicants seven days before they go on the general market.

Teacher First Time Home Buyer Programs for Mortgages

Most of the programs for first time home buyers that involve financial help come from the federal government, and most of them center around down payments. Although these programs are all called “loans,” they are really loan guarantees. That means these federal agencies will stand behind your loan. The actual money, however, comes from private mortgage brokers and banks. Getting approval from the federal government is one half of a two-part process. The other half is being approved for the mortgage with your lender.

In most cases, these federal programs are loan guarantees that insure your mortgage if you should default on payments. That, in turn, gives the private lender confidence in your mortgage application.

The VA Loan Guarantee

The Veteran Administration loan guarantee, if you are eligible, is probably the best of the federal mortgage programs in terms of benefits. Of course, you need to be a veteran, an active duty military member, a Reservist or a member of the National Guard. If you are a veteran who is now a teacher, it’s a great opportunity. The benefits of a VA loan guarantee eclipse the other programs quite a bit. The three advantages that provide the most financial benefit are:

No down payment
No private mortgage insurance
Lower interest rates

These three benefits alone can potentially save you tens of thousands of dollars. Other benefits include:

The VA loan guarantee will limit your closing costs.
Does not require a minimum credit score (but your private lender may have a minimum).
You can use the benefit throughout your lifetime and can even have two VA loans at the same time if you are careful.
VA home loans are assumable.
There is no maximum loan amount, but the VA does limit its guarantee
The VA does not have a maximum debt-to-income (DTI) ratio requirement (but it does have guidelines for your mortgage lender)
You aren’t automatically disqualified from a VA loan if you have had a bankruptcy in the past. If bankruptcy was more than a year ago, you could be eligible.
The VA home loan guarantee can be used for single-family homes (up to four units), condos, manufactured homes, new builds and home improvements like solar panels.
VA Loans may also be used by the surviving spouses of military service members killed in the line of duty.

There are some costs, and one of them is the VA Funding fee. For the first time home buyer, the federal agency lowers its funding fee (2.15% of the total loan). The VA funding fee is a one-time fee you pay to get the VA loan, but it can be folded into your monthly mortgage payments. The funding fee is waived for veterans with service-related injuries, disabilities or recipients of the Purple Heart.

If you want to know whether you qualify for eligibility requirements of the VA loan, based on your service history, they have a very useful chart that explains it.

The USDA Loan Program

USDA loans are part of a national program for folks who want to buy a home in a rural area. The agency defines rural areas as towns with less than 35,000 people, and it includes most of the United States.

The USDA Loan program has benefits that include:

No down payment.
USDA home loans typically have lower interest rates.
USDA loans do not technically have a minimum credit score. However, most private lenders will ask for a score around 640.
You can use a USDA loan guarantee to build a new home or buy an existing home. You can also use the money to renovate or move an existing home.
USDA loans are assumable.

The USDA loan guarantee also has some fees at closing. It has an upfront guarantee fee that costs 1% of the loan. Then it has an annual fee that costs 0.35% of the loan amount. You can roll these fees into the mortgage so you don’t need to pay the money at closing. There are also upper income limits on these loans and the home must be your primary residence.

Since about one third of the teachers in the U.S. (32%) work in rural schools, this program should be a great resource for educators, teachers and school administrators.

The FHA Loan Program

The FHA loan guarantees are for low-to-moderate-income earners who have low credit scores. The low down payment rules and relaxed credit requirements make this loan guarantee a good option for educators who are searching for affordable housing.

Here are some of the advantages of the FHA loan guarantee:

Low Down Payments – The FHA has a minimum down payment of 3.5%. Typical mortgages require up to 20%. Your down payment percentage may be higher if you have a credit score below 580.
Low Credit Scores – This program was designed for those who have a low credit score and cannot get a loan from conventional lenders.
Assumable – FHA loans are assumable. An assumable loan lets you sign your current mortgage over to a potential buyer without a lot of the paperwork. In addition, they assume your loan at the interest rate you got when you bought your house. That becomes a significant advantage for a seller in a real estate market where interest rates have gone up dramatically (for example, this year)

The FHA system does require two insurance-type fees at closing:

The Upfront Funding Fee is 1.75% of the total financed amount. It’s paid at closing, but it can be rolled into the mortgage and paid over time. This is a one-time fee.
The Mortgage Insurance Premiums is a fee you will be paying annually for the life of the loan. The current rate for MIP is 0.55%. You can roll this into your monthly mortgage payments.

The HELPER Act

One teacher home loan program that’s not in place yet has a great deal of potential for educators: the HELPER Act. It’s not a law yet, but Congress is currently considering it. The name stands for: Homes for Every Local Protector, Educator and Responder. It is being compared to VA loans…but for teachers. It would be an amazing teacher first time home buyer program if it passes. The benefits include:

No down payments
No private mortgage insurance (PMI)

Those two benefits on their own would potentially save you thousands of dollars, both up front and over the life of your mortgage. As with the other loan programs, there would be one upfront funding fee (3.6%) that would help in insure your loan.

The bill has bi-partisan support, and the President also supports it. If you are a public school teacher or educator, this is a bright spot in a tough housing market. The bill is waiting for action in the House Committee on Financial Services.

Receive an Average $3,000 Savings with Homes for Heroes

In addition to helping and supporting first time home buyer teachers, Homes for Heroes finishes up with a thank you check. It’s what we call Hero Rewards® savings and it’s a check we send you after closing on your new home. Teachers receive an average of $3,000 when they work with our real estate and mortgage specialists to close on their new home. And, if they buy and sell, the average savings doubles to $6,000.

At Homes for Heroes, we want to thank every hero in the nation, and that includes teachers and educators. We have the largest nationwide network of real estate and mortgage specialists ready to help you achieve homeownership.

Sign up now to get more information from our Homes for Heroes team. There is no obligation, cost, or extra paperwork for you. This is simply our way to say thank you for your service in the community.

Fill out this form to get started or learn more about Homes for Heroes, and we’ll reach out.

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Veteran Home Loans | Get More Savings from Homes for Heroes

Veteran home loans come in many shapes and sizes, but the one you should really concentrate on is the VA loan system. It can help veterans during various stages of their lives, whether you already own a home or are looking for a new home. The benefits of a VA loan guaranteed mortgage are substantial. Save yourself a lot of money, up front and over the course of your mortgage, by learning the basics of the VA loan system. The time you invest will be more than worth it.

There are other loans for veterans out there, and we will talk about those too.

Veteran Home Loans: Benefits of the VA System

young, smiling couple embracing each other and holding up a new house key after using veteran home loan to purchase house through Homes for Heroes

The military VA home loan program was established as part of the GI Bill right after World War II. It saw its 75th birthday in 2019, and it is still one of the most popular benefits offered to eligible veterans. The U.S. Department of Veterans Affairs oversees it, and it has helped more than 25 million veterans and eligible service members since it began. It helped 1.2 million heroes in 2020 alone.

Before we jump into the benefits, it’s important to point out that the VA loan program doesn’t actually give you the loan. The loan, the mortgage and the money all come from either a private mortgage lender or a mortgage broker. The VA system insures the loan, guaranteeing for the lender so that they will get paid if you default. So, while it’s often referred to as the VA loan, it’s actually the VA loan guarantee.

What does that guarantee get you?

You will have no down payment on your mortgage loan.
You won’t need to buy private monthly mortgage insurance.
You will get a low competitive interest rate.
You will have a cap on your closing costs.
The program does not have a minimum credit score requirement–though many lenders will have a number they want you to have.
You do not have to be a first-time home buyer.
It’s a lifetime benefit–you can reuse the benefit.
VA home loans are assumable (which can be a big deal right now with interest rates rather high).
There is no maximum loan amount, but the VA does limit its guarantee. Veterans can borrow up to $647,000 without a down payment in most of the country.
The benefit can be extended to a surviving spouse or to families of soldiers killed in the line of duty.
The VA does not have a maximum debt-to-income (DTI) ratio requirement, which is the comparison of your monthly income to the debts you have to pay each month. It does, however, have strong suggestions to private lenders about what to allow.
Single-family homes (up to four units), condos, manufactured homes, new builds and home improvements like solar panels can take advantage of the VA home loan benefit.

Of course, some of these benefits have some fine print that you should be aware of. The “no down payment” is true, but only if your mortgage loan comes in under a certain amount ($647,000 for example). It’s good to work with a mortgage specialist who knows what they are doing when it comes to the VA.

As a veteran, you may already have a home, and you may have already used the VA system to finance the home you live in right now. But did you know you can use the VA to help you refinance your mortgage, not just one, but in two different ways?

Refinance Your Veteran Home Loans Using the VA

After you’ve owned your home for a while, refinancing your mortgage may become a useful tool to help you in your financial life. The VA can help with that too.

VA IRRRL

The VA Interest Rate Reduction Refinance Loan is a refinance loan you can use the new loan to reduce the interest you pay on your mortgage. That typically becomes an option if interest rates are falling. Refinancing is a great idea. Why? Because it can reduce your monthly payment in the short term and your overall mortgage payments in the long term.

The VA characterizes the VA IRRRL as a streamline refinance. It requires a lot less documentation, fewer requirements and less stress overall. It is also a fast refinance and can typically be closed in about 30 days.

The VA IRRRL is only open to those who already have VA-guaranteed loans.

VA Cash Out Refinance

The Cash Out Refinance lets you refinance your mortgage and turn the equity you’ve developed in the property into cash. That means if you’ve been paying into your mortgage for years, that equity can become cash in your pocket. You can use this cash to repair your home, renovate it, install energy efficient elements, pursue your education and take care of emergencies (for example, medical bills). The choice is yours.

Unlike the VA IRRRL, this loan is not streamlined and very much like a typical refinance with all the rules and documents.

The big advantage for the Cash Out is that it is open to veterans who have VA loan eligibility but may have missed it the first time out. That ability to convert conventional loans into a VA mortgage, and get cash back, makes this a very attractive option under the right circumstances (see list of benefits above).

VA Grants You Should Know About

In addition to VA purchase loans, the VA has a couple of grants veterans should know about. They aren’t exactly Veteran home loans, but they designed these grants to help disabled and aging veterans make changes to a home to make it more livable. Two of the grants have almost identical names, so it’s tough to tell them apart.

The Special Home Adaptation Grant is to help disabled vets who want to build or buy or change their existing home to make it more accessible. In this case either you or a family member can be the owner. You must have a service-related disability and the maximum for this grant is $22,000.

The Specially Adapted Housing Grant is very similar, but this is for the vet who owns their own home and plans to live in it for some time. You need to have a service-related disability, and only 120 of these grants are issued each year. The upper limit on them is $109,986.

A Home Improvements and Structural Alterations Grant will help vets make their existing home more accessible. This grant is not restricted to vets with service-related injuries–it’s open to all veterans. The lifetime limit on this grant is $6,800.

Other Options for Veteran Home Loans

There are two more federal government programs that are not military-specific, but they can help you find and buy a home if the circumstances are right. They are also worth a look.

FHA loans

The Federal Housing Administration insures FHA loans. With that insurance, the buyer only needs to put 3.5% down (conventional mortgages are much higher). Again, the government agency doesn’t give you the mortgage. It does, however, guarantee it so private lenders can reduce their requirements. The eligibility requirements are:

A credit score of 620* or higher
Proof of income (1-2 months of paystubs)
W2 forms for one year
An appraisal from an FHA-approved appraiser
Current debt information (auto loans, credit cards, etc.)
Acceptable debt-to-income ratio (DTI)
The home must be your primary residence

*FHA loans are available to home buyers who have credit scores as low as 580, but they do require mortgage insurance.

USDA Loans

Many retired military members are looking to live in rural areas or small towns. If that’s you, take a look at USDA loans. These loans, backed by the United States Department of Agriculture, offer:

No down payment
Reduced mortgage insurance

The government defines rural, in this case, to include about 97% of the U.S. map, so check this mortgage program out. It can save you thousands of dollars, both at closing and with your monthly payment.

At Homes for Heroes, we want to thank all the community heroes we can find, but veterans hold a special place in our hearts. They have the best stories and they inspire us. If you’re a vet, let us help you find a new home, sell your existing home, or refinance your mortgage. We have the team that can help you every step of the way. And then we will thank you with a Hero Rewards check at the end of the process.

Receive Average of $3,000 in Savings from Homes for Heroes

Homes for Heroes has been helping veterans for more than 20 years and our local mortgage specialists are adept at navigating Veteran homes loans through the VA.

“Overall great experience. I was able to use the Homes for Heroes program along with my VA loan and purchased the home of my dreams. The Homes for Heroes real estate agent was phenomenal and I couldn’t be happier. Thank you!” – Stephen, Navy, bought a new house in Texas.

Homes for Heroes can help veterans in at least three ways.

We provide a local, licensed real estate specialist who is committed to assisting their community heroes with buying or selling a home.
We provide a licensed mortgage specialist experienced in managing VA loans.
We provide Hero Rewards® savings after you close on a house or mortgage in the average amount of $3,000.

Because you need a private lender to get approved for a VA loan guarantee, we provide one.

On your part, there are no fees, no extra paperwork, no red tape. The process is exactly the same as a typical real estate transaction. You just receive excellent care from our real estate and mortgage specialists. And as a bonus for working with our local specialists, you receive Hero Rewards® savings.

For more information, or to speak with one of our local specialists with no obligation, simply sign up today.

To learn more about Homes for Heroes or to get started, fill out this form, and we’ll reach out.

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A Return to ‘Normal’? The State of Real Estate in 2022

Last year was one for the real estate history books. The pandemic helped usher in a buying frenzy that caused home prices to soar nationwide by a record 19.9% between August 2020 and August 2021.¹

However, there were signs in the fourth quarter that the red-hot housing market was beginning to simmer down. In the month of October, only 60.3% of sales involved a bidding war—down from a high of 74.5% in April.² While this trend could be attributed to seasonality, it could also be a signal that the real estate run-up may have passed its peak.

So what’s ahead for the U.S. housing market in 2022? Here’s where industry experts predict the market is headed in the coming year.

MORTGAGE RATES WILL CREEP UP

Most economists expect to see mortgage rates gradually rise this year after hitting record lows in late 2020 and early 2021.³

Freddie Mac forecasts the 30-year fixed-rate mortgage will average 3.5% in 2022, up from around 3% in 2021.⁴

The Mortgage Bankers Association predicts that rates will tick up to 4% by the end of the year. “Mortgage lenders and borrowers should expect rising mortgage rates over the next year, as stronger economic growth pushes Treasury yields higher,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association at their 2001 Annual Convention & Expo in October.⁵

However, it’s important to keep in mind that even a 4% mortgage rate is low when compared to historical standards. According to industry trade blog The Mortgage Reports, “Between 1971 and December 2020, 30-year mortgage rates averaged 7.89%.”⁶

What does it mean for you? Low mortgage rates can reduce your monthly payment and make homeownership more affordable. Fortunately, there’s still time to lock in a historically-low rate. Whether you’re hoping to purchase a new home or refinance an existing mortgage, act soon before rates go up any further. We’d be happy to connect you with a trusted lending professional in our network.

THE MARKET WILL BECOME MORE BALANCED

In 2021, we experienced one of the most competitive real estate markets ever. Fears about the virus and a shift to remote work triggered a huge uptick in demand. At the same time, many existing homeowners delayed their plans to sell, and supply and labor shortages hindered new construction.

This led to an extreme market imbalance that benefitted sellers and frustrated buyers. According to George Ratiu, director of economic research at Realtor.com, “Prices and sellers reached for the moon [last] year. It looks like we are now about to move back to earth.”⁷

Data from Realtor.com released in November showed that listing price reductions had more than doubled since February 2021. And the average days on market (an indicator of how long it takes a home to sell) has been slowly creeping up since June.⁷

What’s causing this change in market dynamics? The real estate market typically slows down in the fall and winter. But economists also suspect a fundamental shift in supply and demand.

At the National Association of Realtors’ annual conference last November, the group’s chief economist, Lawrence Yun, told attendees that he expects increased supply to come from an uptick in new construction—which is already underway—and an end to the mortgage forbearance program. “With more housing inventory to hit the market, the intense multiple offers will start to ease,” he said.⁸

Demand is also predicted to wane slightly in the coming year. Rising mortgage rates and record-high prices have made homeownership unaffordable for a growing number of Americans. And in a recent Reuters poll, nearly 80% of property analysts said they expect housing affordability to worsen over the next several years.⁹

What does it mean for you? If you struggled to buy a home last year, there may be some relief on the horizon. Increased supply and softening demand could make it easier to finally secure the home of your dreams. If you’re a seller, it’s still a great time to cash out your big equity gains! And with more inventory on the market, you’ll have an easier time finding your next home. Reach out for a free consultation so we can discuss your specific needs and goals.

HOME PRICES LIKELY TO KEEP CLIMBING, BUT AT A SLOWER PACE

Nationally, home prices rose an estimated 16.8% in 2021.⁸ But the average rate of appreciation is expected to slow down in 2022.

Danielle Hale, chief economist at Realtor.com, told Yahoo! News, “Home asking prices have decelerated in the second half of 2021, with median listing price growth slipping from a peak of 17.2% in April to just 8.6% in October.”¹⁰

But experts disagree about how much more property values can continue to climb this year. Goldman Sachs predicts that home prices will rise by 13.5%, while Fannie Mae and Freddie Mac are forecasting a 7.9% and 7% rate of appreciation, respectively.²

However, not all analysts are as bullish. The National Association of Realtors predicts a 2.8% rate of appreciation for existing homes and 4.4% for new homes, while the Mortgage Bankers Association expects the average home price to decrease by 2.5% by the end of the year.^10,2

According to Hale, “With prices near all-time highs and mortgage rates expected to rise, we expect this slowdown in prices to continue.”¹⁰

What does it mean for you? If you’re a buyer who has been waiting on the sidelines for home prices to drop, you may be out of luck. Even if home prices dip slightly (and most economists expect them to rise) any savings are likely to be offset by higher mortgage rates. The good news is that decreased competition means more choice and less likelihood of a bidding war. We can help you get the most for your money in today’s market.

RENTS WILL CONTINUE TO RISE

Along with home, gasoline, and used vehicle prices, rent prices rose dramatically last year. According to CoreLogic, in September, rents for single-family homes were up 10.2% nationally year over year.¹¹ And economists at Realtor.com expect them to climb another 7.1% in 2022.¹²

“Homes are expensive now…but for most people, the comparison that is most important is how that cost of homeownership is going to compare to the cost of renting,” Zillow Senior Economist Jeff Tucker told CNBC in November.¹³

Tucker also pointed out that rent is less predictable than a mortgage—and more likely to go up along with inflation.¹³

Real assets, like real estate, are often used as a hedge against inflation. That’s because property values typically rise with inflation.¹⁴And when a homeowner takes out a mortgage, they lock in a set housing payment for the next 30 years.

In contrast, renters are at the mercy of the market—and they don’t gain any of the benefits of homeownership, like tax deductions, equity, or appreciation.

George Ratiu of Realtor.com told CNBC that he advises buyers to consider their budget and time frame. If they plan to stay in the home for at least three to five years, he believes it often makes sense to buy.¹³

Fortunately, it’s shaping up to be a better year for buyers. “I think 2022 has the promise of providing less competition, a lot more homes to choose from, and, as a result, a lot more approachable prices,” Ratiu said.¹³

What does it mean for you? Both property and rent prices are expected to continue rising. But when you purchase a home with a fixed-rate mortgage, you can rest assured knowing that your monthly mortgage payment will never go up. Whether you’re a first-time homebuyer or a real estate investor, we can help you make the most of today’s real estate market.

WE’RE HERE TO GUIDE YOU

While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the local issues that are likely to drive home values in your particular neighborhood.

If you’re considering buying or selling a home in 2022, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.

Sources:

Fortune – https://fortune.com/2021/11/04/us-home-prices-real-estate-forecast-2022-outlook/
Fortune – https://fortune.com/2021/11/29/housing-market-real-estate-predictions-2022-forecast/
Freddie Mac – http://www.freddiemac.com/pmms/pmms30.html
Freddie Mac – https://freddiemac.gcs-web.com/news-releases/news-release-details/freddie-mac-strong-housing-market-will-continue-even-rates-and
Mortgage Bankers Association – https://www.mba.org/2021-press-releases/october/mba-annual-forecast-purchase-originations-to-increase-9-percent-to-record-173-trillion-in-2022
The Mortgage Reports – https://themortgagereports.com/61853/30-year-mortgage-rates-chart
Realtor.com – https://www.realtor.com/news/trends/has-housing-market-peaked/
National Association of Realtors – https://www.nar.realtor/newsroom/nars-yun-says-housing-market-doing-well-may-normalize-in-2022
Reuters – https://www.reuters.com/world/us/rise-us-house-prices-halve-next-year-affordability-worsen-2021-12-07/
Yahoo! News – https://www.yahoo.com/now/where-home-prices-headed-2022-130012748.html
CNBC – https://www.cnbc.com/2021/11/16/inflation-rent-for-single-family-homes-surged-10percent-in-september.html
Realtor.com – https://www.realtor.com/news/trends/what-to-expect-in-2022-housing-market/
CNBC – https://www.cnbc.com/2021/11/23/rising-inflation-hot-housing-market-what-you-need-to-know-about-buying-a-home.html
Money – https://money.com/inflation-2021-stocks-bitcoin-gold-reits-commodities/

New Build or Existing Home: Which One Is Right for You?

Homebuyers today are facing a huge dilemma. There simply aren’t enough homes for sale.1

Nationwide, there were 1.27 million active listings in September, down 13% from the previous year. According to the National Association of Realtors, that’s about 2.4 months of inventory, which is far less than the six months that is generally needed to strike a healthy balance between supply and demand.2

Given the limited number of available properties, if you’re a buyer in today’s market, you may need to expand your search to include both new construction and resale homes. But it can feel a little like comparing apples to oranges.

Let’s take a closer look at some of the factors you should take into account when choosing between a new build or an existing home.

TIMEFRAME

How quickly do you want (or need) to move into your next home? Your timeframe can be a determining factor when it comes to choosing between a new build or resale.

New Build
If you opt for new construction, you may be surprised by how long you have to wait to get the keys to your new digs. Currently, many home builders are dealing with unique challenges brought on by the COVID-19 pandemic, including rising costs, labor and material shortages, and shipping delays. While historically it took around five to six months to build a home, many builders are now reporting construction timelines closer to a year or more.3

These issues have led some builders to cancel contracts or raise the price on unsuspecting homebuyers long after agreements were signed. Unfortunately, this scenario can throw a major wrench in your moving plans and significantly delay your timeline.

To minimize these types of surprises, it’s crucial to have a real estate agent represent you in a new home purchase. We can help negotiate better contract terms and advise you about the potential risks involved.

Existing Home
If you’re in a hurry to move into your next residence, then you may want to stick to shopping for an existing home.

You can typically move into a resale home as soon as you’ve closed the deal. The average time it takes to close a home purchase is around 51 days, but it can vary based on loan type and market activity.4

If you need to move even sooner, it’s sometimes possible to close faster, especially if you’re a cash buyer. In fact, many sellers prefer a quick closing, so it can give you an advantage in a competitive market.

LOCATION

From commute to construction to amenities, there’s a lot to consider when choosing your next neighborhood.

New Build
With a brand-new home, you’re more likely to move into a neighborhood that’s located on the edge of town and is still undergoing development.5 This could mean a longer commute and ongoing construction for some time.

However, new developments can also offer a lot of amenities that appeal to modern homebuyers. Water features, hike-and-bike trails, tot lots, and dog parks are just a few of the enhancements we’re seeing pop up in master-planned communities across the country. And some feature new schools and their own urban-like centers with restaurants, retail, and office space.6

Existing Home
An existing home is more likely to be located close to town in a neighborhood with mature trees, established schools, and a deeply-rooted community. As a result, you may find the neighborhood’s trajectory to be more predictable than an up-and-coming area.

But the amenities may be lacking and the infrastructure dated when compared to newer communities. And while some homebuyers love the charm and eclectic feel of an older neighborhood, others prefer the sleek and cohesive look of a newer development.

MAINTENANCE

Are you a DIY enthusiast, or do you prefer a low-maintenance lifestyle? Set realistic expectations about how much time, effort, and money you want to devote to maintaining your next home.

New Build
When you build a home, everything is brand new. Therefore, in the first few years at least, you can expect less required maintenance and repairs. A 2019 survey found that millennials’ homebuying regrets often came down to maintenance issues, rather than other concerns.7 So if you would rather spend your weekends exploring your new neighborhood than fixing a leaky faucet, you may be happier buying a turnkey build.

That doesn’t mean, though, that a new home will be entirely maintenance-free. In fact, depending on the builder, you could find yourself repairing more than you expected. Some home builders have reputations for shoddy construction and subpar materials, so it’s important to choose one with a solid reputation. We can help you identify the quality builders in our area.

Existing Home
No matter how good a deal you got when you purchased it, you could come to regret buying an older home if it costs you heavily in unexpected maintenance and repairs. According to HomeAdvisor’s yearly True Cost report, home renovations have grown more expensive in recent years. For example, installing a new HVAC system could cost you $5,371 on average. And you can expect to pay nearly double that amount ($9,375) for a new roof.8

Fortunately, there are ways to prepare for these large expenditures. We always recommend that our buyers hire a certified home inspector, whether they buy a new or existing home. Once we have the inspector’s report, we can negotiate with the seller on your behalf for reasonable repairs or concessions.

ENVIRONMENTAL IMPACT

On a quest for greener living? If so, there are several factors to consider when deciding on your next home.

New Build
There’s a growing demand for energy-efficient housing, and many builders are rising to the challenge. Nearly 1 in 4 homes built in 2020 received a HERS (Home Energy Rating System) Index Rating by the Residential Energy Services Network. A HERS rating provides an index score that compares the newly-built home to those that were standard in 2006. The more energy-efficient the home is, the lower the score it receives.11

The average home rated in 2020 was 42% more efficient than those built in 2006 and 72% more efficient than a typical home built in the 1970s.11 So if energy efficiency is a top priority, a new home with a low HERS rating may be a good choice. You can also look for one that’s ENERGY STAR Certified, which means it meets a series of strict efficiency guidelines set by the Environmental Protection Agency. In 2020, only 7.9% of homes built in the U.S. received this designation.12

Existing Home
Of course, a basic tenet of sustainable living is: reduce, reuse, recycle. And since a resale home already exists, it automatically comes with a lower carbon footprint. Research has also shown that remodeling or retrofitting an older home is often greener than building one from scratch.13

With some energy-conservation effort and strategic upgrades, environmentally-conscious consumers can feel good about buying an existing home, as well.

DESIGN

Open floor plan? Kitchen island? High ceilings? Must-have design features could drive your decision to build or buy resale.

New Build
With a new home, you can bet that everything will look shiny and perfect when you move in. Builders tend to put a lot of emphasis on visual details and follow the latest design trends. For example, newly-built homes are likely to feature an open floor plan, central kitchen island, and 9+ foot ceilings, which are must-haves for many modern buyers. They are also unlikely to feature carpet on the main level or laminate countertops, both of which have lost mass appeal.14

However, some buyers complain of the cookie-cutter feel of new homes since they are often built with a similar aesthetic. That doesn’t mean, though, that you can’t incorporate your own style. We can help you negotiate custom features and upgrades to personalize the space and make it feel like your own.

Existing Home
In some of the most coveted neighborhoods, an older home with classic styling and character can be highly sought after. But unless the previous homeowners have invested in tasteful updates, an existing home is also more likely to look dated.

While some buyers prefer the traditional look and character of an older home, others crave something more modern. If that’s the case, we can help you find a resale home that leaves enough room in your budget to renovate it to your liking.

WHICHEVER PATH YOU CHOOSE, WE CAN HELP

When it comes to choosing between a new build or an existing home, there’s no one-size-fits-all answer. There are numerous factors to consider, and you may have to make some compromises along the way. But the homebuying process doesn’t have to feel overwhelming.

We’re here to help. And in many cases, our homebuyer guidance and expertise are available at no cost to you! That’s because the home seller or home builder may compensate us with a commission at closing.

Some new-construction homebuyers make the mistake of visiting a builder’s sales office or even purchasing a home without their own real estate representative. But keep in mind, the builder’s agent or “sales consultant” has their best interests in mind—not yours.

We are knowledgeable about both the new construction and resale home options in our area, and we can help you make an informed decision, negotiate a fair price, and avoid mistakes that can cost you time and money. So give us a call today to schedule a free, no-obligation consultation—and let’s start searching for your next home!

Sources:
Reuters –
https://www.reuters.com/world/us/us-existing-home-sales-fall-august-inventory-declines-2021-09-22/
National Association of Realtors –
https://www.nar.realtor/newsroom/existing-home-sales-ascend-7-0-in-september
KFVS 12 –
https://www.kfvs12.com/2021/09/22/covid-19-pandemic-affects-delivery-rate-building-materials/
Rocket Mortgage –
https://www.rocketmortgage.com/learn/time-to-close-on-a-house
Real Assets Adviser –
https://irei.com/publications/article/master-planned-communities-changing-u-s-housing-trends-favor-investors-can-benefit/
Builder Online –
https://www.builderonline.com/land/development/5-master-plan-trends-home-buyers-gravitate-toward-today_o
Bankrate –
https://www.bankrate.com/real-estate/homebuyer-regret-survey-may-2021/
Home Advisor –
https://www.homeadvisor.com/r/true-cost-report/
Roofing Calculator –
https://roofingcalculator.com/news/how-long-do-roofs-last
Plumbing and Mechanical Engineer –
https://www.pmengineer.com/articles/94873
National Association of Home Builders –
https://nahbnow.com/2021/10/nearly-1-in-4-new-homes-in-2020-was-hers-rated/
EnergyStar –
https://www.energystar.gov/newhomes/energy_star_certified_new_homes_market_share
Advanced Materials Research – https://www.researchgate.net/publication/271358381_Comparative_Study_of_New_Construction_and_Renovation_Project_Based_on_Carbon_Emission
National Association of Home Builders –
https://nahbnow.com/2020/04/most-likely-and-unlikely-features-in-a-new-single-family-home/