Unlocking the Advantage of Assumable FHA & VA Loans

In today's high-interest-rate environment, homebuyers are looking for every possible advantage to secure an affordable mortgage. One often-overlooked opportunity is assuming an existing FHA or VA loan, especially those issued in the past few years when interest rates were at historic lows.

An assumable loan allows a qualified buyer to take over the seller's existing mortgage, including its remaining balance, interest rate, and repayment terms. FHA and VA loans are generally assumable, but buyers must meet the lender's qualification standards, just like they would for a new mortgage.

With interest rates currently much higher than they were just a few years ago, assuming a loan that carries a lower-than-market interest rate can be a game-changer for buyers. Here are some key advantages:

Lower Interest Rate = Lower Monthly Payments - If the seller's mortgage has an interest rate of 3% or 4%, assuming the loan means immediate savings compared to today's rates, which are often above 6% or 7%. A lower rate can translate into hundreds of dollars in savings each month.

Lower Closing Costs - Unlike taking out a new mortgage, assuming an existing loan typically comes with reduced lender fees and fewer closing costs, saving the buyer thousands at the closing table.

No Need for an Appraisal - Since the buyer is taking over an existing mortgage, there's often no need for a new appraisal, reducing both costs and potential delays in the transaction.

More of Your Payment Goes Toward Principal - Because the loan is further into its amortization schedule, a higher percentage of each payment goes toward paying down the principal rather than just interest, building equity faster.

One of the biggest hurdles with loan assumptions is that the seller's remaining loan balance may be significantly lower than the home's purchase price. This means the buyer must cover the difference between the sale price and the outstanding loan balance.

For example, a home is selling for $400,000 with the seller's assumable FHA loan balance is $300,000, the buyer needs to bridge the $100,000 gap between the sale price and the assumed loan.

If a buyer doesn't have enough cash to cover this gap, there are financing options:

• Second Lien Financing ... If the buyer puts down at least 10%, they may qualify for a second mortgage to cover the remaining difference. This could come from a conventional lender or even through owner financing.
• Home Equity Loans or HELOCs ... If the buyer can arrange temporary funding to close the assumption, they may be able to get a home equity loan or line of credit to fund the difference once the property is closed and in their name.

Navigating the Loan Assumption Process

While any FHA- or VA-approved lender can originate new loans, assumptions must be processed through the current loan servicer. Some lenders may not be familiar with the process and could discourage assumptions due to lower fees and longer processing times.

Buyers should be persistent if a lender is uncooperative, request to speak with someone who understands loan assumptions.  It is to a buyers' advantage to work with a knowledgeable agent who is experienced with assumptions and can help negotiate financing solutions and streamline the process.

If you're a buyer looking for lower payments in today's market, an FHA or VA loan assumption could be an excellent opportunity. While it requires careful planning to cover the price difference, the long-term savings from a lower interest rate can make a significant impact.

Thinking about assuming a loan or selling a home with an assumable mortgage? Let's discuss how this strategy could work for you!

Don't Let Capital Gains Tax Surprise You

If you've owned your home for a long time, chances are its value has increased�maybe even doubled, tripled, or more. But did you know that a law written in 1997 still limits the amount of capital gains tax exclusion, despite skyrocketing home prices?

Currently, homeowners can exclude up to $250,000 in gains if single or $500,000 if married filing jointly when selling their primary residence, as long as they've lived there for at least two of the last five years. But with today's home values, more sellers are finding themselves exceeding this exclusion and facing a significant tax bill.

More Homeowners Are Now Affected

In 2023, nearly 8% of home sales surpassed the $500,000 capital gains exclusion. However, in high-cost states like California (28.8%), Hawaii (23.8%), Washington, D.C. (22.1%), Massachusetts (17.9%), and Washington State (15.2%), the numbers were far higher, according to CoreLogic.

What Happens If You Exceed the Exclusion?

If a homeowner sells their home for more than the exclusion allows, the excess profit is subject to long-term capital gains tax rates of 15% to 20%, plus an additional 3.8% net investment income tax for high earners.

For example, if a married couple sells their home with $1 million in gains, they can exclude $500,000, but the remaining $500,000 is taxed at these rates. Depending on their income bracket, they could owe between $95,000 and $119,000 in taxes; an expense many homeowners don't anticipate.

How to Reduce Your Capital Gains Tax Liability

The key to minimizing capital gains tax is increasing your home's cost basis, which is done by tracking capital improvements made over the years. Many homeowners are aware that large-scale renovations count, but small-dollar upgrades also qualify and can add up significantly over time.

What qualifies as capital improvements:

• Kitchen and bathroom remodels
• New roofs, HVAC systems, and water heaters
• Adding a deck, patio, or additional living space
• Energy-efficient upgrades like new windows or solar panels
• Permanent landscaping enhancements, like retaining walls or irrigation systems

However, repairs and maintenance (like painting, fixing leaks, or replacing worn carpet) typically do not qualify unless they are part of a larger renovation.

The Importance of Tracking Expenses

To take advantage of these tax-saving opportunities, homeowners must document their improvements throughout their entire homeownership.

• Keep receipts for materials and labor
• Take before-and-after pictures of major renovations
• Save contractor invoices or permits for work done
• Maintain a running list of all home upgrades

Without proper records, homeowners could lose out on thousands in potential tax savings.

Stay Informed and Plan Ahead

The capital gains tax law may not have adjusted to today's market, but smart homeowners can take proactive steps to minimize their tax burden. If you're thinking about selling, now is the time to gather your records and consult with a tax professional to ensure you're maximizing your cost basis.

For more information, download IRS Publication 523 and our Homeowners Tax Guide for a detailed look at what qualifies.

If you have any questions about how today's home values impact your potential sale, feel free to reach out...I'm happy to help!

In Life, Only Death, Taxes, and Price Hikes Are Guaranteed

Benjamin Franklin famously stated that "in this world, nothing is certain except death and taxes." While his words still ring true, there's another unavoidable reality in modern life: rising costs. From groceries to energy bills, the cost of living continues to climb, and one of the biggest contributors to this is housing.

Housing has always been a major expense for individuals and families, but recent data highlights just how burdensome it can be. According to an article released in September 2024, renters spent a median of 31.0% of their income on housing costs, while homeowners with a mortgage spent 21.1%, and those without a mortgage spent just 11.5%. Despite this, 18.8 million homeowners were still dedicating more than 30% of their income to housing expenses, illustrating that affordability remains a challenge for many.

The long-term trends in housing costs are equally telling. According to the Federal Reserve Economic Data, rent increases have averaged 3.88% annually over the past 60 years, outpacing the average inflation rate of 3.7% during the same period. Meanwhile, the median home has appreciated at an average annual rate of 5.56%, showing that homeownership not only shields against rising rents but also builds wealth over time.

The financial benefits of homeownership extend far beyond escaping annual rent hikes. The latest Federal Reserve Board Survey of Consumer Finance reveals that median homeowners have 38 times the household wealth of renters. This wealth disparity underscores the power of owning a tangible asset like a home, which appreciates in value and provides stability in a world of ever-increasing costs.

While rising home prices and higher mortgage rates may deter some from entering the housing market, it's important to consider the long-term financial advantages of homeownership. Waiting on the sidelines, hoping for prices or rates to drop significantly, could mean missing out on years of equity growth and continued rent hikes.

A significant factor influencing today's housing decisions is mortgage rates. The historically low rates seen before the pandemic were an anomaly, not the norm. The 52-year Freddie Mac average for 30-year fixed-rate mortgages is 7.74%, which is much closer to the rates we're seeing today. For prospective buyers, accepting the current rates as the "new normal" is key to moving forward and securing the long-term benefits of homeownership.

While some individuals are genuinely priced out of the housing market, many are financially capable of purchasing a home but are hesitant due to uncertainty. However, delaying a purchase means continuing to pay rising rents and missing out on the wealth-building potential of owning a home. Even at current rates, the long-term advantages of homeownership�including equity growth, tax benefits, and protection against inflation�far outweigh the costs of waiting.

Death, taxes, and rising costs are life's unavoidable truths, but how you navigate them can shape your financial future. Housing represents one of the most significant expenses for individuals and choosing to own rather than rent can make a profound difference in wealth accumulation and financial security.

While mortgage rates and home prices may feel intimidating, they reflect a long-term norm rather than an exception. For those who can afford to buy now, stepping into the market could be the key to securing stability and wealth in an uncertain world. Don't let hesitation hold you back from building a solid foundation for your future. 

Download the Homeowners Tax Guide.

Innovative Financing Options for Rental Investments

As experienced real estate investors reach the limits of conventional financing options, creative approaches become essential for continued portfolio growth. Here are eight innovative financing strategies to help you expand your rental property investments beyond traditional boundaries:

House Hacking offers a clever entry point for investors looking to maximize their purchasing power. By utilizing owner-occupied loans like FHA or VA, you can secure a property with minimal down payment and favorable terms. The strategy involves living in the property initially, then transitioning it to a rental once you've met occupancy requirements. This approach not only provides a cost-effective way to acquire property but also allows you to gain hands-on landlord experience while building equity.

Seller Financing presents a flexible alternative to traditional mortgages. By negotiating directly with the property owner, you can often secure more favorable terms, including lower down payments and interest rates. This method can be particularly advantageous when dealing with motivated sellers or in markets where conventional financing is challenging. Seller financing agreements can be tailored to suit both parties, potentially offering a win-win situation for buyer and seller alike.

Portfolio Loans cater specifically to real estate investors, especially those managing multiple properties. Unlike conventional loans sold on the secondary market, portfolio lenders retain these loans in-house, allowing for more flexible underwriting criteria. This can be particularly beneficial for investors with complex financial situations or those seeking to finance properties that don't meet standard lending guidelines. Portfolio loans often consider the overall strength of your investment portfolio rather than focusing solely on individual property metrics.

Private Money Lending taps into the resources of individual investors or small groups willing to fund your real estate purchases. These arrangements often offer faster approval and closing processes compared to traditional lenders. While interest rates may be higher, the speed and flexibility of private money can be invaluable in competitive markets or for time-sensitive deals. Cultivating relationships with private lenders can provide a reliable source of capital for future investments.

The BRRRR Strategy (Buy, Rehab, Rent, Refinance, Repeat) is a powerful method for building a rental portfolio with limited capital. This approach involves purchasing distressed properties at below-market prices, renovating to increase value, renting to establish cash flow, then refinancing to extract equity for the next investment. The BRRRR method allows investors to recycle their initial capital, potentially growing their portfolio faster than with traditional buy-and-hold strategies.

Cross Collateralization leverages equity from properties you already own as collateral for new loans. This strategy can significantly reduce the need for large cash down payments on new acquisitions. By using existing equity, investors can expand their portfolios more rapidly. However, it's crucial to carefully consider the risks, as multiple properties may be at stake if financial difficulties arise.

Hard Money Loans provide short-term financing options ideal for quick purchases or properties requiring significant renovation. While these loans typically come with higher interest rates, they offer rapid approval and closing processes, which can be crucial in competitive markets. Hard money lenders focus primarily on the property's potential value rather than the borrower's creditworthiness, making them an attractive option for deals that might not qualify for conventional financing.

Partnerships and Joint Ventures allow investors to combine resources and expertise. By teaming up with other investors, you can pool capital, share risks, and leverage complementary skills. This approach can be particularly effective for larger or more complex investments that might be out of reach for individual investors. Clear agreements outlining roles, responsibilities, and profit-sharing are essential for successful partnerships.

As you explore these creative financing options, remember that each strategy carries its own set of risks and rewards. Careful due diligence, thorough financial analysis, and possibly consultation with legal and financial professionals are crucial steps in determining the best approach for your investment goals and circumstances.

Download our Rental Investment information guide.

Decluttering and Deep Cleaning Made Easy

Maintaining a clean and organized home is essential for creating a comfortable and welcoming living space. Whether you're preparing to sell your home or simply want to enjoy a clutter-free environment, taking time to declutter and deep clean can work wonders.

Not only does it help you stay organized, but it also enhances the functionality and aesthetics of your space. This article provides a comprehensive checklist of tasks to guide you through decluttering and deep cleaning your home, ensuring every corner sparkles and feels refreshed.

Decluttering Tasks:

• Start Small: Begin with one room, drawer, or closet to avoid feeling overwhelmed.
• Create Keep, Donate, and Discard Piles: Sort items into these categories to streamline the process.
• Purge Expired or Unused Items:
  • Check kitchen pantries for expired food.
  • Sort through toiletries and medications for expired products.
• Organize Closets:
  • Donate clothes you haven't worn in the past year.
  • Use matching hangers for a neater look.
  • Store out-of-season clothing in labeled bins.
• Streamline Paper Clutter:
  • Shred old bills and unnecessary documents.
  • Create a filing system for important papers.
• Declutter Drawers and Cabinets:
  • Discard duplicate or broken kitchen gadgets.
  • Organize junk drawers with dividers.
• Sort Toys and Games:
  • Donate items that are no longer used.
  • Organize with clear bins or labeled containers.
• Clear Out the Garage or Basement:
  • Dispose of old tools, paint cans, or unused equipment.
  • Use shelving to keep the floor clear.
• Minimize Decorations:
  • Reduce the number of knick-knacks or personal items to create a cleaner look.
  • Store sentimental items in labeled boxes.

Deep Cleaning Tasks:

• Clean Windows and Mirrors:
  • Wash inside and out for a streak-free shine.
  • Dust and clean windowsills and tracks.
• Dust Everything:
  • Wipe down baseboards, crown molding, and ceiling fans.
  • Clean vents and light fixtures.
  • Vacuum and Shampoo Carpets: Focus on high-traffic areas and spot-treat stains.
• Clean and Polish Hard Floors:
  • Sweep, mop, and polish wood or tile floors.
  • Use grout cleaner for tiled surfaces.
• Scrub Bathrooms:
  • Clean toilets, sinks, bathtubs, and showers thoroughly.
  • Remove hard water stains and reseal grout if necessary.
• Deep Clean the Kitchen:
  • Degrease oven hoods, stovetops, and backsplashes.
  • Empty and clean the refrigerator and freezer.
  • Sanitize countertops and clean cabinet faces.
• Refresh Upholstery and Curtains:
  • Vacuum furniture and wash removable cushion covers.
  • Launder or dry-clean curtains and drapes.
• Eliminate Dust in Hidden Areas:
  • Clean under beds, behind appliances, and in corners.
  • Wash Walls and Doors: Wipe down scuff marks and fingerprints.
• Deodorize and Freshen Up:
  • Use air purifiers or natural remedies like baking soda to eliminate odors.
  • Open windows for fresh air circulation.

Finishing Touches:

• Add Greenery: Place a few indoor plants to create a refreshed and vibrant look.
• Rotate Seasonal D�cor: Keep displays relevant and minimal.
• Organize Entryways: Create a clutter-free, welcoming first impression with tidy shoe racks and coat hooks.
• Maintain a Cleaning Schedule: Regular upkeep can prevent the need for major decluttering sessions in the future.

A decluttered and deeply cleaned home doesn't just look better�it feels better too. By following this checklist, you'll create a space that's more functional, relaxing, and inviting for yourself and your loved ones. Whether you're tackling these tasks in one weekend or spreading them out over time, the effort will be well worth it.

Remember, maintaining a clean and organized home is an ongoing journey, so consider integrating some of these tips into your routine. Here's to a home that brings you joy and peace of mind!

A Solid Hedge Against Inflation

In times of economic uncertainty, real estate stands out as one of the most reliable ways to protect your wealth. Unlike stocks or bonds, real estate is a tangible asset with intrinsic value that retains its worth even during economic fluctuations. Its physical nature provides stability, making it a safe and dependable investment.

Over the past six decades, homes have soared, at an astounding annual compounded growth rate of 5.48%.  In 1963, the average home price was $19,300 and at the end of 2024, the average home price was $501,100.  In parallel, rent has steadily risen at 3.88% annually.  Inflation during the same 60-year period averaged 3.7%.

Historically, property values tend to appreciate over time, often outpacing inflation and preserving purchasing power. This appreciation not only builds equity but also ensures that your investment grows along with or ahead of inflationary pressures. Additionally, real estate investments can generate rental income, which typically rises alongside inflation, providing a steady stream of revenue to offset increasing costs.

For homebuyers, a fixed-rate mortgage offers a significant advantage during inflationary periods. Locking in a consistent monthly payment protects against rising housing costs, allowing homeowners to budget with confidence. At the same time, housing shortages in many markets help sustain property demand, supporting long-term value even when the economy experiences shifts.

Diversifying your investments with real estate also helps reduce overall financial risk. Property ownership adds balance to your portfolio and shields your wealth from the volatility often seen in other asset classes like stocks. Plus, real estate offers tax advantages, such as deductions for mortgage interest and property depreciation, which enhance returns and further mitigate inflation's impact.

Finally, real estate provides a unique combination of stability and growth potential. It is less volatile than many other investments and serves as a long-term store of value, making it a reliable asset during inflationary periods. Whether you're a homeowner or an investor, real estate remains a solid choice for safeguarding your financial future.

Real estate offers a powerful hedge against inflation, combining stability, long-term growth potential, and unique financial benefits. From appreciating property values to tax advantages and fixed-rate mortgage protections, investing in a home ensures your money works for you, even in uncertain economic times. Now is the time to explore how real estate can protect your wealth and provide lasting value.

Download the Homeownership Today Information Guide.

The summer advantage when buying a home

Summer presents an ideal time for prospective buyers to purchase a home. The warm weather and longer days create optimal conditions for house hunting and moving, allowing buyers to thoroughly inspect properties and envision their future homes in the best light.

One of the primary advantages of summer home buying is the increased inventory available. Inventory is up almost 20% as of March this year compared to 2024.  Many sellers choose to list their properties during this season, providing buyers with a wider selection of homes to choose from and increasing the likelihood of finding a property that meets their specific needs and preferences.

The competitive nature of the summer real estate market can also work in buyers' favor. With more homes on the market, sellers often price their properties competitively to attract potential buyers quickly, potentially leading to better deals or more room for negotiation.

Families with school-aged children find summer particularly convenient for relocating. The break between academic years allows for a smoother transition, giving children time to adjust to their new surroundings before starting school in a new district.

Summer's favorable weather conditions make it easier to evaluate a home's exterior features, such as the roof, siding, and landscaping. Additionally, buyers can thoroughly assess outdoor amenities like pools, patios, and gardens, which are often showcased at their best during this season.

Real estate professionals tend to be more readily available during the summer months due to increased market activity. Buyers can expect prompt assistance from agents, mortgage lenders, and home inspectors, facilitating a smoother and more efficient home buying process.

For those selling a home while simultaneously purchasing a new one, summer offers advantages on both fronts. The increased buyer activity during this season can lead to faster sales of existing properties, potentially aligning well with the timeline for purchasing a new home.

While summer home buying does come with some challenges, such as potentially higher prices and increased competition, the benefits often outweigh the drawbacks. The combination of ample inventory, favorable weather, and convenient timing makes summer an opportune season for those looking to make their homeownership dreams a reality.

By leveraging these benefits and working with experienced professionals, buyers can navigate the summer real estate market with confidence and find their ideal home.  Download our Homeownership Today guide as well as our Buyers Guide.