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PCSing to Hawaii, Should I Buy a Home in Hawaii?

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Part of military life is the high percentage of receiving your permanent change of station orders.  This is also called PCS orders for short.  PCS is the military version of a job relocation over 50 miles away.  At least a benefit is that the military will pay for the move in these cases.  Typically, military families are given 2 – 3 months notice of the duty station change.  In order to have a smooth PCS transition, start planning and acting immediately.

After PCS Orders, 3 Decisions to Buy a New Home

For the end result of buying a new home, there are important decisions to make.  First of all, what should you do with the current home?  Renting or selling the home will affect the new home purchase in several ways, but either could work.  Next, is to choose an experienced Realtor local to the new duty station.  It is very helpful to work with a real estate agent who is experienced in the military PCSing process.  Finally and equally as important, is to choose a VA mortgage lender experienced in the PCS process and the VA loan options available for every scenario.  So let us help in explaining the VA loan options for PCS’d service members, plus how these options work.

Should I Rent Out or Sell My Home After Receiving PCS Orders?

Service members need to make some key decisions within a short timeframe after receiving PCS orders.  Often to purchase another property, buyers need to rent or sell the current home.  In order to make this decision, there are several factors to consider.

  1. Is there equity in my home so I can sell it?
  2. How quickly can my home sell?
  3. If bringing money to the sale, can I do it?
  4. Do I want to be a landlord?
  5. How does renting or selling my home affect buying a new home?

While making the decision to sell, it is paramount to choose a listing agent that is familiar with this PCS process.  Additionally, look for real numbers on your house.  A reputable Realtor will show you documentation to back up a listing price, plus expected sales turnaround.  Of course, not all markets support a fast closing.  Plus, there may not be enough equity in the home to sell.  One of the worst things would be to plan on selling at a certain figure to find out in a few weeks, there must be a drastic price reduction.

If selling is not an option because of a slow market or limited equity, renting could work.  Maybe the rental market is strong for the area and becoming a landlord fits the military family’s goals.  Check out a recent article “How to get into real estate investing and build wealth“.  The article discusses potential for starting a real estate portfolio.

Conversation with your VA Loan Officer

Lastly, speak to your mortgage loan officer for the new purchase.  Thoroughly discuss how renting or selling the current home affects the VA entitlement and VA loan qualification.  VA will allow 100% of the new contract rent payment to offset the mortgage payment inclusive of principal, interest, taxes, and insurance.  This could help a service member use VA again to buy a home, which we discuss in more detail below.

Choosing a Real Estate Agent at the New Duty Station

Beginning the home buying process from afar is tough.  Plus it takes a lot of trust and nerves.  Starting the process by looking at pictures online but not knowing anything about the area is difficult.  So that is where a local, experienced real estate agent needs to be your eyes and your guide!  Begin with creating a list of your wants, needs, and a budget.  Next, interview agents in the new PCS’d area and see which one exceeds the others in your opinion.  Relay your list to the agents and once the Realtor is chosen, the agent should start sending houses which meet your criteria.  Because of the relocation situation, Realtors in these cases are depended on more than a traditional purchase.  This is especially important on a fast moving market as the buyers may go under contract without even seeing the house in person.  Talk about trust!  That’s why choosing an agent that is experienced and fully understands your family’s needs is so important.

Keep in mind that a buyers agent will require a prequalification letter from a reputable lender.  Plus it is very important for the buyers agent to have a detailed discussion with the loan officer.  The agent, loan officer, and buyer will have thorough discussions to organize a plan.  Part of this plan is deciding on VA loan options to meet the overall goals and path of the prior home.  So let’s discuss those.

VA Home Loan Options After PCS Orders

Luckily military families have access to probably the best mortgage loan type available.  Because of the no money down option and no monthly mortgage insurance, it is a very attractive option.  But often it is not as easy as “Just give me the VA loan option”.  Especially in the case of a PCS scenario as there is usually another property in the mix.  How much the prior home rents or sells for plays a huge role in the new VA approval.

How to Use a VA Loan While Renting Out Prior Home

One of the first questions an experienced VA loan officer will ask would be the plan for the current home.  In this case, if the home will be rented, VA treats this very favorably for the buyer.  Let’s say the current home has no equity and the total mortgage payment is $1000 per month.  Then if the PCS’d family rents out the current home for $1000, VA considers the payment covered.  We would not have to count a payment in a VA buyer’s debt ratio or residual income.  Therefore, it is much easier to qualify.

But if the current home has a VA loan on it, then a portion of the Veteran’s entitlement will be tied up.  Don’t worry though, because many are still able to purchase with no money down up to a certain amount.  The amount depends on the basis and bonus entitlement available.  Learn more about how VA Entitlement works which is displayed on the Certificate of Eligibility.  Plus we will request the COE for the buyer which is usually obtained online within a few minutes.

Renting Current Home and Using Another VA Loan

Many do not realize that it is very possible to have 2 VA loans at once.  So renting out the current home and having two VA loans at once could be done.  Having two VA loans at once requires accessing the buyer’s bonus entitlement or 2nd Tier entitlement.  Basically if the prior VA loan will not be satisfied prior to the new closing, part of the Veteran’s entitlement is tied up.  Therefore, a VA lender would use a calculation to determine the total entitlement available for the new purchase.  The entitlement and the purchase price will determine the amount of down payment if any at all.  Check out another article to learn more called, “Rent your current home and buy your dream home with no money down“.  Keep in mind this is for the conversion of a primary to a rental.  Once a home has already been a rental property for a bit, the tax return numbers must be used.

Selling Current Home and Using VA Loan on New Home

What if the current home is sold?  This will at least free up the VA entitlement towards the new purchase.  Keep in mind that both the sale and the purchase can happen on the same day.  Our underwriters would verify the eligibility would be freed up by the simultaneous sale.  But what if the PCS orders came not long after buying the prior home?  The family may have to bring some money to closing or maybe breaks even.  Again, at least VA offers a no money down option.

Using Seller Paid Costs and Sales Concessions After Receiving PCS Orders

Unlike other mortgage loans, VA allows the seller to pay all reasonable closing costs without setting a percentage limit.  In addition, VA will allow for the seller to pay up to 4% of the sales price towards sales concessions.  If buying after receiving PCS orders, there could be a creative strategy to help the closing happen.  The buyer may lack funds for some painting that needs to be done.  Maybe the buyer needs to pay off a debt in order to qualify or just feel comfortable enough to buy the new home.  That is where a knowledgeable realtor and lender, plus a willing seller could help make a closing happen for everyone.  Learn more about using sales concessions creatively here.

Additional Benefits of a VA Home Loan

  • Loans up to $1,000,000
  • Higher debt ratios allowed to 55%
  • 600 minimum credit score
  • Seller may pay all closing costs
  • Flexible guidelines for recent short sales, foreclosures, bankruptcy
  • Purchase VA approved condos
  • Favorable guidelines for deferred student loans

If your PSC orders have you relocating to a Hawaii contact our VA experts to discuss your PSC and mortgage strategy.


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7 Essential Tips for VA Home Buyers in Hawaii

home buyers

Veterans and military members understand the power of preparation better than most.

That’s good news considering most home buyers still lack a solid grasp of what it takes today to land a home loan.

VA loans tend to feature more flexible and forgiving requirements than other loan types. But this no-down payment program is also a specialized option for home buyers.

Here’s a look at seven essential tips for veterans and service members considering a VA home loan.

1. No COE to start

You don’t need your Certificate of Eligibility to begin. You don’t even need to know if you’re eligible for a VA loan to start.

Lenders will typically obtain this critical document for you using an automated system.

2. Pre-approval is critical

This shows sellers and real estate agents you’re a serious buyer. Some agents won’t even accept an offer on a home without a copy of your pre-approval letter.

Pre-approval also gives you a clear sense of what you can afford and how much house you can buy. The last thing you want is to get under contract only to learn you can’t afford the payments on the home.

3. Find VA-knowledgeable agents

Real estate agents play a key role in the home buying process. But some know VA loans better than others.

VA-savvy agents can help borrowers avoid properties likely to pose a problem for the VA’s appraisal process. They can also lean on their understanding of VA closing costs to maximize your dollar.

4. Prepare for upfront costs

Most VA buyers take advantage of the $0 down benefit. That’s a huge opportunity that helps get veterans into homes now.

But homeownership can come with other upfront expenses, from making an earnest money deposit and paying for an appraisal to possibly covering a portion (or all) of your closing costs.

5. Understand closing costs

You can negotiate with the seller to pay some or all of your closing costs. There’s no limit to how much they can contribute to cover loan-related costs.

In addition, sellers can pay up to 4% of the purchase price to pay for things like prepaid property taxes, insurance and HOA Fees.

6. Buying condos

Veterans can only purchase condos in VA-approved developments. Lenders can help try to get an unapproved one on the list, but the process can take some time. In Hawaii there are several VA Approved Condo Buildings.

Adjust your home-buying timeline accordingly.

7. Not a one-time benefit

Veterans can use the VA loan program over and over again. It’s even possible to have more than one at the same time.

Veterans who’ve lost a VA loan to foreclosure may be able to buy again, too.

Its great to plan ahead and know you have a chance at Home Ownership when you PCS to Hawaii.

For more information please feel free to contact us today.

Our Team with having over 45 years of experience helping Military Buyers and sellers in Hawaii, We would like to Thank you for your service.

Mahalo

Ryan Riggins (RA)

John Riggins Real Estate

808-330-9105


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PCS – Before and After arrival

You know when it comes to getting the correct info this is a great blog. Big Mahalo for sharing your info and your viewpoint on PCS here to Hawaii

PCS to Hawaii - a Military wife's Journey

We arrived in Honolulu on May 31 and I have a lot to share.  I’m going to start with the flight and finish up with what I’ve learned so far about  temporary lodging allowance (TLA), entitlements and reimbursements.

As I posted in my previous blog, animals traveling between May 15 and September 15 will need to be shipped as cargo.  Because of this, we had to be at Air Cargo 2 1/2 hours before our flight left.  We had a rental car since we shipped our POV out the day before we left.  We had intended to use curbside check in for our luggage, but when we tried, we were told by the Sky Valet that unless we checked our bags at the ticket counter, we would incur extra baggage fees even though we were allowed 4 checked bags each since we were traveling on orders.  I’m going to spare…

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PCS to Hawaii?

It seems so many military families are PCS’ing to Hawaii . It is because of this, that even though I absolutely hate this place that I feel it important to discuss some of the most important questions in relation to coming here. Throughout the months I have been listening and watching the Army Wife 101 fan page and I have compiled many of your questions for these types of posts. I hope you find it helpful.

In this post I will discuss questions in relation to housing and living offpost.

How long is the waiting list for housing onpost?

As I always tell spouses never ask another spouse that only because the wait time varies greatly. You will hear stories of people who PCS’ed here and within a a week they had housing. Then you will hear from those who moved here and lived in lodging for 2 -3 months. Your best bet is to call the housing office and they can give you a round about estimate. You can be placed on something close to a waiting list. When you arrive you will jump ahead of those who have NOT arrived on island yet.  As of the time this post was written you can call the main housing office at 877-487-4323 or visit their site at http://www.islandpalmcommunities.com

Where will I stay while I am waiting for housing?

This is a common question and in my experience I’ve learned you will hear various answers. The first place you definitely want to contact is Schofield Lodging. You can visit them atwww.innatschofield.com. The way it goes is that you need to contact them first and see if they have space available, if they don’t then they will issue you a statement of nonavailability and you will usually wind up at a hotel close to Honolulu Airport. You will hear some people say that they went and stayed at the freaking Ritz Carlton or the Hilton Hawaiian and the Army paid for it. My advice, do it the proper way this way you are guaranteed to receive your TLA and have no issues. PCS’ing to Hawaii is not the time to play around financially.

What does housing look like on Schofield?

Fortunately for me I live in new housing and I will post a few pictures of that below.  Unfortunately you have a great chance of being put in what they call “New Old Housing” which is not that bad in comparison to the old stuff that let’s just say you have to see it for yourself. Housing can also place you in what is known as military reservations. Wheeler is Schofield’s airfield and is right outisde the main gate. They have very new housing and extremely old housing. Let me just say when I say old housing I am talking about Pearl Harbor Era. Some of the housing on Wheeler are considered of historical value and cannot be torn down. At that point they try to revamp the inside but their is only so much revamping you can do to a house that old.

Helemano Military Reservation is about 15 minutes from post near the North Shore. I hear mixed reviews on it but personally Schofield is far enough , I wouldn’t want to be even further at Helemano. The other place they can place you at is AMR. I have friends who live there and they have new housing but there is old housing there as well. AMR is very hilly and high up , but the good thing is you are right near Honolulu . It seems like you have to go to Honolulu to have any kind of life here. Keep in mind in Hawaii military can live in any branches housing, but there are always stipulations on everything . For instance Army can live in Navy housing but they might not be able to get new navy housing.

Many wives ask me what housing areas on Schofield they should ask about when at the housing office. I always say Kaena, Porter, Moyer and Kalakua. Those are the newest housing areas to my knowledge.

Here are a few pictures of a new 3 bedroom home on Schofield in Kaena (my home)

You can view more here if you have Facebook

Do I keep my BAH when I live onpost?

Uh No…I wish! Now when I first arrived here, there was some pretty crappy housing that they actually were giving some onpost residents 15% of their BAH back. Generally speaking your BAH is taken out of your check and that’s that. if you live offpost you get to keep your BAH and utilize it as you wish for a mortgage or rent and possibly utilities.

Do we pay utilities onpost?

You can read my previous post about Mock Light Billing here.

In regards to other utilities it’s the same as any other post. You pay for your cable and phone. Water is free  I wonder for how long.

Who takes care of the lawn maintenance onpost?

I am still trying to figure that out myself because since my husband has returned from his deployment we have cut our own yard, Yet and still we see the landscaping guys in our backyard and cutting our bushes.

Best places to live offpost?

If had to live offpost the 4 places I would look into are Mililani, Ewa Beach, Pearl City, and Kapolei. If you wanna know about the site . Read my post about Offpost Housing. I know many people are quick to want to live off post but please be aware Hawaii is very expensive. I know because we looked and I gladly would take on post housing considering the prices, and the utility cost I have heard about here.

See there look at how fair I was and I didn’t even talk about how much I hate it here 🙂

I think I just about covered all the common housing questions. If I missed one feel free to share it in the comments section.

Thank you Army Wife 101 for this awesome post.


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Money Down the Drain

iStock_000012313013Small200.jpgPrivate mortgage insurance is necessary for buyers who don’t have or choose not to put 20% or more down payment when they purchase a home. It is required for high loan-to-value mortgages and it provides an opportunity for many people to get into a home who otherwise would not be able.

The problem is that it is expensive and a homeowner’s goal should be to eliminate it as soon as possible to lower their monthly payment and avoid putting good money down the drain.

FHA loans made after 6/1/13 that have 90% or higher loan-to-value at time of purchase have mortgage insurance premium for the life of the loan. FHA loans made prior to 6/1/13, can have the MIP removed after five years and if the unpaid balance is 78% or less than the original loan-to-value.

VA loans do not require mortgage insurance.

Conventional loans, in most cases, with higher than 80% loan-to-value require mortgage insurance. The cost of that insurance varies but with a $250,000 mortgage, it could easily be between $100 and $200 a month.

Your monthly mortgage statement should itemize what your monthly fee is for the mortgage insurance. Unlike interest that is deductible, most homeowners are not able to deduct mortgage insurance premiums.

If you plan to remain in the home or to stay there for a considerable number of years, the solution may be to refinance the home. If the home has increased since it was purchased, the loan-to-value at its new appraised value may not require PMI. You might even be fortunate enough to obtain a lower rate than you currently have.


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Cash Flow and Equity Build-up

Cash Flow.pngMany years ago, Las Vegas hotels would entice customers with inexpensive rooms, meals and entertainment so they would gamble. It may have worked initially but if you’ve been to Las Vegas recently, the bargains are gone. Hotels expect each division to be a profit center on its own. As a consumer, I might not like the changes but as an investor, I’d have to be pleased with increased profitability.

Years ago, real estate investors used to accept negative cash flow buoyed by tax incentives in hopes of making a big payday due to appreciation when they sold it. Today’s investors are focusing on tangible, current results like cash flow and equity build-up.

Cash flow is the amount of money you have left over after collecting the rent and paying the expenses. Since rents have gone up considerably due to supply and demand in the last few years and mortgage rates are at near record lows, income is up and expenses are down, making the cash flows attractive.

If the cash flow is sufficient, you could have a good investment even if the value of the property never increased. Cash on Cash doesn’t consider appreciation and measures the cash flow before tax advantages by the initial investment. A rental with $3,170 CFBT divided by an initial investment of $29,000 would generate a 10.93% Cash on Cash rate of return.

Low down payments on investor properties are also a thing of the past. Non-owner occupied mortgage money is available but the investor should expect to put down 25-30%. An advantage of having a smaller mortgage is a lower payment.

Most mortgages are amortized loans with both principal and interest due with each payment. The forced savings of the principal contribution builds equity in the property and can be considered a part of the rate of return.

A $100,000 mortgage at 4.5% for 30 years would have $1,613.29 applied to principal in the first year. Divide that by the same $29,000 initial investment and the amortization would generate another 6%.

Without factoring in appreciation or tax advantages, this rental example generates much more than most alternative investments. There certainly are many different aspects that affect the risk and return on rental investments. If you haven’t scrutinized single-family rental opportunities in a while, you should look again.


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Why Use a REALTOR®

A REALTOR® is a licensed real estate salesperson who belongs to the National Association of REALTORS®, the largest trade group in the country.

Every agent is not a REALTOR®, but most are. If you’re unsure, you can ask your agent if they’re a licensed REALTOR®.

REALTORS® are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.

Some REALTORS® are brokers, while some are agents. Unfortunately, people use the term interchangeably: there are some differences.

Brokers are usually managers. They run an agency and have agents working under them as salespeople. They might own a real estate brokerage or manage a franchise operation. They must take additional courses and pay additional fees to maintain their state-issued broker license.

An agent, on the other hand, is a salesperson selling on behalf of the broker.

Agents are also state licensed and must pass a written test before legally acting as a real estate agent. Each state has its own licensing laws and standards.

Some states—like Illinois—have eliminated the real estate salesperson license and mandate all agents take additional course work and pass another test to become brokers. They are broker associates still selling under a managing broker.

The Typical REALTOR®

There is a stereotype of the typical REALTOR® that must be dispelled: the stereotypical agent works a few hours a day and makes millions of dollars a year. Reality TV shows perpetuate this myth.

On television, buyers find the perfect house after visiting just three homes—and write an offer that is accepted immediately. The next thing you know, they’re moving in!

Nothing could be further from the truth.

The typical buyer searches with a REALTOR® for about 12 weeks and looks at about 10 properties before selecting a home, according to the National Association of REALTORS®. They then wait about 30 days—on average—or the deal to close. The agent is only paid once the deal closes.

If the buyer decides to sign another lease—or not to buy—that agent is not compensated. The same is true of listings. If the listing does not sell, the agent is not paid.

The average agent earned $47,700 in 2013, according to the National Association of REALTORS® Member Profile 2014.

Selling real estate is a commission-only business. That means an agent can work with a buyer for months without ever making a commission—because deals fall though and not every listing sells. It’s a business run on trust and faith.

Also, many people see the commission check at the closing table and have no idea how that money is split. They think their agent walks away with all of it—that’s just not true.

Remember, agents work for brokers. The commission check is made payable to the brokerage which then cuts a check to the listing agent and the selling agent. Both agents also must pay a percentage of their earnings to their broker.

Generally, agents also are responsible for paying their own federal and state income taxes, social security tax, and health insurance.

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